Coinbase's 10 Predictions for Web3 and the Crypto Economy in 2022
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Coinbase's 10 Predictions for Web3 and the Crypto Economy in 2022
On the last day of 2021, Coinbase Chief Product Officer Surojit Chatterjee shared his 10 predictions for Web3 and the crypto economy in 2022.
Navigating Web3 tides with focused insights
Author: Surojit Chatterjee, Coinbase Chief Product Officer
Original title: "10 Predictions for Web3 and the Cryptoeconomy for 2022"
Compiled by: Chain Master
2021 proved to be a breakout year for the crypto industry, with BTC price up nearly 70% year-on-year, DeFi total value locked reaching $150B, and NFTs emerging as a new category.
Here are my views on 2022:
1. Ethereum scalability will improve, while new Layer 1 blockchains will continue significant growth
As the next billion users enter the crypto and Web3 space, Ethereum’s scalability challenges may intensify. With the arrival of Ethereum 2.0 and numerous Layer 2 solutions, I am optimistic about improvements in Ethereum’s scalability.
The development of Layer 1 blockchains such as Solana and Avalanche shows that we are moving toward a multi-chain world, where new Layer 1 chains focused on specific use cases—such as gaming or social media—will emerge.
2. Usability of L1-L2 bridges will see significant improvement
As more Layer 1 and Layer 2 networks develop, our industry will strive to enhance the speed and usability of cross-chain bridges between them. We are likely to see interesting developments in bridge usability in the coming year.
3. Zero-knowledge proof technology will gain more attention
In 2021, protocols like ZkSync and Starknet began gaining traction. As Layer 1 chains become congested due to increased usage, ZK-rollup technology will attract investor and user interest.
We will see new privacy-centric use cases emerge, including privacy-preserving applications. This may draw greater regulatory scrutiny toward the crypto industry, as KYC/AML compliance could pose real challenges for privacy-focused networks.
4. Regulated DeFi and on-chain KYC verification will emerge
Many DeFi protocols will embrace regulation and create separate user pools for those who have completed KYC. Decentralized identity and on-chain KYC authentication services will play a key role in linking real-world identities with DeFi wallets. We will see broader adoption of ENS-style addresses, along with new systems from cross-chain solutions.
5. Institutions will play a larger role in participating in DeFi
Institutions are becoming increasingly interested in engaging with DeFi. First, they are attracted by above-average yield returns compared to traditional financial products. Additionally, the reduced cost of delivering financial services via DeFi presents compelling opportunities for institutions.
However, they remain hesitant to join DeFi. Institutions want assurance that they are transacting only with known counterparties who have undergone KYC procedures. The growth of regulated DeFi and on-chain KYC verification will help build institutional confidence in DeFi.
6. DeFi insurance will emerge
With rapid application growth, DeFi will remain a prime target for hackers. According to London-based Elliptic, losses from DeFi vulnerabilities exceeded $10B in 2021. To protect users from hacks, viable insurance protocols will emerge in 2022 to safeguard user funds against security breaches.
7. NFT-based communities will pose meaningful competition to Web 2.0 social networks
NFTs will continue expanding their use cases. We will see creator tokens or fan tokens playing an increasingly important role. NFTs will serve as digital identities and access passes to the metaverse. Users will gather into smaller communities based on the types of NFTs they own. User-created metaverses will define the future of social networking and threaten today’s centralized platforms.
8. Brands will begin actively engaging with the Metaverse and NFTs
Many brands recognize NFTs as powerful tools for marketing and building brand loyalty. Coca-Cola, Campbell’s, Dolce & Gabbana, and Charmin released NFT collections in 2021. Adidas recently launched a new Metaverse project with Bored Ape Yacht Club. We are likely to see many more innovative NFT marketing campaigns from brands.
NFTs and the Metaverse will become the new Instagram for brands. Just as brands started on Instagram, many may now begin with NFTs. We will also see more celebrities joining the trend and leveraging NFTs to strengthen their personal brands.
9. Web2 companies will awaken and attempt to enter Web3
We’ve already seen Facebook attempt to rebrand itself as a Web3 company. We are likely to see other major Web2 companies venture into Web3 and the Metaverse in 2022. However, many may end up creating centralized, closed versions of the Metaverse.
10. The era of DAO 2.0 is approaching
We will see DAOs mature and go mainstream. More people will join DAOs, leading to shifts in employment models: no formal offer letters, accepting tokens instead of fixed salaries, and working across multiple DAO projects simultaneously.
DAOs will face new challenges around mergers and acquisitions, managing compensation and benefits, and coordinating activities within increasingly large organizations. We will see a surge of tools designed to help DAOs operate efficiently. Many DAOs will also need to figure out how to interact with traditional Web2 companies. Regulators will likely take greater interest in DAOs and seek to understand how they function.
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