Review of Crypto Market in 2021 & Analysis of the prospects of each track of Crypto Market in 2022

Review of Crypto Market in 2021

2021 is another myth-making year for the crypto market, with the prices of mainstream crypto currencies as Bitcoin and Ethereum hitting an all-time high. The total capitalization of crypto market in 2021 hit $1 trillion in January and peaked at $3 trillion by the end of the year after increasing to $2 trillion in May.In terms of the results of global asset in 2021, the return rate of Bitcoin is as high as 60.26%, surpassing traditional assets such as crude oil, S&P 500, Nasdaq and gold.

Data from Bloomberg 2.7

In 2021, the DeFi ecosystem will wake up again after 20 years of explosion, and many high-quality liquidity protocols and lending projects will emerge, which makes the concept of decentralized finance more and more popular.The development of platform currency as CEX and DEX is remarkable. Among the sudden emergence of Binance and FTX makes us witness the necessity of mutual empowerment of CEX and public chain：Binance quickly occupies market share under the blessing of BSC chain in order to promote the price of BNB with continuous rise; the deep integration of FTX and the solana chain has promoted it to quickly become the top of the exchange.The excellent performance of DEXs such as uniswap, sushiswap, and curve makes us full of confidence in the second spring of DeFi (DeFi 2.0).In the second half of 2021, we can also see hundreds of flowers contend for the expansion plan of Ethereum：the vigorous development of layer1 such as solana and avalanche, and the enrichment and improvement of layer2 such as IMX and dydx.

It also indicates the rapid growth of meme coins such as Doge and SHIB： Dogecoin has gained a large amount of following members among community with the support of Tesla CEO Elon Musk；and the emergence of Shiba Inu has ignited enthusiasm of the bull market in 2021.According to statistics, the price of Shiba Inu’s cryptocurrency SHIB increased by more than 632,000 times in 2021, and many crypto enthusiasts had achieved financial freedom with SHIB.

The NFT storm swept the world in 2021, anything from artwork, game props, a pair of sneakers to Olympic badges, and highlights on the court can take a ride on the NFT storm.According to Chainalysis, throughout whole 2021, the market size of NFT has reached about 40.9 billion US dollars, which is comparable to the traditional art market.At the same time, the in-depth combination of NFT and the game field has jointly created the launch of GameFI.Starting from the explosion of Axie Infinity in early 2021, the blockchain game track has attracted more and more traditional financial funds and game companies to settle in, and various kinds of games have emerged. There are also more and more players participating in the game of play products. But this is only the beginning of the 1.0 era, and the development of chain games will require several rounds of update iterations to gradually mature.

In terms of the public chain ecosystem, each public chain ecosystem will have a well market share in 2021, which tells us that the future is still in the era of multi-chain, although ETH is still the leader of the public chain, with a market share of more than 50%, even reaching up 55.78%.Moreover, we believe that in the future, each public chain ecology will become specialized and subdivided, and each chain can fit its own suitable landing application ecology, forming a benign closed loop of the market.

The proportion of market share is from footprint 2.7

Data from footprint 2.7

Up to now, the value of Bitcoin market has decreased from 70% in January to 43% by the end of the year. The decline in the value of Bitcoin market is mainly due to the increase in the value of ETH and other public chains market.

Bitcoin Market Cap share data from qkl123 2.7

The general trend for the crypto market in 2021 is a bull market, but it has also experienced several major falls, which many earth-shaking events have occurred during that period：In early 2021, companies such as Tesla, Square and MicroStrategy began to use their balance sheets to buy Bitcoin；The market value of Bitcoin exceeded 1 trillion US dollars for the first time on Feb 19th ；Mainland China issued a document to withdraw virtual currency mining and speculation on May 19th, and Bitcoin fell to a minimum of 30,000 US dollars in 24 hours；In June, El Salvador announced the adoption of Bitcoin as legal tender, becoming the first country that legalized bitcoin；In September, mainland China issued a notice on further preventing and disposing of the risk of virtual currency trading speculation, Bitcoin fell to 40,000；In October, the first Bitcoin ETF based on US futures was launched, and Bitcoin soared to $69,000; the explosion of Gamefi, NFT, and DAO at the end of the year has driven the enthusiasm of the entire market；people pay more and more attention to regulation, and in November, US President Joe Biden signed the bipartisan infrastructure bill into law,among which Including tax reporting provisions applicable to digital assets such as crypto currencies and NFTs；the news that the United States is preparing to raise interest rates swept the world in December, and the crypto market ushered in a catastrophic decline at the end of the year.

The global financial environment changes rapidly, but we believe that the consensus of decentralization will become more and more popular, as shown by the strengthened global supervision of the crypto market in the bull market in 2021. In 2022, we can still have the expectation.

Analysis of the prospects of each track of Crypto Market in 2022

A、 Analysis of the overall market situation of the crypto market in 2022

The market’s interpretation of the macroeconomic aspects for 2022 is comprehensive enough.2022 is the first year of interest rate hikes, and the Fed’s start of the interest rate hike cycle is the keynote. Previously, Goldman Sachs predicted in December that the Federal Reserve would raise interest rates three times in March, June and September this year.The latest forecast is about that it will raise interest rates four times, and will begin to “shrink its balance sheet” in July (or even earlier).Recently, the official signal released by the Federal Reserve is also a more aggressive hawkish attitude, so there is basically no suspense for the Fed to raise interest rates this year.From the recent interest rate cut, it can be seen that the monetary environment is tight in the United States and China, but it should be clear that the domestic interest rate cut is not for “stimulus”, but for “bottom”.In any case, domestic policies are always unfriendly to the crypto currency industry, and the regulation will only become more severe.Crypto market needs to be psychologically prepared, but the impact of domestic policy regulation on the Crypto field has become less and less.In general, crypto-assets, which have largely benefited from the entire credit expansion cycle, are under the shadow of interest rate hikes and balance sheet reductions in 2022, and we believe that the market is not optimistic.

But even if the crypto market is about to experience a long “bear” market, we can still expect the performance of some “savior” sectors in different periods.We believe that in 2022, ETH2.0 (a more carbon-neutral POS consensus mechanism, a more secure, fast and decentralized expansion scheme layer1, layer2), DeFi2.0 (more compliant and highly liquid DeFI products) , Stablecoin (more stable algorithm stable currency), cross-chain products (more secure and efficient liquidity cross-chain protocol, cross-chain bridge and wallet aggregator), Web3.0 (infrastructure, storage, creator economic platform, SocialFI, Metaverse products, privacy, etc.), DAO organizational form (decentralized autonomous organization method), and application ecological products (GameFI2.0, NFT, fan tokens and payment products) that are in contact with the real world will still be welcomed at appropriate nodes in spring!

