The blockchain and crypto sector enjoyed one of its strongest years on record in 2021. Major cryptocurrencies like Bitcoin and Ethereum soared to all-time highs, pushing the market past the $2 trillion mark for the first time ever. A host of promising Layer 1 protocols, such as Solana, Avalanche, Polkadot and Hedera Hashgraph, burst onto the scene to claim their place into the spotlight. Meanwhile, Ethereum continued its transition to Proof of Stake and implemented important changes to its gas fee mechanism.
Twenty-twenty-one was the year of the NFT boom, of DeFi maturation and Layer 2 expansion. So what about 2022? Here are the blockchain trends that we are likely to see this year.
The massive success that NFT projects enjoyed in 2021 gave us a taste of the great potential of non fungible tokens. In 2022, we anticipate that the market will continue to grow, as developers continue to advance the technology forward. And while art-focused projects are going nowhere, 2022 is also likely to bring an increased emphasis on utility, which would further boost the appeal of NFTs.
We see two catalysts for a potential shift towards utility. The first one is the growing prominence of the Metaverse, which already challenges how we perceive ownership of digital assets, and promises to give us new ways to share and enjoy virtual experiences. A growing Metaverse can accommodate for a wide range of NFTs – from cosmetic items and mementoes to virtual property, digital passes and so on.
The second factor we need to consider is gaming. So far, NFTs’ foray into traditional gaming has been met with significant backlash from gamers, which is frankly hardly surprising given how rushed those initial attempts to implement the technology felt. In order for NFTs to succeed in gaming, the technology needs to produce something more than just a new type of collectibles.
Continued DeFi evolution
The DeFi space continued to grow in 2021, with major players stepping up their game by refining their tech and utilizing scaling solutions to improve efficiency. The latter part of the year saw the emergence of the ‘DeFi 2.0’ narrative, which was driven by the rising popularity of a new wave of products, such as Olympus DAO, Rari and Tokemak. While there is a debate on whether the DeFi 2.0 moniker is justified, it is, nevertheless, indicative of the ongoing evolution of the DeFi space and the technology behind decentralized finance.
In 2022 this trend is likely to continue, with technology improvements enabling developers to come up with new products and better liquidity models. We are also likely to see the first serious attempts to advance the sector beyond its self-contained bubble and make it more connected to the broader economy.
This year we’re also likely to see an increased presence of DeFi products on chains other than Ethereum. The success of Pancakeswap on Binance Smart Chain last year showed that while Ethereum is the undisputed leader in the space, it’s not the only game in town.
Ethereum scaling and Layer 2
Efforts to scale Ethereum will continue throughout 2022. Last year, we saw significant progress in that regard, with Polygon taking off in a big way and roll-up technology making big strides forward. The pursuit to scale Ethereum through better utilization of Layer 2 technologies like roll-ups will continue to be among the leading blockchain trends for a foreseeable future.
Multichain and interoperability
As we mentioned above, the dominance of Ethereum has not gone unchallenged. With competition from promising Layer 1 protocols like Solana, BSC and Avalanche likely to increase in the future, it’s to be expected that more dApps would go the multichain route. Some prominent dApps such as DeFi giant Aave have already gone multichain. One of LimeChain’s clients, MatraDAO is also a strong believer in the multichain approach.
An increased focus on multichain support would accelerate the development of interoperability solutions such as blockchain bridges.
One of the prevailing criticisms towards blockchain technology has been related to its environmental impact that comes as a result of the large consumption of energy that some of today’s most popular blockchain protocols require. Specifically, protocols that rely on Proof of Work, as by design, this consensus algorithm requires validators to perform a lot of computational work.
In 2022, we’ll likely see an increased focus on alleviating that problem, especially through the implementation of more eco-friendly algorithms like Proof of Stake. For example, Ethereum’s move to implement PoS is in part driven by a desire to make the platform more environmentally friendly.