2021 was the most monumental year in the history of cryptocurrency. A number of tokens gained huge amounts of value, including Bitcoin, which rose 60%, Ethereum, which jumped 400%, and Binance Coin, which gained 1,300%. The major factor was the adoption of crypto by institutional investors, big companies, and even countries, with El Salvador embracing Bitcoin as legal tender, as well as the innovations and integration we saw in the DeFi, NFT, and Metaverse spaces.
Add to that the embrace of crypto by multiple well known personalities such as Elon Musk and Eminem, and we have dozens of reasons to argue why 2021 was the biggest year ever. So what follows in 2022?
One thing is certain, crypto has a tough act to follow and while no-one is predicting a 2018-style meltdown, the reality is that the market may struggle to match last year’s stunning gains. That said, there are still plenty of bright spots in the crypto space that are worth keeping a close eye on as we head into the new year.
1. The goal of DeFi is to provide more financial inclusion and opportunities
The decentralized finance space, which enables financial products without relying on intermediaries such as banks, showed it has real legs in 2021. With adoption growing across the space, it’s expected that by March of this year, DeFi contracts will have a combined value of $41 billion. So 2022 is shaping up to be a seminal year for hundreds of emerging DeFi dApps.
DeFi is growing not only because it provides true financial freedom for its users and banks the unbanked. It also provides real investment opportunities for millions. One of the most popular fields of DeFi investing is yield farming, which incentivizes crypto asset holders to secure decentralized networks. One of the most popular DeFi apps in that regard is Compound Finance Protocol, which lets users provide liquidity in a variety of liquidity pools so long as they have an Ethereum wallet, earning rewards consistent with its basic principles.
DeFi also opens up the possibility of more complex, and potentially more rewarding financial instruments. Take Synthetix, which issues synthetic assets in the form of ERC-20 smart contracts that track and provide returns on crypto assets without needing to hold said token. Similar to that is SynFutures, which makes it possible to synthesize and freely trade Ethereum-based cross-chain and off-chain assets. SynFutures works through a Synthetic Automated Market Maker, so users only need to hold one asset among trading pairs, with a smart contract synthesizing the other.
The beauty of such DeFi apps is they enable exposure to assets that investors cannot access and potentially make sizable gains if they’re able to predict market movements.
2. The popularity of NFTs continues to grow
Non-fungible tokens came under the spotlight in 2021 as their total sales volume surpassed $20 billion. A number of big-ticket items led the way, with a single JPG made by the artist Beeple selling for a record $69 million, and dozens of other multi-million sales of Bored Ape Yacht Club and CryptoPunks NFTs.
While the euphoria and eye-watering price tags of NFTs may start to fade, there’s no doubt NFTs are here to stay. Fact is, they have too many potential use cases, ranging from gaming to the arts, real estate and the tokenization of assets. The benefits for those who adopt NFTs are clear too, with artists and musicians for example able to build automated royalties into the resale of their creators. Real estate sellers, meanwhile, can expand their horizons to millions of buyers by using NFTs to fractionalize property ownership.
It means there’s a bright future not only for NFTs, but also for the marketplaces that sell them. At present the clear leader in the space is OpenSea, which captured more than 60 percent of the total sales registered in 2021. But keep an eye out for more decentralized platforms such as Infinity to increase in popularity. Infinity is a decentralized NFT marketplace that aims to improve on OpenSea by better representing and incorporating the needs of the community. Infinity is aiming to evolve towards a direct governance model in partnership with Common Protocol, while also making it easier to list NFTs and do so at lower cost, simply charging a 1.5 percent transaction fee that goes to its community-controlled treasury.
3. It’s the year that shapes the Metaverse
The interactive nature of the Metaverse as a facilitator of social interaction, recreation, commerce, business, gaming and education, to name just a few, will ensure it grows to become a much bigger part of our culture and the economy in 2022.