Affected by the global interest rate hike, we believe that the DeFi 2.0 track and the Stablecoin track will come forward in the first quarter of 2022. As market sentiment gradually tends to invest in safe-haven assets, DeFi2.0 and Stablecoin will be the best choices. As DeFi shines in 2021, TVL has also increased by more than 10 times, and we believe that DeFi will have a more prominent performance in 2022 after improving liquidity and compliance.

Data from Footprint 2.7

GameFi2.0, ETH’s expansion plan (L1 side chain, L2) will probably shine in the second quarter of 2022.In terms of block chain games, many 3A masterpieces will release games in Q2, which attract more traditional game players to join the gold game, triggering a new upsurge.ETH2.0 is officially expected to be upgraded at the end of the second quarter of 2022.Before that, we believe that the L1 side-chain and L2 of ETH will make a good trend.

We believe that ETH ecology and Cross-Chain market will explode after the completion of the ETH2.0 upgrade in the third quarter of 2022.With the addition of multi-chain support, cross-chain products will become an important part of the entire crypto currency market. Both the chain bridge and the wallet can be followed.

At the same time, we estimate that the fan token will be exploded in the fourth quarter of 2022, because the Qatar World Cup will start in November 2022, which may trigger a boom in fan tokens field. From sports to art for the entire fans circle cultural market, we believe that the development of fan tokens can improve the empowerment of NFT and become an important bridge chain for contacting and landing with real industries.

In addition, the NFT, Web3.0 (infrastructure, creator economic platform, SocialFi, Metaverse products, etc.), DAO organizational form (decentralized autonomous organization) and other sectors issued by celebrity IP will be released in 2022. There is a possibility of explosion, one hot spot needs to be ignited, and the next one only needs to be handed over to the market!

B、 Analysis of the prospects of each track of Crypto Market in 2022

1、Ecological Track for BTC and ETH

BTC：The world’s first cryptocurrency with the title of virtual currency gold.

ETH：The world’s first and largest blockchain ecosystem.

BTC and ETH are collectively known as the pie of the crypto market, which largely determines the direction and investment sentiment of the crypto market.

1.1 Review of 2021

Bitcoin is the best-performing asset or alternative asset class in 2021 in terms of market trends.Back in early 2021, Bitcoin continued its rally at the end of 2020 and stood at the $20,000 mark in one fell swoop, breaking the 2017 creation with a historical high.But as the blockbuster news of Tesla’s purchase of Bitcoin swept the world, the price of Bitcoin didn’t stop surging, reaching a height of $60,000 in April.

Since then, with the ban on virtual currency mining and speculation in China in May and the turmoil in the global capital market, Bitcoin has experienced several major plunges, and there has been a short-term price correction of nearly 50% in May.By the end of 2021, the price of Bitcoin will remain around $50,000. The second time was the Chinese government’s ban on virtual currency spot trading in September, which also led to a nearly 40% correction in BTC.

Data from coinmarketcap 2.7

Ethereum has become the largest blockchain ecosystem in the world. In recent years, innovative applications of blockchain, such as DeFi and NFT, have been traced back to Ethereum, and the centrality of Ethereum has become the consensus of the Western encryption community.

This can also be told from the market trend. The price of Ethereum is only $700 at the beginning of 2021, but by the end of 2021, it has reached to $4,000, an increase of more than 400% during the year, and it also accounts for more than 20% of the overall market value of crypto currencies. It includes large institutions as Grayscale on their balance.

Of course, the technical development of Ethereum has also brought some difficulties to it. High handling fees and congested network transactions have become the premise of this year’s Layer 2 ecological explosion. In August, Ethereum launched EIP-1559, which was merged into Eth2.0 for preparation. In order to alleviate the high handling fee, its performance improvement speed is far less than the pace of user and ecological expansion, which brings other blockchains and cross-chain bridges a stage to play their respective advantages.

Data from coinmarketcap 2.7

1.2 2022 Trend Analysis

The crypto market faces potential multiple interest rate hikes by the Federal Reserve after March 2022, and there is a high probability that there will be a major correction in the early stage due to the market panic stage.The first supportive line of BTC price is about 39,000. If the price is lower than 39,000, it will go to the second supportive line of 28,000; the first supportive line of ETH is 2600, and if the price is lower than 2600, it will go to the second supportive line of 1800. As an indicator of encrypted digital currency, the recovery of the pie index symbolizes the overall market situation of the entire encrypted digital currency. When the interest rate is raised once or twice, most of the fear of investors is released, and the funds are expected to warm up the virtual currency market again.

2、Platform Currency

2.1Centralized Exchange Platform Tokens—CEX

BNB:Binance Coin (BNB) is a token issued by the Binance platform and a decentralized blockchain digital asset based on Ethereum.

FTT:FTT is the exchange token of the FTX ecosystem.

OKB:OKB is a global token issued by the OKX Exchange Foundation, referred to as OKB. OKB was initially issued based on the Ethereum ERC 20 protocol, and will be transferred to the self-developed public chain OKChain in the future.

HT:HT is the abbreviation of Huobi Token, which is a decentralized digital asset (ERC20) under Ethereum designed by Huobi Group. Based on the Token system, assets are managed and issued through the blockchain.

Data from Non-trumpet 2.7

2.2Decentralized Exchange Platform Tokens—DEX

UNI:UNI is the native token of the Uniswap protocol, which gives holders the right to vote on developments and changes to the platform, including how minted tokens should be distributed to the community, developers and changes to the fee structure.

dYdX:dYdX is a governance token that allows the dYdX community to hold and govern the dYdX protocol. It can be mainly used for dYdX protocol governance and fee discounts.

SUSHI:SUSHI token is the native token of Sushiswap, a branch of UniSwap. Sushiswap is almost identical to UniSwap. The only difference is the native token issuance, which acts as a novelty to incentivize liquidity providers to conduct liquidity mining.

