10 Predictions For Blockchain, Crypto Assets, DeFi, And NFTs For 2022

Frankfurt, January 12, 2022 – Last year, the market capitalization of cryptocurrencies reached $3 trillion USD for the first time. At the beginning of the 2021, it was less than $800 billion USD. DeFi now has a total value locked (TVL) of $100 billion USD on Ethereum alone. But NFTs have been the most surprising, flanked by complementary areas like metaverse and GameFi. Who can claim to have foreseen these developments? Looking into the future is notoriously difficult. Nevertheless, we dare to make predictions for the year 2022. It will be exciting to see whether they come true.

1. Bitcoin price reaches $100,000 USD and the crypto asset market grows in breadth and depth

Rising inflation rates make scarce assets like Bitcoins (BTCs) increasingly attractive. Bitcoin is not only the oldest, most decentralized, and best-known cryptocurrency – a distinctive feature compared to other cryptocurrencies is its limited supply of 21 million BTCs. Against the backdrop of Bitcoin’s institutional adoption and the greater demand that comes with it, it is very much within the realm of possibility that the BTC price will rise to more than $100,000 USD this year.

But the overall crypto asset market will also grow. Since the beginning of 2021, the USD prices of the largest 20 cryptocurrencies listed on CoinMarketCap by market cap have increased by triple digits. It is noticeable that many native cryptocurrencies from alternative Layer-1 blockchain protocols (Alt-L1s), which are traded as potential Ethereum killers (such as Solana, Binance Smart Chain, Cardano, Polkadot, Avalanche), are among the top 20. Of course, investments in the crypto asset market are riskier than traditional investment opportunities, partly due to higher price volatility. Nevertheless, it is fair to contrast the price performance of cryptocurrencies with those of well-known market indices. For example, the MSCI World Index is only 17% higher than it was at the beginning of 2021, and the gold price trend is currently negative. Also, the increasing number of wallet addresses, for example, measured by monthly active users of the MetaMask wallet (10 million active monthly users currently), indicate that demand for crypto investment opportunities will continue: DeFi offers double-digit interest rates through liquidity provision, lending, and staking, whereas banks in developed countries quite often offer less than 2% on savings.

2. Ethereum undergoes upgrade and remains the dominant smart contract platform

Ethereum is expected to complete the transition to the proof-of-stake consensus mechanism this summer. It is also likely that financial institutions from the TradFi sector will enter the staking business. Staking rewards could thus become a kind of “prime rate” of the crypto asset market, as one can rarely invest in this market in a more risk-free way than through ETH staking. Here, one has the option to set up one’s own staking infrastructure or to resort to staking services such as those of Coinbase or Blockdaemon, for example. In terms of price development, ETH continues to have great potential, as do other Alt-L1 tokens. Although the share of those protocols and tokens that are mapped to Ethereum-based DeFi and NFT is decreasing, Ethereum still carries the largest transaction volume.

3. Crypto investments become more sustainable

Issuers of ETPs, crypto exchanges, mining companies, and financial institutions are interested in offering green products and services to their customers. To date, many potential crypto investors have been reluctant to invest in Bitcoins due to the relatively high carbon footprint of Bitcoin mining. Often, interested companies are also subject to ESG regulations that they must follow.

However, there are models that calculate the required climate compensation for Bitcoin-based products for providers of crypto investments. For example, a recent study by the Frankfurt School Blockchain Center outlines how a Bitcoin transaction, as well as holding bitcoins, can be offset by the purchase of emission allowances from the European Emissions Trading System (ETS). In the former case, $18 USD is required to offset CO2 emissions. In the latter case, emissions allowances must be purchased for $100 USD assuming one holds a Bitcoin for a period of one year. It can be assumed that the prices for CO2 emissions will increase significantly in 2022.

Overall, the energy mix used for blockchain network operations is becoming increasingly green. Not only have mining companies pulled out of China after the crackdown on the country’s mining industry. Mining companies are increasingly tapping renewable energy sources, such as geothermal or solar energy, because of the cost structures such energy sources offer.

4. Web3 infrastructure paves the way for the decentralization of the internet

Web3 represents a novel approach to potentially delivering internet architecture in a decentralized and autonomous way using blockchain technology. At its core, it is about reducing dependency on large “big tech” networks and IT service providers, such as cloud or internet providers, as they often handle the collected data in a non-transparent manner, represent a “single point of failure” and can operate a partly arbitrary product and pricing policy due to an oligopolistic market environment.

Web3, on the other hand, is based on the idea of putting the users of the internet back in control of data and infrastructure. From decentralized data storage via blockchains such as Arweave or Filecoin, decentralized wireless networks such as the Helium network, tokenized platforms, and projects where all decisions are made by the community, to completely new ways of identity management – Web3 offers a wide range of possibilities. Cryptocurrencies are particularly important in this context because they can provide a sustainable incentive system that encourages network users to provide the required infrastructure over the long term.

5. NFTs and blockchain-based gaming become a source of income

The Metaverse is a virtual platform on which people can collaborate and trade economically. These digital economies are hard to imagine without NFTs and blockchain-based infrastructures. The year 2021 represented a turning point in “GameFi” with Axie Infinity and the launch of the Ronin sidechain, which enabled the throughput necessary to allow one million active players to participate in the Axie Infinity universe in August 2021. Especially in the Philippines, Axie Infinity, developed by Sky Mavis, has become a source of income for many.

Microsoft and Facebook have announced that they are setting up their own approaches to digital worlds, i.e., “metaverses”. It can be assumed that these internet giants will develop a largely centralized, partly closed system, so that value transfers to other digital ecosystems will be made more difficult or even impossible. However, this is diametrically opposed to the philosophy of Web3, which focuses on individuals with clearly defined property rights and freedom of action with the help of blockchain technologies.

It remains exciting to wait for the dawn of the multi-chain world. Once value transfers are seamless across different crypto-universes, this could spur a new wave of adoption, and the NFT and blockchain-based gaming economy, in particular, could receive a further boost. In emerging economies, the employment sector could undergo structural change. Such an interconnected economy could arguably be considered a “meta-metaverse.” What sounds like it is a long way off could become reality quite quickly, i.e., in 2022, especially in certain areas of gaming.

6. Emergence of a multi-chain world

The debate about which smart-contract-enabled blockchain ecosystem will prevail has slowly come to an end in 2021. The prevailing opinion is that we will live in a multi-chain world in which multiple…