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Top blockchain trends for 2022 that you cannot miss

One month into 2022 and we are pleased to see that blockchain development is continuing at pace, regardless of recent cryptocurrency trends. This year promises to be exciting mainly due to the maturation of developments that occurred over 2020 and 2021. The DeFi sector and NFT trends, in particular, are moving beyond initial hype and experimentation, meaning they will stay relevant, solving real-world problems for a greater number of individuals.

In this blog post, we will rapidly cover 8 blockchain trends. Although we could go much deeper, this short summary should give you a solid idea of what we are likely to expect over the remainder of the year.

NFT growth and maturation

We heavily covered NFT development in all its forms throughout last year, acknowledging their novelty while trying to explore the potential use cases for the future. As mentioned in the extensive Messari report, Crypto Theses for 2022:

NFTs are cool because they represent verifiably scarce, portable, and programmable pieces of digital property. An NFT could be a share of stock, a virtual sword in an MMORPG, a profile picture on social media, a new digital art piece, a plot of land in the metaverse, or your data record on Facebook.

The whole point is that an NFT can be anything, meaning its application can easily be widened beyond Bored Apes and CryptoPunks to incorporate things like property deeds and insurance contracts. In fact, this is already being achieved through physical asset tokenization and fractionalization. In terms of proper remuneration for artists, musicians, and celebrities, NFTs are the tool that can be used to regain some control over their work and image. A recent example comes from Kanye West, who expressed his desire to monetize paparazzi shots through NFTs. 

Finally, we are likely to see an expansion of crypto fan tokens for sports clubs. Teams such as Barcelona are increasing their revenue and deepening fan engagement with tokens that are not just collectibles, but offer things such as discounts and the chance to win club merchandise or tickets. 

All we have looked at, however, is just the tip iceberg. With further NFT market growth, we can imagine this technology at the center of the new decentralized and creator-controlled Web 3.0, which we will explore below.

Metaverse development incorporating GameFi and play-to-earn

The Metaverse became a hot topic towards the end of last year, with Facebook’s rebrand sparking equal parts interest and concern. Decentralized platforms, namely Decentraland and the Sandbox received a huge boost, and companies that weren’t already creating strategies in this arena took notice. As Andrew Kiguel, CEO of Tokens.com, told the online magazine Glossy:

Every day, you hear about Chanel, Jimmy Choo, Nike, Adidas — every fashion brand in the world is trying to find a way to create a presence and a strategy for the metaverse…

So what’s the next step? With Microsoft acquiring Activision Blizzard for $69 billion, it seems like the race is on to build as big a stake as possible in this fertile ground; however, it remains to be seen how these large centralized companies will incorporate with blockchain, DAOs, and NFTs (if they do at all).

Regardless, DeFi development continues in the decentralized play-to-earn (P2E) sector, with new communities picking up where games like Axie Infinity left off. One recent P2E gaming trend involves profit-sharing communities, where investors can raise the capital to provide NFTs to players, who earn a share of the rewards for good game-play. Watch this space!

Multi-chain

At the end of last year, we explored the multi-chain future, highlighting the fact that cooperation and connection are key to a decentralized web, not competition to be the next Ethereum killer. While bridges between blockchains are the most common solution at the moment, there are still some issues involving NFT transfer, network overload, and security. We expect to see more efforts in this area to create an ecosystem of interoperable blockchains (outside of individual projects like Cosmos and Polkadot).

Noting what was said in the above paragraph, there will still be competition to be the best blockchain on which to build Dapps, as seen by the incorporation of EVMs into different projects, and just recently, Cardano’s ADALend, a solution which is tipped to draw away developers building on Ethereum.

Environmentally friendly blockchain initiatives

Bitcoin and other Proof of Work blockchains attracted a lot of criticism last year for their energy consumption. There are of course climate implications, but there are also concerns over the fair distribution of energy, a factor that saw Kosovo recently ban Bitcoin mining. With Ethereum transitioning to Proof of Stake and blockchains like NEAR becoming climate-neutral, more blockchains are likely to show off their climate credentials as a selling point.

In line with climate initiatives, regenerative finance (ReFi) projects, which involve the redistribution of wealth to historically overlooked people and causes, may also feature more heavily this year. In a recent blog post, John Ellison of Toucan Protocol talks about how ReFi can really come into its own as part of Web 3.0, noting the 115 Web 3 projects that aim to tackle environmental or climate-related issues.