Data from Non-trumpet 2.7

2.3 Review of 2021

2021 is a year with a great impact on the development of CEX, because the Chinese government suppressed cryptocurrencies, from suspending the registration of users in mainland China to forcibly canceling users in mainland China.Under the continuous crackdown of the regulatory authorities, domestic cryptocurrency transactions are completely “shut down”.Centralized virtual currency trading platforms: Huobi, Binance, and OKEx have all been severely affected, resulting in a drop in the currency prices of each platform.

Data from Footprint Analytics 2.7

In 2021, the decentralized exchange platform(DEX) will continue to ride on the express train of DeFi. The total TVL has reached 358.38M. Among them, Uniswap ranks first in terms of transaction volume and is the leading exchange of DEX. Other swaps also have very good performances and gradually seized the market share of CEX.

2.4 2022 Trend Analysis

Due to many drawbacks of centralized exchange platforms, such as: platforms run away and close down frequently, manipulation of the market, cutting users’ leeks are common, hacker attacks, self-stealing and other incidents emerge in an endless stream, which has repeatedly caused investors to lose all their capital and cannot be traced. The worse behavior of centralized exchange platforms has become a fatal bottleneck for the development of block chain and digital currency.We believe that 2022 will be a year in which decentralized digital currency exchange platforms will continue to flourish, and the competition of decentralized digital currency exchange platforms will intensify.Facing the coming “bear” market in 2022, raising interest rates multiple times will lead to unprecedented panic in the market.However, judging from the development trend of 2022, the platform tokens of the DEX track and the CEX track will not fluctuate too much, and the “bear” market will not influence too much on the platform tokens.We estimate that the price of the platform currency will increase day by day around June in the second half of 2022.

3、Scaling Solutions of Ethereum

Scaling solutions of Ethereum are divided into Layer1 (L1) and Layer2 (L2). L1 scaling refers to the technique of increasing the capacity on the Ethereum chain by changing the Ethereum architecture. L2 scaling refers to the technology of scaling Ethereum by moving computation and transactions from the Ethereum base chain to the second layer.

L2 project TVL share：

Data from Footprint Analytics 2.7

At present, Arbitrun accounts for 50% of the market and is in an absolute leading position, so Optimistic Rollup is one of the best ways for L2 at present.

3.1 L1

In 2022, we believe that L1 with relatively large development potential is mainly NEAR and Polygon.

NEAR：The NEAR protocol is an open source decentralized PoS public chain platform. The protocol adopts fragmentation technology and is very friendly to developers. Technically, the NEAR protocol has the advantages of high scalability and low development cost.

Polygon（Matic）：Polygon is ETH’s side chain of L1 and a framework for creating Ethereum-compatible block chain networks and scaling solutions. It’s more of a protocol than a single solution. At present, Polygon technology is very mature and has received investment from major capital institutions, and the market prospect is getting better and better.

3.2 L2

The Rollup system in L2 is our most optimistic about the Layer 2 expansion method, and it is also the real Layer 2 network system in the future. Rollup is useful for reducing fees, providing faster transaction throughput, and opening up participation to users. There are three main types: Optimistic Rollup and ZK Rollup, Metis.

3.2.1 Optimistic Rollup

Optimistic Rollup is fully compatible with the Ethereum Virtual Machine (EVM), the disadvantage is that the withdrawal speed is slow and takes a week.

Arbitrum:The leader of the entire L2, TVL accounts for more than 50%, and has not yet issued coins. It is characterized by scalability, speed and privacy, and is fully compatible with EVM.

Optimism:By running computations off-chain, Optimism is able to reduce Ethereum gas costs by 10,000% or more and increase throughput by 200x.

3.2.2 ZK Rollup

ZK Rollups, also known as zero-knowledge proof technology, will run all calculations outside the chain, and due to current technical issues, it has not yet reached full compatibility with EVM virtual machines. The advantage is that the withdrawal speed is fast, and the GAS fee is very low.

Immutable X：In the future, it may become the leader of NFT and game public chains. Immutable X is essentially an open source protocol that allows anyone to develop their own decentralized marketplaces, NFTs, blockchain-based games, and various other decentralized applications, and it realizes instant transactions and zero gas fees, which can be very suitable for the general trend of carbon neutrality and conforms to the core essence of the POS consensus mechanism.

Loopring:The Loopring protocol uses zero-knowledge proof technology to allow developers to build a high-throughput, low-cost, non-custodial, order book-based decentralized trading platform on Ethereum. We speculate that it will develop well in 2022.

DYDX：The centralized derivatives trading platform dYdX, but the current development momentum is not as good as ImmutableX and Loopring.

3.2.3 Metis

Metis：It is L2 that we are very optimistic about that will continue to usher in an explosion in 2022. It combines the advantages of Optimistic Rollup and ZK Rollup, and the future ecology is very broad.

3.3 Review of 2021

2021 is the year when the Layer 2 project is set up. All project teams are scrambling to launch safer, faster and more innovative expansion solutions, in order to achieve the goal of Ethereum being able to carry tens of millions of users. Reviewing this whole year, there are dark horses that stand out on the L2 track; there are cultivators who are steady and calm; and there are also players who leave the field sadly.

Data from block unicorn 2.7

This graph shows us the total cumulative transactions on Ethereum in 2021, including Ethereum mainnet L1 and L2. In 2021, Ethereum’s L1 will reach about 1.2 million transactions per day.As the Layer 2 protocol went live, the effective capacity of Ethereum began to increase.L2 was very popular in 2021.Arbitrum, an Optimistic Rollup solution launched in September, has now reached a peak TVL of $2.78 billion and amassed more than 50 dApps, including 1inch, Balancer, and Coinbase Wallet, among others. The TVL of ZK Rollup has increased from $43.5 million to $1.9 billion, and has been used to expand the transaction throughput of dApps such as dYdX.

As the L2 protocol continues to be mature and capture market share, the L2 portion of the graph will continue to grow until it exceeds the transaction capacity of L1. At that time, Ethereum will no longer refer to a single protocol, but a community of protocols that share a common L1. The main Ethereum network will be mainly responsible for contract consensus and security assurance at that time, and all data calculation and processing on the chain will be handed over to L2 for processing, which greatly increase the capacity and liquidity of the ETH network.

3.4 2022 Trend Analysis

It is expected that ETH2.0 will be merged and upgraded at the end of Q2 in 2022. Combined with the outbreak of GameFi 2.0 in Q2 of 2022, we guess that L2 and L1 side chains such as Near and Polygon will become popular. Both Optimistic Rollup and ZK Rollup will gain more attention in the coming year. Optimistic Rollup may dominate in the short term, but ZK Rollup with more complex technology will achieve longer development as a long-term scalability solution. Likewise , Metis’s development in 2022 also let us wait and see.

