What Are The Perspectives for Blockchain in 2022?
As the year 2022 is off to a start, cryptocurrency experts are now voicing their 2022 expectations about possible trends in the blockchain space. Although opinions vary widely, there is still an overall consensus regarding a number of different cryptocurrency products.
According to Tascha Che, a Ph.D. holder in macroeconomics and the founder of Tascha Labs, newer Layer-1 blockchains, such as Avalanche (AVAX), Solana (SOL), and Terra (LUNA), will continue their exponential growth in 2022, although Ethereum’s scalability is expected to improve.
Tascha believes that it is quite difficult to make enough progress with upgrading a huge network like Ethereum, due to which Ethereum is expected to keep struggling with its existing troubles like the low transaction output and the astronomical gas fees.
Ethereum’s dominance in the total value locked (TVL) in smart contracts has fallen from 100% to %63 in 2021, which is currently at around $158 billion according to data from DefiLlama.
Terra has taken the second spot now in DeFi wars in terms of the assets under its management at $18 billion of TVL. It is currently followed by the Binance Smart Chain at $17 billion of TVL.
Solana and Avalanche share the third and fourth spots, which hold $11.9 billion and $11.8 billion of TVL in their blockchains, running almost neck to neck with each other.
In 2022, several additional blockchains are expected to take additional market share from Ethereum including Cosmos, Near, and Polygon.
According to experts, there will be increased use of cross-chain bridges in 2022 between layer-1 and layer-2 blockchains. During the last months of 2021, there has been a lot of investments in cross-chain bridge technology with which users are now able to exchange between a myriad of different blockchains.
Cross-chain bridges allow users to perform a large variety of DeFi operations. Bridges most usually connect to the Ethereum network because they possess Ethereum’s Virtual Machine (EVM) compatibility.
As of today, the TVL locked in different bridges has amounted up to $7.6 billion, which constitutes more than a 100x increase year-over-year.
Some of the largest cross-chain bridges are:
Wrap Protocol Bridge
The Wrap Protocol Bridge is a bridge launched on the Tezos blockchain. With the Wrap Protocol Bridge, users are able to bridge with the Ethereum blockchain as a collective team. The bridge allows Tezos users to wrap ERC20 and ERC721 tokens, so that they can leverage these wrapped tokens in different DeFi applications.
Binance Smart Chain Bridge
The Binance Smart Chain (BSC) is the second largest blockchain after Ethereum but it is also compatible with Ethereum. BSC offers the same smart contract functionality as Ethereum while alternatively charging way much lower transaction fees compared to the Ethereum network.
Using BSC’s custom cross-chain bridge, Binance Chain users are able to switch from the native BNB chain to the BSC chain.
Wormhole Token Bridge
The Wormhole Token Bridge is launched on the Solana blockchain in September 2021. The Wormhole Token Bridge connects Ethereum and Solana with each other so that users can interchange assets across both blockchains.
According to Dune Analytics, the Wormhole Token Bridge has around $400 million of TVL parked on the bridge right now.
With the Avalanche Bridge, Avalanche (AVAX) participants are able to bridge their AVAX assets to Ethereum by utilizing the cross-chain capabilities of the online Avalanche wallet.
Avalanche wallet users can exchange their crypto assets between the Avalanche and Ethereum networks in return for a very small fee.
Zero-Knowledge Proof Protocols
Zero-Knowledge Proof (ZKP) protocols are intended to overcome the future regulatory compliance laws in a decentralized way. Regulatory pressures are increasingly coming to surface following the explosive growth of the DeFi industry in 2020 and 2021.
A ZPK protocol is a proof methodology on a blockchain, by which the proving party states to the verifier that a given information is true without providing any proof. In that case, if the proof of the information requires the disclosure of some confidential information by the prover, the verifier will not be able to prove the information to any other party without possessing that confidential information.
Zero-Knowledge Proofs are expected to gain more traction while transacting on the blockchain due to the expectation of intensified government regulations for the DeFi space.
One of the popular ZPK projects that could be worth keeping an eye on is Polygon Zero. The protocol seeks to build scalability and security together.
ZKPs may be a game-changer for the earlier standards established by Bitcoin and Ethereum since keeping the crypto ecosystem decentralized is the most crucial thing for crypto projects to keep evolving in the future.
Hacks, exploits, rugpulls, and smart contract failures in the DeFi space have so far resulted in hundreds of million dollars of funds lost for the DeFi users. Some of the notable hacks and exploits from 2021 were the Nexus Mutual hack, the EasyFi hack, the Poly Network heist, and the Vulcan Forged exploit.
Although DeFi insurance has still not gained any popularity in the industry, it is eventually expected to receive significant adoption in the ecosystem starting in 2022.
Insurance makes up for around 25% of the traditional finance system so it constitutes the bedrock on which the entire finance industry is built. In that sense, cryptocurrency insurance is also expected to become a major component of the DeFi industry going forward.
Risks unique to DeFi include smart contract risks, decentralized governance risks, and oracle risks. There are a number of crypto insurance projects in the market that seek to provide protection against these risks. Some of the largest ones are Nexus Mutual, Bridge Mutual, Armor, and InsurAce, all of which have their own native cryptocurrency.
However, the expectation is that retail users will not go and buy insurance products themselves like those offered by the above-mentioned projects, but instead, there would be a need for existing Defi protocols like the Aave to integrate an insurance module into its platform so that users can buy insurance on the go.
More Brands Join the Metaverse
Metaverse is marketed as the next big thing in the blockchain industry, due to which a number of globally famous brands have joined the wagon in order to not miss out on the opportunity. Adidas, Balenciaga, Charli Cohen, and Dolce & Gabbana were to name a few.
Sportswear brand Adidas officially entered the world of a metaverse in December by organizing an NFT collection sale there. There was a huge demand for the sale. All pieces of the collection were sold in a matter of 24 hours. According to Decrypt, Adidas generated a turnover of $23.4 million.
In 2022, this movement is expected to gain much traction with popular fashion brands around the world rushing to join the world of metaverse by buying virtual plots of land and marketing their virtual products therein in the form of NFTs.