Institutional capital

2021 was the year that saw more institutional investors come to the table, with a Bloomberg article in June claiming $17 billion had entered the crypto sector over the preceding 5 months. PWC’s Annual Global Crypto Hedge Fund Report 2021 showed that hedge fund capital amounted to $3.8 billion in the year 2021, almost double that of 2020. Despite bear market fears, this trend is likely to continue, especially as projects bring on credible individuals from the world of tech as high-profile members of their teams. Two recent examples of this include:

While the influx of institutional capital is largely celebrated, the issue of centralization/decentralization remains, with questions such as:

DAOs as part of DeFi 2.0 and Web 3.0

DAOs are not a new concept; The DAO, acknowledged as the first project of this type, was formed back in 2015, flaming out in the now-infamous hack. Since then, we have seen more DAO projects, and in the last year or so, they have been positioned as an essential component of the decentralized web.

DAO evangelists claim that they represent an evolved form of democracy, and when linked to DeFi, NFTs, and the Metaverse, allow for creators to transparently work for the good of a community while being fairly paid for their work. 

Although we haven’t seen many prominent cases until recently, DAOs can be built around any kind of social project, as demonstrated by Constitution DAO, the crowdfunding project that raised US$47M in an effort to buy the US constitution from auction at Sotheby’s. As Li Jin, the Variant co-founder talks about in The Generalist, DAOs can be used to trial bold social projects, including Universal Basic Income (UBI) — this topic seems to be of particular interest in the blockchain/crypto sphere, with projects including Proof of Humanity, Circles, and Worldcoin tackling the issue.

Despite the wealth of promising DAOs on the horizon, there are still some issues that need to be satisfactorily addressed to move DAOs beyond their experimental stages:

As for the last point, we delve into this topic in a recent long read, looking at the implications of coin-based governance within DAOs.

CBDCs

The CBDC race was won by China last year, which after a trial, is looking to further roll out and encourage the use of its digital yuan; however, as a recent article in CNBC points out, getting people to switch from WeChat and Alipay, apps already widely used for payments, may prove difficult.

There will doubtless be more speculation in 2022 regarding which countries are likely to implement their own digital currencies, and whether the development of these currencies is worthwhile. Going back to the Messari report, its author, CEO Ryan Selkis, essentially argues that for liberal countries, CBDCs are inherently contradictory. In relation to the race with China, he says of Western CBDC development:

Our only interesting advantages (respect for privacy, openness, a commitment to rule of law, etc.) would be more or less absent from a CBDC design, while a CBDC would further deputize our payments companies to surveil customers, even as it threatens to disintermediate them.

For the moment the US Federal Reserve has released a much-anticipated paper outlining the pros and cons of a CBDC, refusing to provide recommendations and instead passed the issue on to Congress, meaning that a US CBDC is likely years away.

As far as other countries are concerned, the handy CBDC tracker shows that countries including Canada, France, Saudi Arabia, and South Africa are already in the pilot stage with their digital currencies, while Turkey, Norway, Ukraine, and Australia are in the proof of concept stage. The sole country that has launched a digital currency is the e-Naira of Nigeria. This makes sense, as the country’s famously unstable currency and political instability has made Nigeria one of the largest crypto markets, second only to the US. The e-Naira is a way to take back some control from decentralized platforms.

Further Bitcoin adoption

The price of Bitcoin has taken a dip lately, reflecting a wider selloff off tech stocks and riskier assets, which many say is in anticipation of tighter fiscal policy and interest rate rises from the Federal Reserve. Then there are the mining bans, which we touched on earlier, and Russia’s proposed ban on cryptocurrencies, which seems to have been walked back to simply include some restrictions.

Despite the inevitable turbulence that should by now be expected from the world’s largest digital asset, other groups are predicting another year of highs for the cryptocurrency. A crypto.com report analyzing the Bitcoin trend throughout 2021 points to 1 billion holders by the end of 2022, should trends continue. While we need to be mindful that crypto.com has a very vested interest in the growth of cryptocurrency adoption, a panel of more independent crypto experts has also come to the conclusion that the Bitcoin future is bright, with an all-time high likely to be reached despite a revised downward prediction.

A bright 2022 for blockchain projects

As we can see, 2022 promises to be a year of maturation for the blockchain industry as a whole, widening its influence to incorporate more users with a broader variety of applications, whether it be community projects run as DAOs or blockchain-as-a-service solutions for businesses.

At INC4, we are continuing to build on a variety of blockchains for clients that are looking to create smart contracts for DeFi, NFT platforms, mining pool software, and anything in-between! Get in touch to schedule a free consultation with one of our friendly and knowledgeable specialists.

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