4、DeFi 2.0

4.1 Review of 2021

DeFi means decentralized finance. The main DeFi products on the market are as follows:

ComPound：Compound is a crypto currency market on Ethereum, also as an on-chain ledger that any user, institution, and dApps can use. It provides the function of depositing and borrowing currency, just like a bank, users can deposit the interest income earned by the currency, or carry out mortgage loan.

AAve：AAVE is the native governance token of the Aave protocol. Holders of Ethereum-based cryptocurrencies can discuss and vote on proposals that affect the direction of the project. The AAVE project, we started to pay attention to and follow up in early January, and now the rate of return is about 230%.

Curve：Simply, Curve is a decentralized exchange platform with great advantages in stable tokens exchange.

BenQi：BENQI is built on the Avalanche Chain, which is the first non-custodial liquidity market protocol on the Avalanche Chain. Users can easily lend and borrow digital assets and earn interest on BENQI. Liquidity providers can also obtain passive income, borrowers can borrow on the platform with over-collateralization.

Data from footprint 2.7

Till the end of 2021, Debank data shows that the total value of DeFi locked assets on Ethereum alone has exceeded 100 billion US dollars, excluding other public chains such as BSC and SOL. The charm of “DeFi” lies in that a large number of tasks in traditional finance that require human resources are handed over to computers in the form of smart contracts, providing financial services without the participation of centralized institutions, which greatly improves the efficiency of capital utilization. Starting from the most traditional lending business, DeFi has gradually expanded to stable tokens, trading, asset management, derivatives and other fields.

But in 2021, the explosive growth of DeFi will also bring huge security risks behind. Including the transfer of USD 610 million of assets from the O3 protocol by hackers in August 2021, the crypto sector has been shaken, which directly exceeding the total loss of USD 250 million in the field for the whole of 2020.

At the same time, the Bank for International Settlements believes that it is doubtful whether DeFi’s leverage, liquidity mismatch, and risk control ability in the pursuit of high-profit models can withstand the test of extreme market conditions. The crypto space sees it as the financial infrastructure of the future, but the Bank for International Settlements quarterly report sees limited potential for DeFi to disrupt the wider financial system and the real economy so far.

At the same time, the Bank for International Settlements believes that it is doubtful whether DeFi’s leverage, liquidity mismatch, and risk control ability in the pursuit of high-profit models can withstand the test of extreme market conditions. The crypto space thinks it as the financial infrastructure of the future, but the Bank for International Settlements quarterly report considers limited potential for DeFi to disrupt the wider financial system and the real economy so far.

In general, DeFi is all 1.0 products before 2021 , and products often lack liquidity or regulatory compliance. Therefore, a more liquid and compliant DeFi 2.0 market has increasingly become the focus of capital.

4.2 2022 Trend Analysis

We expect that there will be a wave of DeFi 2.0 outbreaks in the first quarter of 2022. On the one hand, the market is gradually discovering the problems and drawbacks of DeFi 1.0. On the other hand, the financial market around the world is weak, and governments in many countries are preparing to raise interest rates more than once. In the face of a sluggish economic market, the DeFi track will become one of the important ways for an asset hedging.

The pace of DeFi is fast.We witnessed a surging DeFi last year. At that time, DeFi adopted the liquidity mining model and detonated the entire encryption field.However, with the exploration of the liquidity mining model, people gradually discovered the disadvantages of liquidity mining.This short-term incentive model will lead to over-exploitation of projects and protocols by some liquidity providers, and even accelerate the death of projects.In this model, the long-term interests of liquidity providers and protocols are not aligned, and the existence of this contradiction has led to DeFi in a state of slow growth. In addition, countries have strengthened the supervision of DeFi, and the self-reform of decentralized finance has become inevitable.

As a result, the concept of DEFI2.0 was proposed in early 2022 and many potential projects have emerged: AaveArc, Compound Treasury, Uniswappro and other products have been prepared and gradually moved towards Regulated DeFi.

DeFi 2.0 can better solve the liquidity issues, which will undoubtedly pave the way for more hot money to enter the DeFi track.Asset tokenization, clear supervision and lower transaction costs will increase mainstream institutional adoption of DeFi 2.0 in 2022.

One of the biggest barriers to institutional adoption of DeFi today is compliance and regulation.Fortunately, DeFi compliance expected in 2022 has a chance to become a reality.For example, the upcoming EU regulation on the regulation of crypto markets (MiCA) will have a major impact on the DeFi space. In addition, the US SEC will increase scrutiny, which will require DeFi protocols themselves to improve compliance. In DeFi, [know-your-customer, KYC] and [anti-money laundering, AML] solutions, wallets with built-in KYC will help DeFi increase institutional adoption in the coming year.

Therefore, in 2022, the DeFi 2.0 track will become popular again, and it will continue with the bear market. The specific hot duration is estimated to be positively correlated with the degree of the “bear” market and the degree of market panic.

5、Web3.0

With the popularity of the metaverse concept at the end of 2021, Web 3.0 will gradually become a core topic in the blockchain field by the end of 2021. We believe that in 2022, Web 3.0 will become more and more out of the field.

Web 3.0 is a derivative of the World Wide Web, the underlying protocol of the current Internet. Within this concept, the Internet has gone through the Web1.0 era, and is currently in the Web2.0 era, while Web3.0 is what people expect from the next-generation Internet, which means that machines can read any information (that is, the Semantic Web), Websites can provide intelligent selection and better information based on information (artificial intelligence), the Internet is ubiquitous (Internet of Things), and more importantly, the ownership of data on the Internet will be decentralized.

Under the meaning, Web1 is the original rough Internet in the 1990s, and its data is characterized by readability. Then Web2 is the mobile Internet monopolized by giants, and the data is readable and interactive. Web3, on the other hand, building a more balanced Internet where everyone participates and benefits everyone. In addition to reading and interacting with data, users will also be able to own data.

Under the meaning of Web3.0, due to the distributed storage, asymmetric encryption technology and decentralization concept represented by block chain are very consistent with the concept of Web3.0, it has become one of the most promising fields to realize the vision of Web3.0.

