- Metaverse, NFTs and Gaming
- Layer-2 scaling solutions
- Web 3.0
- Multi-chain, Cross-chain and Interoperability
The year 2021 saw a resurgence in interest in cryptocurrencies, with the next generation of investors at the forefront. The cryptocurrency industry is now worth more than $2.5 trillion, with leading coins like Bitcoin and Ether reaching new highs.
Other digital assets, like non-fungible tokens, or NFTs, have also seen a rise in value. What’s next for the blockchain sector as a whole, and what are the most important narratives for 2022?
Metaverse, NFTs and Gaming
Users can’t get enough of the virtual world these days, and metaverse tokens, the currency needed to partake in many virtual activities, were among the year’s best-performing cryptocurrencies.
The metaverse aims to create an immersive, interactive, and shared digital world by combining mixed reality – augmented reality (AR) and virtual reality (VR) – with 3D holographic avatars, the Internet of Things (IoT), and digital twins.
The demand for NFTs of art, music, and in-game assets, such as digital plots of metaverse land, skyrocketed. The NFT gaming sector will receive $2 billion in investment in 2021, according to the crypto industry.
Video games have come a long way in the last few decades, and online gaming, in particular, has become a hotbed for cutting-edge crypto innovation, because blockchain technologies answer fundamental gameplay challenges.
The realm of blockchain gaming is still in its early stages. Gamers and crypto’s early adopters should expect a lot of enthusiasm, especially as the globe moves toward broad acceptance with the introduction of the play-to-earn business model.
The play-to-earn gaming industry is a business strategy that allows gamers to procure or accumulate cryptocurrency and NFTs to sell on the open market. The approach represents a new paradigm in the gaming business because consumers are financially compensated for playing games.
With firms like Facebook (now Meta), Microsoft, and NVIDIA presenting their plans for this other universe, the metaverse is being hailed as the next great leap in the internet’s evolution.
The Metaverse market cap is $27.2 billion as of this writing, and the multibillion-dollar sector that is gaining pace requires cheap prices, efficiency, and precision, which crypto delivers. The metaverse is likely to take off in 2022 as demand and interest grow.
Layer-2 scaling solutions
The Ethereum ecosystem handles about 1.3 million transactions every day according to ychart. However, scalability difficulties have plagued Ethereum. The network’s capacity is limited, which has resulted in a steady increase in gas prices.
The network becomes clogged as a result of a lack of throughput, resulting in highly volatile gas prices. This is a major issue for companies who have built their businesses around the blockchain.
This network congestion has sparked interest in Layer-2 scaling solutions, as well as movement of users to other Layer-1 blockchains, indicating that users are dissatisfied with the network’s scaling issues and the resulting unaffordable fees.
The Ethereum scaling narrative is a massive cryptocurrency wave that you should be following right now. It’s still growing, and it’s a robust one. If you arrive early enough, you might be able to beat the crowd.
The total value locked (TVL) on Ethereum Layer-2 networks such as Arbitrum, Optimism, and dYdX is approximately $5.41 billion, according to Ethereum Layer-2 scaling analytics site L2 Beat.
Users are migrating to Layer-2 networks, where they can do what they need without slow network response rates or exorbitant gas expenses, as seen by the increase in total value locked in the last few months.
The ZK narrative looks to be the most popular in the Ethereum scaling solutions market right now since it allows one person to demonstrate to another that a statement is accurate without providing any information other than the veracity of the statement.
The two similar technologies of ZK technology are zero-knowledge scalable transparent argument of knowledge (ZK-STARK) and zero-knowledge succinct non-interactive argument of knowledge (zk-SNARK), which aim for similar goals but use different methodologies and approaches.
The following table by Matter Labs’ summarizes the differences between the two high-level technologies:
The rise in astronomically high gas fees means Layer-2 scaling solutions will likely be the next hot topic in 2022 as users seek to reap the benefits of the Ethereum ecosystem without being chased away by high fees.
Web 3.0 is a global paradigm change for the Internet, described by a set of open, trust-minimized, and decentralised networks and protocols that provide services such as computing, storage, bandwidth, finance, and identification.
Web3 is a term used by internet enthusiasts to represent the next phase of the internet, which is defined by decentralised blockchain-based online services and mobile apps.
It frequently encompasses a wide range of developing technology such as cryptocurrencies, decentralised autonomous organisations (DAOs), and digital assets such as non-fungible tokens (NFTs).
After the Facebook transition, technology proponents such as Dorsey and Musk, as well as Andreessen Horowitz and other venture capital companies, began talking about Web3.
As of August 2021, tokens connected with decentralized Internet applications have increased by an average of 244 percent, underperforming the NFT sub-2,726 sector’s percent gain but topping bitcoin’s 37 percent gain.
While Web 3.0 tokens have outperformed bitcoin and other major coins this year by a wide margin, the sector has yet to see the enthusiasm or mainstream attention that Bitcoin, Ethereum, DeFi, NFT, and even Ethereum layer 2 initiatives have experienced.
With Elon Musk, the CEO of Tesla and SpaceX, and Jack Dorsey, the founder of Twitter, giving their thoughts on the next hot narrative, interest in the business is high going into 2022.
Multi-chain, Cross-chain and Interoperability
The blockchain is still in its early stages of development, and the absence of cross-chain compatibility has limited the blockchain’s potential.
Existing blockchains’ inability to communicate with one another limits their capabilities. Interoperability is the capacity for several blockchains to communicate with one another in order to access and share data.
Users will be able to interact and transact more easily between two relatively independent blockchain networks, such as the Ethereum and Bitcoin blockchain networks, thanks to interoperability.
Users tend to play with their assets on multiple chains depending on the features of each chain and the allocation of various applications, choosing the most appropriate chain in each segmented demand. This has fueled demand for cross-chain.
Investors must go through multiple exchanges and pay more costs when attempting to deploy digital asset transactions without a cross-chain bridge.
When investing in new chains, investors can use cross-chain bridges to get to the head mine faster, but they must first examine the new chain’s full mechanics and security.
Polkadot, Kusama, Cosmos, Wanchain, and other cross-chain compatibility and interoperability initiatives are expected to gain traction in 2022 and will most likely be one of the greatest winners.
The blockchain sector is still in its infancy since its inception in 2009. It has primarily been used in financial markets, but its full potential has yet to be realized.
The exceptional rise of dApps, DeFi, and NFTs has been critical to the blockchain industry’s success, and it has presented enormous growth potential in relatively new areas such as gaming and Web 3.0.
Due to unsustainable gas prices and the necessity for cross-chain compatibility, there is an insatiable demand for Layer-2 scaling solutions, which gives another opportunity to explore.
The crypto market will continue to thrive in 2022, do your own research, be on the alert, and invest in a variety of narratives and trends to diversify your portfolio.