What is the next technology or application in cryptocurrencies to drive progress? Let’s talk about a few exciting areas in infrastructure and applications to see what to focus on in the next market rotation. This article is based on 5 Sectors to Keep An Eye On by Bankless researcher Ben Giove [LITE]”, compiled and organized by TechFlow, a columnist in the dynamic area. (Recap:Bankless view: Why should All-in bet on Ethereum? 5 simple reasons to explain) (background supplement:How to allocate funds in a bear market? This admin guide from a16z is worth a look )
The market is in turmoil, regulatory chains are tightening, demand for blockchain is at its lowest point since 2019, and the biggest event of the year, the merger, is over. Is it my delusion, or is cryptocurrencies feeling like there’s nowhere to go now?
We know this delusion won’t last forever. Anyone can build and innovate on blockchain, and the potential for intellectual capital in this area means that some application or technology will get people excited again, bring demand for blockchain, and drive the next Wave users adopt.
The question is… what is the next technology or application in cryptocurrencies to drive progress?
Let’s talk about a few exciting areas in infrastructure and applications to see what should be focused on?
1. Layer 2
Layer 2 is expected to continue growing in the coming months.
While there is currently little demand for blockchains, the increased transaction capacity provided by these networks has started to unlock new use cases and will pay long-term dividends in the next bull market by allowing more users to join the on-chain economy.
Despite still being in a bear market, the value locked in Layer 2 is still hitting new highs in ETH terms.
Arbiturm and Optimism are undoubtedly the two largest L2s, with Optimistic Rollups collectively accounting for 96.6% of all DeFi TVLs on L2.
Each of these networks has several catalysts on the horizon.
For example, Arbitrum is expected to grow with the recovery of Arbitrum Odyssey, a program designed to encourage users to experiment with different protocols by rewarding NFTs.
The network may also benefit from the launch of their (still unconfirmed) native token, which is expected to take place after Odyssey is complete. Meanwhile, L2 will continue to benefit from numerous upcoming protocols.
Optimism also has several exciting catalysts, including Quests, an active protocol similar to Odyssey where users can earn NFTs by interacting with the protocol, and Bedrock network upgrades.
Although their life cycle is relatively early, Zk-rollups will also generate some action in the near future. Several ZK-EVMs, such as those under development by zkSync, Polygon, and Scroll, will launch on mainnet or testnet by the end of the year, while StarkWare’s governance token, STARK, is scheduled to go live by the end of this month.
32 Days to zkSync 2.0 on mainnet. We’re getting closer to the first production zkEVM zkRollup, and every week we’re inspired by the exciting projects launching on our platform. Here are another five updates from our growing ecosystem. #jointhemission
— zkSync (@zksync) September 26, 2022
Further reading:Opinion | Valuation jumped by $6 billion in half a year, why is Layer 2 unicorn StarkWare?
L2 is not the only infrastructure to be concerned about. The Cosmos ecosystem has also seen many exciting developments. Cosmos enables developers to create highly customizable, application-specific blockchains that can take advantage of interoperability through Inter-Blockchain Communication (IBC), and with key network upgrades and blockchains Launched, it looks set to grow in both user and developer activity.
Interchain security is one such upgrade. Inter-chain security will be available in January 2023 and will enable Cosmos chains to leverage the Cosmos Hub, the network with the most value, for their security, meaning they don’t need to launch their own validator set.
There is also some exciting Cosmos chain news that seems to be gaining traction in the coming months.
Canto, an L1 offering native DEXs, stablecoins and lending markets as public goods. Berachain, an upcoming L1 for DeFi, has a large following while leveraging a unique Proof of Liquidity consensus mechanism.
Further reading:Understanding the Cosmos 2.0 Upgrade: Introducing Interchain Security Solutions to Improve ATOM’s Value Capability
3. The recovery of DeFi
Driven by the above-mentioned L2 and application chain, DeFi may experience a recovery between the fourth quarter of 2222 and the first quarter of 2023.
One area that appears to be gaining considerable momentum is options agreements. Protocols like Dopex, Lyra, and Premia look set to see growth in the near future, benefiting from more capacity provided by L2.
Because options have become a more important part of the cryptocurrency market structure, and sophisticated DeFi users can manage their risk on-chain.
Another sub-sector that looks poised for explosive growth is NFTFi, or DeFi for NFTs.
Like it or not, NFTs are not going away and the JPEG market will become more liquid and mature as trading, lending and derivatives continue to build.
There are many exciting NFTFi projects running and launching in the coming months.
This includes AMMs like SudoSwap, lending like NFT-Fi, JPEG’d, and MetaStreet, valuation protocols like Abacus, and perpetual DEXs like NFT Perp.
Further reading:Disney increases Web3.0 layout! Recruit transaction lawyers to explore the Metaverse, NFTs, DeFi
4. Web3.0 Social
Between DeFi, NFTs, and purely speculative trading, the use of many of the most popular cryptocurrencies to date is entirely financial in nature.
While almost all dApps have some exposure to money, there are also many that are primarily non-financial. And these seem to be gaining traction in the near future.
One of the exciting areas is decentralized media platforms. These networks differentiate themselves from Web2 incumbents by offering users strong censorship-resistant safeguards, as well as enhanced ability for creators to port their audiences.
Applications and protocols to watch in the coming months are gm.xyz, Lens, and DeSo, an L1 dedicated to hosting blockchain-based social applications.
Further reading:Inventory of 10 SocialFi Potential Projects” Will Social Finance Become a Web 3.0 Outlet? : Mirror Matters RSS3..
Another area of potential growth is cryptocurrency gaming (GameFi). Hundreds of millions of dollars have poured into the space over the past year with the success of games like Axie Infinity, StepN, and Sweatcoin.
While many gamers seem to hate cryptocurrencies and NFTs today, GameFi has the potential to become a major channel, bringing hundreds of millions or even billions of users on-chain. Will we see a breakthrough AAA quality cryptocurrency game?
Hope is in sight
While cryptocurrencies can feel lethargic, there are many network upgrades and innovative applications poised to help drive the next wave of adoption and make cryptocurrencies exciting again.
The macro cloud will eventually dissipate, and the insatiable demand for blockchain will return again. But in the meantime, the seeds for the next bull run will continue to be sown.
Further reading:Industry Trends｜E-sports game + Web3, what will be the chemical reaction of the integration of the two new industries?
＊This article does not make any investment advice, please be careful with your financial management.
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