Therefore, the core concepts of the combination of Web3.0 and blockchain are: co-creation, sharing, co-governance, privacy protection, emphasizing interaction and creator autonomy. The sub-segment tracks are: Infrastructure, Creator Economic Platform, SocialFi, DAO, GameFi2.0, Privacy and Metaverse.

Web3.0 Concept

5.1 Infrastructure

The infrastructure section of Web3.0 mainly includes cross-chain facilities, storage, domain name services, open source bottom layers, query and retrieval tools, and smart contract operating systems. The following are projects in the Web3.0 infrastructure sector that we are optimistic about in 2022:

DOT：DOT is the native token of the Polkadot chain, which is intended to provide cross-chain services for the multi-chain era. Its main parachain technology is more in line with the application requirements of Web3.0.

ATOM：ATOM is the native token of the Cosmos chain, and it is also a new leading public chain in the field of cross-chain infrastructure. Different from the parachain and cross-chain technology that DOT has operated for so many years, ATOM adopts a more interoperable underlying protocol to provide security and high efficiency for multi-chain and cross-chain. We believe that the ATOM ecosystem should usher in 2022 for a break out.

AR: Arweave can be used as an encrypted information input system, and can also be used as a reward to motivate miners. The main function of AR is to permanently store payment data, but it also has transaction value. Users need to pay AR as a transaction fee to record the transaction on the block, and the transaction fee paid by the user will not be directly transferred to the block that produces the block. In the miner’s wallet, most of the transaction fee will flow to the storage donation, and then it will be gradually distributed to the miner’s wallet.

ENS：ENS is a Web3.0 domain name service system on the ETH chain, and it will develop to provide domain name services for the entire public chain ecosystem in the future. In the future of Web3.0 era, each IP is independently individual, and then the domain name service will be particularly necessary.

GRT:The Graph is a decentralized protocol for retrieving and querying blockchain data, applied to Ethereum, similar to traditional Google.

LPT:Livepeer is an open source video live broadcast platform service based on the Ethereum blockchain. LivepeerToken (LPT) is the protocol token of the Livepeer network. Token holders can bind tokens to the transcoder to perform work on their behalf, and also earn new tokens and benefits every day.

LINK:Chainlink is a decentralized open-source network that encourages users to run nodes on its network and rewards them in the form of its native token LINK.

ICP:Internet Computer is a layer 1 protocol and the main project in the storage sector, aiming to develop a decentralized public network that enables smart contracts to operate at scale. The project aims to be an internet computer, providing the functionality of the public internet and allowing back-end software to be hosted on the web.

Filecoin:The token is called FIL, Filecoin is a token on IPFS, and Filecoin is a way to reward miners by contributing idle hard drives. Filecoin uses a brand new algorithm (Proof of Work). Simply put, the larger the hard drive capacity you have, the more Filecoin rewards you get. However, there are a lot of redundant storage content on Filecoin that cannot be cleaned up. In general, the development prospects of FIL are not as good as ICP or AR.

Web3.0 Infrastructure map

5.1.1 Review of 2021

In 2014, Gavin Wood, the founder of Polkadot, created the term Web 3.0 (hereinafter abbreviated as Web3). Seven years ago, these remarks may have been too avant-garde, but in 2021, it will be of great practical significance. The growth of major Internet companies is sluggish. On the other hand, with the blessing of blockchain technology, the elements of the Web 2.0 era such as storage, domain names, payment, social communication, and content platforms can all be presented in a decentralized way. It seems that these projects are still very imperfect, and even the cost of use is too high. But Web2.0 is being replaced by Web3.0, which is the beginning to take shape as the general trend of the times.

In Web3.0, payment tools include Metamask, domain name systems include ENS and TNS, storage work is completed by Arweave, etc., content is distributed on content platforms such as Mirror, and decentralized social tools include Telegram and Discord. It can be considered that the current Web3 .0 already took shape in 2021.

5.1.2 2022 Trend Analysis

As far as the current development trend is concerned, Metaverse and NFT will become the most mutually successful fields in Web3, but all of this requires the development support of infrastructure. In general, Web 3.0 is still in a relatively early stage, and it is more at the level of application exploration. For Web3.0, as members of the encryption ecosystem, we may have patience and expectations. Because the outbreak of Web 3.0 is not driven by one sector, but based on the gradual improvement and accumulation of infrastructure such as storage and search, and then the comprehensive promotion of the application layer. Therefore, it will take a long, long time. Particularly, the construction of infrastructure may require more trial and error, we should wait patiently!

5.2 Creator Economy Platform

Since the core essence of Web3.0 includes co-creation and sharing, we are looking forward to the development of the creator economy platform in 2022! We are very optimistic about the development of the following projects in this sector in 2022:

Mirror:The token is as WRITE, and Mirror cuts in from the perspective of content financialization, providing a platform for each article to have the attribute of “NFT + governance”, which can be invested, traded and governed. Creators who meet the requirements can initiate crowdfunding under the article, and users can get it by participating in the crowdfunding. Each transaction of the NFT share token “article NFT” is linked to investor dividends.

Audius:The token is as AUDIO, Audius is a decentralized music sharing and streaming protocol designed to facilitate direct transactions between listeners and creators, enabling everyone to freely distribute, commercialize and stream any audio content.

Rally:The token is as RLY, Rally is an open network community for digital creators, crypto influencers, brands and celebrities. Rally gives creators the tools to build a virtual economy and expand their brands, while also providing fans with community perks and new economic incentives to interact with their favorite creators. Rally is a combination of creator economic platform, SocialFi, and fan token sector. It has the value-added empowerment of multiple tracks, and the investment endorsement of A16Z and Coinbase. We believe that it will perform very well in 2022.

GITCOIN:The token is GTC, and Gitcoin is an open source platform that enables anyone to get paid for developing open source software using Python, Rust, Ruby, JavaScript, Solidity, HTML, CSS, Design, and more.

XCAD Network:The token is XCAD, and XcadNetwork provides creators with DeFi tools to create an incentive economy by tokenizing the engagement of each creator’s audience and their content. The Xcad network also provides creators with an exclusive NFT marketplace to create rare and limited edition NFTs with one click. Token Economy Empowers XCAD Creator Token DEX and NFT Market Staking XCAD enables content creators to double their rewards for governance.

