2022 outlook for Web3
TL;DR
Crypto split into multiple sub communities including Protocols, DeFi, NFTs, and DAOs in the 2020-2021 uptrend. Here are some of the narratives I will be paying attention to over the next year. Some notable ones are L1 scaling, decentralised Infrastructure, financial instruments, GameFi, multimedia NFTs, DAO governance, and BTC regulation.
Note: These narratives span the entire project spectrum from narratives that could become tokens, to early stage projects, micro caps and blue chips. Here is a table that I’ll use to track these projects! DM me if you want to collab on research!
Protocols and dApps
As the use cases for ETH (DeFi, DAOs, NFTs) became popular the network became congested and lead to a big narrative of scalability in 2021, this will continue into 2022 with various solutions. Here are some of relevant projects:
We will see coins like BNB, Solana, Avalanche, Fantom, Near and Harmony that are trade-offooors of decentralisation for speed, having to prove organic growth of their ecosystem during a bear market. Cardano ($ada) sadly ngmi, but all the best to the community.
Chains like Polkadot ($dot), ETH2.0, Cosmo ($atom) and Celestia are scaling with interoperability and will continue to grow slowly with smaller micro cap projects benefiting from marketing this.
L2s in the form of roll ups will be a major theme for ETH in 2022 with major projects migrating their stack and new L2 native projects launching:
Zero Knowledge proof projects: Hermez ($Hez), ZkSync, StarkWare, Loopring ($Loop), Boba Network ($boba)
DeFi pool ZipSwap ($zip) newly launching on Optimism and Arbitrum are going to be early movers that will capture user base.
I think the number of organically active L1s will reduce over time but in the meantime bridges will be experiment to capture value for cross-chain projects:
I will observe bridge protocols AnySwap ($any) which has been going countering market trend. There are many more under experimentation in each ecosystem that will trying to capture the market share, I will talk about these in the future.
Fat wallets as multi-chain apps narrative started again by @hasufl, from Paradigm research. The scattered accounts, liquidity pools and assets in different ecosystems don’t make for good UX. Also, rumours of token airdrops by wallets will perpetuate the narrative further.
Financial derivatives such as Options have the significant share of trading volume in tradfi markets. However, this is not the case in crypto given the lack of infrastructure, but many projects are up and coming:
Attention worthy project that I will expand on in future posts are: Ribbon ($RBN), Dopex ($DPX), Opyn, Friktion, Lyra Finance ($lyra), Thetnuts, Katana, Zeta.
Infrastructure/ middlewear protocols often grow after a bull run, as the ecosystem facilitates new projects and prepares to handle the new adopters:
Previous infrastructure protocols have proven their utility in 2021 such as Arweave ($AR) chosen as Solana’s off-chain storage, The Graph was used by various protocols, Helium ($HNT) partnered with internet providers.
Newly listed tokens are Livepeer ($LPT) as decentralised twitch, Askash ($akash) decentralised cloud computing platform, Pocket Network ($Pokt) providing a decentralised Infura, Render Network ($RNDR) putting ETH PoW GPUs to create the metaverse.
Early stage projects not listed: Andrena and Althea similar to HNT, Ceramic as data wallets, Aleph.im for decentralised computing.
Also, with continuous discourse and user dissatisfaction for social media platforms, Web3 is attempting to decentralise these services:
Lens Protocol by Aave, BlueSky by twitter, DeSo formally BitClout, Mirror.xyz are platforms starting in this narrative.
DeFi & GameFi
DeFi 2.0 continues with Olympus white-labelling their protocol and improving their tokenomics. However, I believe experiments like $Ohm lead to the rise of new projects, and these new projects capture majority of the investor attention in the next cycle.
Axie infinity broke ground in GameFi which is continuing to show strength as a narrative:
DeFi Kingdom ($JEWEL) has been showing strength with its community centric growth and trade volume that is greater than Opensea!
GameFi guilds that buy in game assets to lend to competitive players for future revenue share. This is an equivalent version of the MLG clans in tradgaming which has proven to be a very successful businesses. Notable guild in the space are Merit Circle ($merit) and Good Games Guild ($GGG) building their communities.
Curve protocol has evolved into a geopolitical like battle where owning the most tokens allows you to direct resources to liquidity pools of interest:
CVX, Redacted Cartel, Abracadabra.money, Frax Finance and others are making an effort to win these battles. Seeing these projects and their evolution is an important narrative for the whole space and how future project will evolve.
An interesting battle for DeFi in 2021 was the government’s ability to force censorship through the applications front-end, even though the back-end protocol could not be censored. Skynet responded with a Decentralised front-ends called Homescreen. This might go hand-in-hand with the Web2 migration.