The idea of the Metaverse, a digital realm that combines technologies such as VR, AR and video, where people interact with digital avatars, has great promise. It will usher in an age of greater overlap between our digital and physical lives, streamlining connectivity and making each of our online interactions more realistic.
While Mark Zuckerberg has been one of the most vocal proponents of the Metaverse, it won’t be Facebook that dominates it. Rather, it will be the truly decentralized metaverses that capture the imagination of the masses. We’re talking of worlds such as The Sandbox and Decentraland, where dwellers of those virtual universes are able to secure the rights to digital plots of land through NFTs. Play-to-earn gaming is another hot Metaverse prospect, with DEA creating an entire virtual culture based on its Play Mining platform, where users can explore new worlds, battle and complete tasks, collect in-game resources and then trade these with other players.
The Metaverse might still be in its infancy and no one really knows what it will ultimately look like or how much it will influence how we interact with technology. Nonetheless, 2022 will be the year that lays the groundwork for the Metaverse and its evolution over the next decade, shaping how the masses will go about working, relaxing, gaming and socializing in the virtual space.
4. Web3 to grow more legs
The convergence of DeFi, NFTs and the Metaverse is leading to the creation of a Web3 ecosystem and all the signs suggest 2022 may be the year it truly arrives.
Web3 is the next evolution of the internet, which began with the static Web1 that was best represented by the likes of Netscape and AOL. Then came Web2, which was far more engaging but dominated by massive corporations like Google and Facebook. With Web3, we will see an internet that’s fully decentralized and permissionless, where users gain control of their data.
One of the main catalysts of Web3 will, again, be play-to-earn gaming, where users can earn and trade NFTs to make money from playing games. P2E gaming has already hit the big-time, as evidenced by Axie Infinity and its user base of over 2 million monthly active players, as well as Solana, which has amassed a $150 million Web3 gaming fund.
Web3 is not only about gaming though. Other applications include Siacoin, a decentralized cloud storage platform and marketplace that works by encrypting and distributing files across its network. Siacoin allows users to control their private encryption keys, thus owning their data, unlike with traditional cloud storage.
Then there’s Lum Network, which aims to revolutionize the world of product reviews by providing incentives for companies to reward people who take the time to write an honest review, no matter if it’s positive or negative. Lum Networks does this with its blockchain-based decentralized reward system, which allows anyone to check its immutable records and confirm that a consumer who left a 1-star review received the same reward as someone who left a 5-star verdict. It works by paying out rewards based on the quality of the reviews as opposed to how many stars are given.
5. DAOs to collaborate for the good of their communities
Decentralized autonomous organizations, known as DAOs, had a banner year in 2021, rapidly emerging as community led organizations structures for a range of purposes, be it investing, fundraising, managing tokenized assets and transparent governance.
DAOs are really an alternative to the traditional board structure of large companies and provide a new way for crypto companies to go public. Some of the most popular DeFi apps, including Uniswap and MakerDAO, are governed by DAOs, which enable a mechanism for treasury management and protocol development through blockchain-based smart contracts.
Some of the most popular DAOs exist to invest. Take BitDAO, which invests in DeFi projects and currently has more than $3 billion worth of assets in its treasury, according to its website. Another example is PleasrDAO, which was formed by NFT collectors, digital artists and DeFi leaders to buy Pplpleasr’s Uniswap V3 NFT. It has since acquired many more digital artworks, and in June was able to secure a $3.5 million loan using some of its high-value NFTs as collateral.
GoodDollar is an up and coming DAO that has been set up to convince other DAOs to take on more social responsibility by supporting Universal Basic Income distribution. The December launch of GoodDollarV2 provides a new standard for UBI distribution. It works by leveraging yield farming and liquidity mining rewards to enable the sustainable generation of capital flow towards the protocol, providing crypto-based UBI for the entire community.
It’s an initiative that’s likely to gain steam, because as 2021 has shown, the idea of specific purposes and identity-based DAOs that have the interest of their community at heart has already caught on. As we enter 2022, we can expect to see more DAOs increase their collaboration as they act for the good of their communities.