Traditional Creator Economic Platform model

Creator Economy Platform Classification

5.2.1 Review of 2021

In terms of creator economic platforms, we can see that all major platforms have funds flowing into this field. But the space hasn’t really exploded yet, with the top-performing YouTube channel taking in $211 million between June 2019 and June 2020. The creator economy platform still has a lot of market space in the future, and the things it creates will become more and more practical.

5.2.2 2022 Trend Analysis

In 2022, the creator economy platform will be one of our focus tracks. As the most suitable project for socialfi, it will usher in the first spring together with SocialFi in 2022! And the diversity of the creator economic platform also enables many future projects to be extended and improved based on this. It is believed that in 2022, more funds will enter the market to develop the unlimited potential of this blue ocean track.

5.3 SocialFi

The evolution from DeFi to GameFi to SociaFi is actually similar to the inevitable trend of Web1.0 to Web2.0 to Web3.0. The existence of social attributes is an inevitable element of the Web3.0 world.

The open and transparent conduct of all economic activities is the premise of the establishment of SocialFi, which can lead to more gameplay and modes. Take the Play-to-Earn mode in GameFi as an example, in the future SocialFi’s economic mode can widely exist similar to Post-to-Earn Earn, Share-to-Earn, Comment-to-Earn, etc., that is to say, the influence and activity of users in social networks can be quantified by the decentralized economic system, that is, the active and passive social activities of users Degree is linked to income. Traditional social platform companies convert user-contributed content into their own profits, while users who spend a lot of time and energy cannot get the slightest direct reward, while SocialFi turns users into direct beneficiaries, and the effort or time they put in can be rewarded, etc. value incentives.

We believe that there are three main projects worth looking forward to in the SocialFi sector in 2022:

WHALE:WHALE is a well-known personal token issued by individual buyer WhaleShark based on the Roll platform. WHALE allocates 50,000 tokens per month for NFT acquisitions, donations to artists, team wages, community activities, etc., and records through Discord, one of the mainstream overseas social platforms.

MASK:Mask Network is a portal that helps users seamlessly transition from Web 2.0 to Web 3.0. It allows users to seamlessly send encrypted messages, cryptocurrencies, and even decentralized applications (such as DeFi, NFT, and DAO) on the platforms of traditional social giants, thus allowing users to create a decentralized application ecosystem .

Rally:Rally is a combination of the creator economy platform, SocialFi, and fan token sections. It has the value-added empowerment of multiple tracks, and with investment endorsements from A16Z and Coinbase. For more detailed analysis, please refer to the Creator Economy Platform section above. Repeat.

SocialFi Model

5.3.1 Review of 2021

From DeFi, NFT to GameFi, blockchain technology seeks to be applied, and new outlets are constantly emerging. At the moment when web2.0 turns to Web3.0, SocialFi may become the next outlet. SocialFi is in the warm-up stage in 2021, and the real take-off may be after 2022.

5.3.2 2022Trend Analysis

In 2022, we believe that the general environment is a “bear” market year. The Fed is expected to raise interest rates several times in 2022, and the market panic is unprecedented. However, according to the development of the encryption market, the web 3.0 track will lead the development of blockchain in 2022 as a popular track, and SocialFi is considered by many to be a “new trend in the future”. Now that blockchain technology has made significant progress, and other applications in the encryption industry are also prospering and developing, we believe that SocialFi will lead the development of the Web3.0 sector in the current transition cycle from Web2.0 to Web3.0, and the prospect is worth looking forward to!

5.4 DAO

DAO decentralized autonomous organization is a brand-new organizational collaboration method. It uses intelligent management methods and token economic incentives to enable organizations to achieve self-operation, self-governance, and self-evolution according to preset rules without centralized institution control.

DAO Concept

5.4.1 Review of 2021

DAO is also one of the hottest trend in the Crypto space in 2021, gaining a lot of attention for its achievements in building fair and decentralized collective organizations. This year, not only DAO focused on digital cultural identity (such as FWB and pleasrDAO), DAO in crowdfunding and capital allocation (such as BitDAO and ConstitutionDAO), but even DAO focused on social causes (such as working to improve the climate) have emerged. Variation of KlimaDAO). Given their outstanding achievements in their respective fields, we expect DAO to become a mainstream tool for online organizing and collective action in the coming year, enabling people around the world to actively participate in causes they care about.

While the number of DAOs continues to grow, people continue to optimize DAO’s tools, operations, and introductory tutorials. For example, Syndicate simplifies the DAO creation process, making it easier for people to collaborate and invest; Station provides users with a DAO getting started guide, allowing people to spend less time than ever building and running a functional DAO. As DAO operations are becoming increasingly complex, we expect to see more projects dedicated to building DAO tools and infrastructure in 2022.

5.4.2 2022 Trend Analysis

2022 is the first year of DAO. As the purest block chain concept, DAO is with a gorgeous vision. So far, DAOs have only been a limited fantasy. If you really want to let DAO develop out of the circle, there are still great difficulties and obstacles, because there are still many issues in the current DAO organizational model.

The problem of the flat structure of the DAO organization. Since there is no clear authority figure or chain of command, the decentralized organization operates slowly and is inefficient, because it takes longer to make decisions. Divergence issues, when the community is strongly divided, can divide the organization in two. The ratio problem also exists in some DAOs, and the person with the most tokens issues orders, so that it is no different from ordinary management. These three problems are the three largest and difficult problems that exist in the current DAO organization. Although these problems cannot be solved at present, we believe that more and more projects will gradually used for solving the above problems, so the general trend of more projects using DAO for organizational governance will not change in 2022.

5.5 GameFi2.0

When NFT was out of the circle, a new concept emerged in the encryption community. In 2021, a blockchain game called “Axie Infinity” has had a huge impact in Southeast Asia, and some residents who lost their jobs due to the epidemic began to earn stable income from the game.

“Axie Infinity” is a pet development game based on blockchain technology. It integrates a variety of gameplays including NFT. It is the NFT project with the highest transaction volume in 2021. TokenTerminal data shows that Axie Infinity’s daily income exceeds $8.2 million, which is close to “Honor of Kings”. On August 6, 2021, Axie Infinity officially stated that its daily active users had exceeded 1 million.

The popularity of “Axie Infinity” has delivered a new “play to earn” mode to more people. With the help of blockchain and smart contracts, players are no longer a single role, except for the fun and economic benefits they can get from the game. , and can also participate in the governance of the game ecology. This subjectivity is not granted by game producers, but is guaranteed by blockchain decentralized technology and consensus.

