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Trend 1: Regulators Embrace DeFi as Mainstream
Cryptocurrency adoption has soared in 2021, with the number of cryptocurrency users doubling in the first half of the year and institutional investors adding cryptocurrencies like Bitcoin and Ethereum to their balance sheets. The launch of the much-anticipated bitcoin futures ETF in the United States is seen as a watershed moment for the industry, providing legitimacy and assurance for bitcoin as an asset class.
After DeFi was born in the summer of 2020, it began to become an important sector in the industry. DeFi users can use smart contracts to conduct financial transactions directly without intermediaries, bringing economic and social benefits to the unbanked around the world, allowing them to have savings accounts and obtain loans.
The DeFi industry is still in its early stages, but a wide range of blockchain-based financial services, such as asset management, lending, decentralized trading platforms, derivatives, and stablecoins, will flourish again in 2021. According to the latest data from DeFiLlama, the total value of assets locked in DeFi protocols has increased from US$22 billion at the beginning of the year to US$245.7 billion. According to data from blockchain data analysis company Elliptic, as DeFi has become more popular, the amount of fraud and theft on DeFi platforms has also surged, from $1.5 billion in 2020 to more than $10.5 billion in 2021, an increase of up to 600%.
Currently, U.S. regulators are still grappling with the risks of DeFi, especially since there may not be a clearly identifiable intermediary to regulate in decentralized protocols that run on top of smart contracts.
Regarding DeFi’s institutional regulation and compliance issues, Elliptic Financial Senior Consultant believes that “regulators, if they can play an active role in shaping the system to adapt to new technologies, may become a positive force, establishing its market as a hub for global DeFi activities.” safety center and help reduce crime rates."
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Trend 2: NFT use cases expand with the establishment of the metaverse
2021 can be said to be the year of the explosion of NFT. The landmark event was the NFT art work of encrypted artist Beeple sold at Christie's auction for a sky-high price of US$69 million in March. According to data from Nonfungible.com, in December 2021, NFT sales increased by 17,700% compared to the same period in 2020.
The cumulative trading volume of Opensea, the world's largest NFT market, exceeded the $10 billion mark in November. Numerous companies, including payment giants Visa and McDonald's, have jumped on the NFT bandwagon. NFT can be seen as an asset class and a tool for attracting fans and collectors, and adoption is expected to continue to see a huge boost next year, with the trend of NFT avatars (PFP profile picture collections) continuing.
In addition to art and collectibles, blockchain-based Play-to-earn games such as AxieInfinity and AlienWorlds are also popular. Playing Axie Infinity in the context of the epidemic is not an interesting pastime, but a source of income for many Southeast Asian gamers.
The integration of NFT, DeFi and Play-to-earn games is also accelerating. Some platforms have started to launch initial game offering (IGO) departments for customers to invest in game NFT projects. With the rise of GameFi, this game genre will no longer be driven by crypto-native developers, traditional game developers have begun to pay attention to blockchain games, and in 2022 we are likely to see large game developers and publishers enter the field.
The adoption rate of NFT in traditional markets such as music, ticketing, and entertainment will be greatly increased, and participation in revenue distribution through smart contracts will become possible, including all components involved in the value chain, such as composers, artists, musicians, producers, and collectors. While current NFTs are mostly static images, in 2022 dynamic NFTs will be combined with real-world events like weather data or stock data. Any real-world data can be incorporated into an NFT and have an impact on the NFT itself. In addition, brands and creators will strengthen loyal community behaviors in rewarding NFT, distributing content, making purchases, etc., and promote the prosperity of the NFT community.
Thanks to the expansion of the NFT market, Layer 2 solutions, such as the NFT scaling platform ImmutableX on Ethereum, will open up a lot of activity for NFT. People will see more NFTs from famous brands in their daily life. Big brands will somehow explore NFT to bring more incremental users to the crypto market.
The Metaverse will also be a key theme in 2022. Traditional technology giants such as Facebook plan to create new markets in the metaverse, and new narratives have just begun, which will continue to imperceptibly promote the continued development of virtual land projects such as Decentraland and The Sandbox.
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Trend 3: The rise of DAO will change people's life and work
DAOs (Decentralized Autonomous Organizations) have emerged as organizational structures for managing tokenized assets, raising funds, and promoting transparent governance. Venture capital firm a16z believes that DAOs could have a huge impact on the adoption of Web 3.0 products.
DAOs are often interpreted as an alternative governance mechanism for companies to traditional board structures, as well as a new way for crypto companies to go public. Many DeFi applications, such as Uniswap, Aave, and MakerDAO, are governed by DAOs, which provide protocol development and fund management mechanisms through self-executing smart contracts on the blockchain. According to DeepDAO data, DAO currently manages about $11.5 billion in assets.
The U.S. state of Wyoming passed legislation earlier in 2021 giving the DAO legal status as a limited liability company (LLC). Wyoming is home to CityDAO, a company organized as a DAO with the mission of creating blockchain cities in the real world. The CityDAO team purchased a 40-acre piece of land in a remote corner of Wyoming and plans to purchase more properties in the future, each piece of land is an NFT owned collectively or individually by the DAO.
Some DAOs are set up for investment purposes. For example, BitDAO, which bills itself as one of the largest DAOs in the world, was created to invest in DeFi. Earlier in 2021, it completed a $230 million private placement led by Peter Thiel, Founders Fund, Pantera Capital, and Dragonfly Capital. According to BitDAO website data, BitDAO vaults currently hold more than $3 billion worth of encrypted assets.
In 2021, PleasrDAO will be formed by a group of DeFi leaders, NFT collectors and digital artists, aiming to purchase the UniswapV3 NFT of digital artist Pplpleasr. PleasrDAO has since gone on to acquire more digital artwork, and in July secured a $3.5 million loan from CREAMFinance’s IronBank using some of its high-value NFTs as collateral.
Most recently, ConstitutionDAO came together to attempt to purchase the last privately owned copy of the first edition of the U.S. Constitution at a Sotheby’s auction in November. The attempt failed, but the incident propelled The DAO to mainstream headlines and awakened public awareness.
In 2022, more DAOs will be able to use on-chain voting, as Layer 2 such as Arbitrum, Optimism, ZKsync, and Starknet will reduce the gas cost of Ethereum, which will create opportunities for more DAOs without relying on multi-signature executive committees, Thereby reducing the barriers for more people to centralize assets within DAO.
Purpose-driven and identity-based DAOs driven by community values and interests will become more common, and collaboration between DAOs will become more frequent. DAOs will own a piece of each other and have a better and fairer impact.
More DAO tools will be a major growth area in 2022, especially DAO tools led by DAO-to-DAO (D2D) collaboration, which will allow all stakeholders to use trustless tools consistent with Web3.0 values Indigenous peoples on the chain participate and thrive.
