Cryptocurrencies and Web3: trends for 2022 – Cash.

Crypto-economy continues to develop with high momentum. An exciting question is therefore: what are the most important trends in 2022? Crypto platform Coinbase makes the following 10 predictions for Web3 topics and cryptocurrencies.

1. ETH Scalability Will Improve, But New L1 Chains Will See Significant Growth

As we welcome the next hundred million users to crypto and Web3, ETH’s scalability challenges are likely to increase. I am optimistic that the scalability of ETH will improve with the advent of ETH2 and many L2 rollups.

The success of Solana, Avalanche and other L1 channels shows that we will live in a multi-channel world in the future. New L1 channels will also emerge, focused on specific use cases such as gaming or social media.

2. The usability of L1-L2 bridges will be greatly improved

As more L1 networks become larger and L2 networks grow larger, our industry will be intensely seeking improvements in the speed and usability of L1 and L2 bridges. We will likely see some interesting developments in bridge usability over the coming year.

3. Zero Knowledge Proof technology shall prevail

In 2021, protocols like ZkSync and Starknet started to catch on. As L1 channels become crowded with increased usage, ZK Rollup technology will attract the attention of investors and users.

We will see new privacy-focused use cases emerge, including apps and game models where privacy is at the core. This could also draw the attention of cryptocurrency regulators, as KYC/AML (Know Your Customer/Anti Money Laundering) could pose a real challenge on privacy-centric networks.

4. Regulated DeFi and the emergence of on-chain KYC attestation

Many DeFi (Decentralized Finance) protocols will be subject to regulation and create separate user groups that will only include people who have gone through a KYC process. Decentralized identity and on-chain KYC attestation services will play a key role in connecting user identities to Defi-wallet endpoints. We will see greater acceptance of ENS addresses and new cross-chain name resolution schemes will emerge.

5. Institutions will play a bigger role in DeFi participation

Institutions are increasingly interested in participating in DeFi. First, they are attracted by the above-average crypto interest-based returns compared to those of traditional financial products. Reducing the costs of providing financial services with the help of DeFi also opens up exciting opportunities for institutions.

However, institutions are still hesitant to get involved in DeFi because they want to be sure they are only doing business with known counterparties that have completed a KYC process. But the growth of regulated DeFi applications and on-chain KYC attestation will help institutions gain confidence in DeFi.

6. DeFi insurance will emerge

As DeFi applications become more prevalent, they also become the target of security hacks. According to London-based company Elliptic, damage from DeFi exploits amounted to more than $10 billion in 2021. To protect users from hacks, viable insurance protocols will be released in 2022 protecting users’ coins against security breaches.

7. NFT-based communities will seriously compete with Web 2.0 social networks

The appreciation of NFTs will continue to rise. We will see that Creator Tokens or Fan Tokens are more important. NFTs will be the next evolution of user digital identity and metaverse access. Users will gather in small diverse communities based on the types of NFTs they own. User-created metaverses will be the future of social media, challenging the centralized, ad-centric versions of social media today.

8. Brands will begin to actively participate in the metaverse and NFTs

Many brands have recognized that NFTs are a great tool for brand marketing and brand loyalty. Coca-Cola, Campbell’s, Dolce & Gabbana and Charmin released NFT collectibles in 2021. Adidas recently launched a new Metaverse project with Bored Ape Yacht Club. It is likely that we will see more interesting marketing initiatives from brands using NFTs. NFTs and the Metaverse will become the new Instagram for brands. And just like Instagram, many brands will launch as NFT natives. We will also see more and more celebrities jump on the bandwagon and use NFTs to boost their personal brand.

9. Web2 companies will try to enter Web3

We can already see it with Facebook trying to reposition itself as a Web3 company. It is likely that other major Web2 companies will also dive into Web3 and the Metaverse in 2022. However, many of them will likely create centralized, closed network versions of the Metaverse.

10. Time for DAO 2.0

DAOs (Decentralized Autonomous Organizations) are maturing and entering the mainstream. More and more people will join DAOs, which will lead to a change in the definition of employment – they will never receive a formal employment contract, will accept tokens instead or with fixed salaries, and will work in multiple DAO projects at the same time.

DAOs will also face new challenges determining how to conduct mergers and acquisitions, manage payroll and benefits, and coordinate activities in increasingly large organizations. We will see a plethora of tools to help DAOs work efficiently. Many DAOs will also learn how to interact with traditional Web2 businesses. We are likely to see regulators take more interest in DAOs and try to educate themselves on how they work.

Author Surojit Chatterjee is Coinbase’s European Product Manager.

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