Increase of some GameFi projects in 2021 The data from LBank

However, we believe that the GameFi projects that will explode in 2021 can only be regarded as 1.0-level products. Because it is very lacking in terms of playability, smooth interactivity, game image quality, economic model, long-term liquidity and social attributes, we believe that with the entry of traditional capital and game manufacturers, the Gamefi track will be in Around Q2 of 2022, there will be a wave of GameFi 2.0 upsurge. The following projects are the Gamefi 2.0 projects that we are more optimistic about in 2022:

Illuvium：Illuvium is a decentralized RPG (role-playing game) adventure and NFT collection game based on the second-layer solution of Ethereum, Immutable X. The core mechanism is that players can capture beasts by fighting monsters and upgrade them, and cast them to generate NFTs. Then trade at a profit in the market. Its gameplay is similar to Dota’s auto chess mode. It is a 3A masterpiece in 2022 and one of the most anticipated chain games at present.

Big time：Big Time is a multiplayer online action role-playing game, similar to the Elder Scrolls, World of Warcraft and other large-scale 3A games. Players can create their own characters, choose races and skills, explore maps, team up, battle, and produce in this season. , transactions, etc. Big Time will use Unreal Engine, which is also a project we will continue to focus on in 2022.

Sandworms：Sandworms is a metaverse game that will be launched in mid-2022. It is the first P2E+NFT+DeFi+ metaverse sandbox game released by the blockchain game platform Sandworms Metaverse. Freely draw blind boxes to obtain character NFTs, and purchase collection equipment in the game store, and exchange them into game assets by collecting and mining spice Spicemine (SPS); players can also participate in the battle through the mode of forming a team, incubating and cultivating calot Ulla to catch sand Insects can obtain Spicemine (SPS), or subscribe for land on Dune Star to become a lord, and participate in mining, construction and trade. Ultimately, players, lords, and investors can continue to gain profits in the game.

Image from Sandworms Metaverse official website 2.7

5.5.1 Review of 2021

In 2019, the concept of GameFi was proposed and defined as Game Finance, which added elements of financial attributes to the game.

In the first half of 2021, the concept of GameFi has really taken shape, which is defined as the comprehensive concept of Game+DeFi+NFT. Taking Axie Infinity as an example, the value of decentralized finance and non-homogeneous digital assets is presented through games.

During the second half of 2021, GameFi will take over the DeFi ecosystem and become the most popular track in the crypto market. With the renaming of Facebook to Meta, the concept of the Metaverse has re-emerged, and virtual games have become more attractive than ever.

According to Footprint Analytics, GameFi concept blockchain games will develop rapidly in 2021, with projects growing from 658 at the beginning of the year to 1,141, with a growth rate of 73.1%. After the popularity of NFT and DeFi has stabilized, it provides an opportunity for GameFi, which makes the GameFi market more active, and ranks with NFT and DeFi as the most popular encryption field in 2021.

Number of GameFi projects Data from Footprint Analytics 2.7

5.5.2 2022年Trend Analysis

Compared with GameFi in 2021, we predict that the GameFi track in 2022 will further combine NFT+DeFi+SocialFi+DAO, which will comprehensively improve in terms of playability, interactivity, and richness. The production cycle of 3A games generally takes a year or even longer. Most of the 3A games start their projects and designs in 2021, and traditional capital and game companies will gradually enter the chain game industry in 2021, such as BIG TIME. , illuvium, Star Atlas and other games will be released in the official version in 2022Q2, so we have to give some time to the explosion of Chain Games 2.0. But we firmly believe that the upsurge of GameFi 2.0 in 2022 will subvert the entire game field in the middle of the year!

5.6 Privacy

5.6.1 2022 Trend Analysis

Although the privacy sector of Web3.0 does not attract as much attention as Metaverse, SocialFi, GameFi2.0 and other sectors, it is an essential link for the long-term and healthy development of Web3.0 in 2022. Privacy protection, as the underlying logic of the global implementation in the Web3.0 system, can be practical and scaled only under the conditions of high computing performance and low computing cost. The privacy sector projects we will continue to focus on in 2022 are NYM, Cellframe and Oasis Network.

NYM：Existing Internet protocols leak sensitive data that others can use without the user’s knowledge. Nym is developing the infrastructure to prevent this data leakage by securing every packet in the network and application layers.

Cellframe：Cellframe is an open source framework of the third-generation blockchain bridge, protected by post-quantum cryptography, and the token name is Cell. Based on the original sharding implementation, it can provide extremely high transaction throughput. Furthermore, quantum cryptography makes the system resistant to hacking by quantum computers.

Oasis Network：Oasis Network is a decentralized blockchain network built by Oasis Labs, and the token name is Rose. It builds a blockchain-based “cloud computing platform” based on the underlying public chain technology of Cosmos, which can achieve the balance of privacy protection, security and performance. Using the software and hardware integration technology of the project, it is possible for the first time to realize such as Compute-intensive applications like artificial intelligence power privacy-preserving, scalable decentralized finance (DeFi).

5.7 Metaverse

Metaverse refers to a networked 3D virtual space and is an important part of the Web 3.0 concept. Users can enter the virtual world through other devices such as headsets, mobile phones or game consoles, and perform various immersive experiences in it. Users have their own digital avatars or avatars in the virtual world. Through this digital avatar, they communicate with other users, explore new spaces, and create new content. The concept of the metaverse is that it can develop for a long time, as an interactive virtual space for work and study.

7-layer elements of the Metaverse

5.7.1 Review of 2021

2021 is the year when Metaverse is out of the circle.

In March 2021, the video game platform Roblox was listed on the New York Stock Exchange on March 10. Among many companies entering the track, Roblox was the first company to write the “Metaverse” into its prospectus, known as “Metaverse”. Cosmos” concept stocks. Roblox mentions: Some people refer to our category as the “metaverse,” a term commonly used to describe a persistent, shared, three-dimensional virtual space within a virtual universe. The “metaverse” will gradually become a reality with the advent of increasingly powerful computing devices, cloud computing, and high-bandwidth Internet connections. Subsequently, the explosion of Decentraland and Sandbox made the metaverse land market a hit, and more and more people began to pay attention to the concept of metaverse, and the metaverse land project gradually came out of the circle.