NFTs
Multimedia NFTs and their marketplaces, starting with music, are the upcoming narratives. Block’s (formally Square) acquisition of Tidal and their mission to improve the creator community makes for a macro force. Below are some related projects but there are many more in CoopahTroopa’s post:
Catalogue: 1/1 music NFTs with established market on Zora.
As an extension to music NFTs, wallets that provide a good UX will become more than thin application as music is a more repeatable experience thus accruing more value. Notable multi media wallets that I will be paying attention to are Genesis, Bitski, and Sudo.
Soulbound NFTs (by Vitalik) that are earned not traded or NFNTTs? (Non-Fungible Non-Tradable Tokens):
POAPs maybe the best example where you earn NTFs based on attendance or contribution, however removing the buying and selling aspect to make them more unique. This is an unexplored area but an investment could be NFT-as-a-service (NaaF) projects that serve DAOs and communities.
Ethereum Name Services ($ens) still has a lot of untapped potential given its composability, it will be a go to service for identity across DAOs and social media’s in the future.
Tetranodes JPEG’d ($jpegd) is financializing illiquid NFTs. Financializing NFTs has been an ongoing theme but this particularly stands out because of the user friendly approach Tetranode and his team are going to take.
DAOs
DAOs funding IRL groups in areas such as science and politics are beginning to experiment. These DAOs are coined (pun intended) as decentralised science (DeSci) and some examples are Molecule and VitaDAO which will bring medicine closer to a public good.
Learn-to-Earn DAOs like RabbitHole are showing DAO scaling services where they streamline the DAO contribution process. The composability of crypto leads to sub-DAOs that set up sprints for gigs, then move onto the next project once the main DAO can self sustain. The earliest version of this has been developer guilds called Raid Guild and Solidity Guilds, but we are now seeing experiments with community level meta-governance such as Wildfire DAO. The founding members are looking to scale governance groups based on their experience to make contributions to DAOs in DeFi, public goods, creator community, and infrastructure.
As DAOs become more common place given forks of successful templates, then the service level economy and infrastructure will expand. One area is Investor Relations projects for DAO treasuries: Token Terminal, The Graph, Nansen, Dune analytics, DeFiLlama and Messari Reporting Studio that could tokenize overtime.
Macro backdrop
As countries like Venezuela, Brazil, Argentina, Turkey, observe El Salvadors success and realise the demand from their citizens they will make concrete decisions to integrate BTC into their countries. Also, influential crypto natives continue to lobby and work with politicians in major US states like Texas and Florida, which will drive the the wedge into Federal regulation.
The approval of the Bitcoin Spot ETF is a function of US regulatory satisfaction. Exchanges and Bitcoin miners will work with The US to register their presence and satisfy the “E” in the ESG mandate. Ethereum will get a head start on the Energy mandate with their PoS upgrade, making it more appealing for institutional investors.
Accounting regulation for BTC will improve allowing S&P500 companies to record it on their balance sheets without having a negative impact on their earning per share. Also, as stable coins get regulation like normal banking institutions the onramp for to the ecosystem will become even more streamlined for institutional adoption.
The AANG companies and the like will become louder about their Web3 efforts. Meta (formally Facebook) made their intentions clear at the tail-end of the cycle. I believe the competing companies held back their announcements because of timing, and will be more outspoken at the start of the next cycle.
DeFi and dApps will be pressured to follow the security laws. This could all lead to a major change and new experiments in DeFi, DAOs and NFTs as we know it. Potion Labs, an options protocol, is showcasing an experiment where open source releases are coordinated with NFT sales. Then, NFT holders voluntarily organise to govern through a gamified process. The new moat for projects will be ones that will have some KYC or good legal advisory to avoid any hurdles at launch.
Sources
Messari 2022 report: https://messari.io/pdf/messari-report-crypto-theses-for-2022.pdf
The Block Research 2022 report: https://www.tbstat.com/wp/uploads/2021/12/The-Block-Research-2022-Digital-Asset-Outlook.v2.pdf
The Generalist: https://www.readthegeneralist.com/briefing/crypto-2022
Egirl Capital: https://www.egirlcapital.com/insights/95576068
Vitaliks Blog: https://vitalik.ca/
Cobie’s Substack:
Ansem’s Substack:
Money with Carter Substack:
CoopahTroopa: https://coopahtroopa.mirror.xyz/
Tetranode projects:
Decentral Park Capital: https://www.decentralpark.io/research/the-regulatory-state-22-predictions-for-2022
The Apollo Capital: https://www.apollocap.io/2022/01/2022-predictions/
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