On October 29, 2021, Facebook CEO Mark Zuckerberg said at his developer conference that the company will officially change its name to Meta to embrace the new growth opportunities presented by the Metaverse. This event can be called a major news event in the technology field of the year, because Facebook, as a global social giant with more than 3 billion users and a technology company with a market value of nearly one trillion US dollars, its every move will be paid attention by the global media and investors. Therefore, when it announced that it was renamed Meta, it caused great fluctuations in the technology industry, and even became the fuse of the new upsurge of the metaverse in the past two months, setting off the climax of the metaverse.

5.7.2 2022 Trend Analysis

On the morning of January 18, 2022, Microsoft announced that it would acquire Activision Blizzard, a game developer and interactive entertainment content publisher, at a price of $95 per share. The total value of the transaction reached a staggering $68.7 billion. The transaction is expected to be completed in fiscal year 2023. After the acquisition, Microsoft will surpass Nintendo to become the world’s third-largest gaming company by revenue after Tencent and Sony. This move is seen as a big move to lay out the metaverse. The combination of Microsoft and Blizzard in 2022 is also destined for the Metaverse to be the direction in which major international capitals will compete for layout in the future.

Metaverse’s investment growth points in 2022 are mainly in three directions: hardware (AR, VR and other hardware devices), software (software development for Metaverse layout), and Metaverse underlying infrastructure (public chains, servers and other protocols). In 2022, Meta will focus on both hardware and software, and it will launch many new VR/AR hardware products one after another. At the same time, its Oculus VR products account for nearly half of the global personal VR market share. In 2022, more infrastructure protocols such as public chains focusing on the metaverse will emerge, and we will pay close attention to these projects.

In addition, you can also pay close attention to the cross-projects of the Metaverse and Chain Tour, SocialFi, DAO and other tracks, as well as the Metaverse real estate projects in 2022. The value-added blessings of multiple tracks will make the development of these projects rise steadily.

6 Fan Token

The emergence of NFT allows more creator IPs to be born in the crypto market in 2021, while providing more vitality to the entire market.But it must be mentioned that these NFTs are often short-lived, and their value is not guaranteed. After a period of popularity, they are often replaced by NFT upstarts.The fundamental reason is that these NFTs have not been properly empowered and implemented in application scenarios， and most of the investors changed hands to earn the price difference in the short term. There are very few players who really want to collect NFTs, which will inevitably make it difficult to preserve their value.Due to lack of empowerment and application scenarios, there is a lack of consensus, which can be very detrimental to the future development of NFT. In all we think the Fan Token economy of NFT2.0 in 2022 will change this dilemma. Fan tokens bring token holders more authority and empowerment, and it will be integrated with the real industry in terms of application scenarios, so it also can well solve the current problems of NFT.

6.1 2022 Trend Analysis

The Fan Token economy includes many industrial fields: e.g. e-sports, sports, music, art, film and television, etc., and we believe that the real heat wave of the fan economy in 2022 will be the World Cup in Q4. At present, teams including the Portuguese national team and Paris Saint-Germain have their own fan tokens. Fans who hold the tokens have a series of rights to vote on the style of the team’s jersey, the music played in the game, and the list of players to play. We believe that the popularity of fan tokens will set sail from the Football World Cup and gradually blossom in other fields such as sports and music.

We predict that the Chiliz chain, which is the leader of fan tokens, it will likely skyrocket during the 2022 Qatar World Cup, and continue to focus on its cooperation with the world’s top clubs. As the only token used in the Chiliz chain, CHZ provides sports and e-sports fans with the right to jointly manage teams, events, leagues and other activities. We believe that by 2022, the landscape of the sports and esports industry will not only be written by the most high-profile events, teams and leagues, but will be dominated by those groups that can effectively engage and monetize fans. Fans can buy and sell FAN Tokens (FTO), as well as participate, influence and vote in polls and polls for the club. Additionally, it allows them to participate in polls on surveys published by partners in the partner app. On the other hand, token holders will also receive exclusive rewards and incredible experiences. Therefore, the market of CHZ in 2022 is very worthy of attention.

Fan tokens issued on the ChiliZ chain Data from fanmarketcap

Partial Fan Token

7 Payment

7.1 Review of 2021

In 2021, more and more e-commerce platforms are deploying the cryptocurrency payment sector, such as APMEX, Dallas Mavericks, Dish, Jomashop, Microsoft, Newegg, Pacsun, Sotheby’s and Shop.com. In 2022, both of them announced that they will add or expand cryptocurrency options, which also contributes to the further development of the cryptocurrency market. According to an authoritative survey, consumers are expected to use cryptocurrencies to pay about $55 billion in purchases in the next 12 months.

7.2 2022 Trend Analysis

FTX announced in January 2022 that it is partnering with VISA to issue cards that allow cardholders to pay with their cryptocurrency in their FTX account at millions of merchants around the world, and it’s completely free, with no administrative or processing fees from FTX.

FTX announces cooperation with VISA In January 2022

At present, there are many companies that have launched cryptocurrency payment cards. The stablecoin USDC issuer Circle, the cryptocurrency lending platform BlockFi, and Coinbase are also Visa’s card issuing partners. Taking Coinbase’s card as an example, cardholders can directly use the assets of their Coinbase account to consume, support more than 30 currency options such as Bitcoin (BTC), Ethereum (ETH) and Litecoin (LTC), and provide users with up to 4 % back in cryptocurrency. In addition, many cash machine projects have emerged, and these gratifying developments are telling us that the heat wave of cryptocurrency payment is about to hit.

In 2022, we can expect some high-quality projects in the payment sector to emerge, including real-world payments and payment systems in the Metaverse. At present, only NFT and GameFi are connected to the physical industry of Web2.0. The payment track will become a popular sector for Web2.0 to take root to Web3.0 in 2022 or together with the fan economy.

C、 Conclusion

Although 2022 is the first year of ETH2.0, it is still a multi-chain era. Different layer1 and layer2 will play a more specialized role, which is compatible with the EVM ecology and is suitable for more refined track segments. At the same time, based on the maturity of cross-chain technology, layer0, a blockchain network that communicates with each other, that will also emerge. On the basis of these public chain protocols, there will be more creative and practical projects and tracks, which will further accelerate the connection between the encrypted market and the real world. Meanwhile, under the common supervision of the whole world, we have reason to believe that a more compliant blockchain ecology will gradually gain consensus and support from all over the world, and the future of the encryption market is still bright and beautiful!

Cooperation

Twitter: @decent_capital

Gmail: decentcapital1@gmail.com