Times Are A Changin’: Current Trends & 2022 H2 Predictions for Web 3.0
Closing out last year , the Web 3.0 industry was preparing for a year set to provide the next massive expansion from new technical advances to maturing categories & infrastructure upgrades to recording-breaking metrics in venture capital dollars & active users. On the capital side, the investors poured more than $31.40 billion into companies through the space representing ~5.0% of all venture capital invested for 2021 ($621.0Bn per PitchBook). Non-fungible tokens (NFTs) saw recorded numbers with more than $40.0 billion in transaction volumes across marketplaces, along with decentralized finance (DeFi) seeing total values locked surpass $250.0 billion. With all this activity and more, I defined this time as the beginnings of “The Turning” — the moment when technical adoption becomes the default and decentralization is a target milestone for more than less.
We’ve already outpaced many of last year’s records and my original 2022 Blockchain & dApps predictions only six months into the year. This led me to not only take time for a mid-year moment of reflection on the momentous first six months, but it was clear that Web 3.0’s outlook for the year had changed dramatically. Thus, time wanting to prepare and share my 2022 H2 (second half) predictions for where we are at this moment and what to expect in what looks to be a reshaping time for the Web 3.0 landscape. I’ll revisit this in Q3 2022 for a more in-depth review to continue strengthening my thesis around the future of dApps and the more significant Web 3.0 industry:
The Turning Revisited & 2022 H2 Predictions:
Total Venture Dollars (TVD): $29.175Bn invested in Web 3.0 — *Data from Dove Metrics through June 15th, 2022
My EOY 2022 Prediction For TVD: $39.186Bn (*25% increase YoY)
1.Build mode has become fully activated. While there’s much discussion around a bear crypto market and a new cycle of crypto winter, the industry was already reaching a recording setting of 34,391 developers joining web3 in 2021(per Electric Capital). As more companies and new entrepreneurs focus on improved infrastructures and expanding application features, demand for developers will only increase and could see significant growth by EOY that of 2021 figures. Prediction: 45,750 a 32.3% YoY increase.
2. Regulation takes its place at the Web 3.0 dinner table. Over the last six months, conversations have only intensified across the board around all digital & alternative assets, mining operations, industrial environmental impacts, energy (renewables) usage, the future of stablecoins, and much more. The outcomes and their impact are still to be determined. Government bodies globally are acting swiftly to not only be involved like never before but also set rules, regulations, and standards where they can in the industry — they can no longer afford to sit on the sidelines. The Security & Exchanges Commission (SEC) already had one foot in, but following the UST/Luna collapse, they will be more involved and are prepared to be here for the long haul. An important action to watch around this will be building up towards the pending July 6th announcement by SEC on Grayscale’s GBTC conversion into an ETF. We also have the release of a 70-page crypto regulation bill, known as the “Responsible Financial Innovation Act,” and led by US Senator Cynthia Lummis’s now released (full bill) with great attempts to see it passed before midterms elections in November (2022).
3. Consolidations will ramp up across the industry and throughout the technical stack adding to a company’s offerings and accelerating deployment plans for many. In June, we’ve received a sneak peek into how aggressive M&A activity could get over the next six months with acquisitions by FTX (Bitvo, Embed Financial), eBay (KnownOrigin), Uniswap (Genie), Animoca Brands (TinyTap), Circle (Cybavo), Flexa (Drop Party) along with a merger between Admix & LandVaultand all in a week. I predict that we’ll see mergers & acquisitions soaring to record levels with more participation from traditional enterprises & brands. Additionally, we’ll see a surprising amount of deals between venture & hedge funds, NFT collections (i.e., Yuga Labs acquiring Larva Labs), DAOs, and at least two notable protocol mergers.
4. Stablecoins up and to the right following the aftermath of UST with the industry rethinking the future algorithmic-based stablecoins. I’m expecting that we’ll not only see further introductions of ecosystem-based stablecoins (i.e., USN/Near, USDD/Tron, USDA/Stacks, etc.) but that it’ll become regular practice could lead to the wrapping (i.e., xUSD) of tokens rather than network-native, still TBD. I also predict we’ll see the emergence of bank and traditional financial institutional backed tokens enter the market beyond the central bank digital century (CBDCs) pilots already in progress and due to launch in 2023.
5. Bitcoin will further rise as a network for which more applications (dApps) will look to leverage as their underpinning infrastructure for its security and stability, as well as bridging for the added liquidity. All of this will continue to grow, thanks in part to the networks & protocols such as: Stacks, RSK, Liquid, Lightning Network, Counterparty, and Omni.
6. Gaming will help onboard 5.0+ million new users, each with new active digital wallets, by the year’s end. With blockchain games attracting 1.22 million UAW (unique active wallets) in March 2022, accounting for 52% of the industry’s activity, the use of blockchain games has increased 2,000% from Q1 2021, according to Dappsradar. We can see this as a high likelihood for 2022. Furthermore, business models like “Play-To-Earn” are driving increased adoption faster as they evolve to Move & Learn models. There remains a great demand for improved user experience (UX).
7. Battles of scalability and cross-chain interoperability further emerge. The limit testing of networks has only increased as the applications ecosystem grows and users look toward performance over features. The second half of the year is an important one with many significant upgrades throughout many networks — Hyperchains released for Stacks, Ethereum’s merge targeted for Q3/Q4, Avalanche’s expansion of Subnets, VeChains’s Proof of Authority 2.0 upgrade, the further rollout of Kusama and deployment of Polkdot’s Parachains, and more. I also anticipate we’ll see an explosion of bridging between major protocols teasing the early trials of moving non-native assets cross-chain.
8. Security is a must. In 2021, according to a report by bug bounty service ImmuneFi, the company found that losses resulting from hacks, scams & other malicious activities exceeded $10.2 billion!
The first three months of 2022 saw $1.3 billion stolen from exchanges, platforms, and private entities, with ~97.0% of all cryptocurrency stolen in those months being taken from DeFi protocols, up from 72% in 2021 and just 30% in 2020 according to Chainalysis. This unfortunate trend is only increasing, stressing the importance of security (+audits) and privacy throughout all dApps and protocols.
8. Decentralized Autonomous Organizations (DAOs) have begun to initial outlay frameworks guiding the establishment of early business models, use cases beyond governance, and showcasing the infancy of “on-chain reputations” management, a likely crucial component of our future of work. At the time of writing, we’re currently at 7,9k DAOs(Snapshot) and $7.6 billion in total DAO treasuries (DeepDAO). *Bold prediction, we’ll see two early-stage pilots launched by EOY with DAOs as trialing replacements for the new Nation States.*
9. Non-Fungible Tokens (NFTs) will take to evolving beyond the infancy stages of the category-leading towards the build-out of required tooling and improved infrastructure, ushering in an increase in scalable real-life trials (ticketing, music, fan engagement, bio-samples, identification, etc.). Even with the technical stack developed thus far and transaction volumes of $37.0 billion as of May 1st, putting the category on track to surpass 2021 records before July 2022, NFTs themselves will not yet be ready for mainstream adoption, and that’s OK. The pieces are falling into place for a 2023 takeover. Furthermore, an area of interest I’m curious to see develop and over is Vitalik Buterin’s non-transferable (initially public) “soulbound” tokens (SBTs) concept which could correspond to a series of aliations, memberships, and credentials all centered around a future “Decentralized Society” (DeSoc) & Crypto Cities (ex. CityCoins).
10. My last prediction for the year’s second half is that we will drop the term “Web 3.0.” A more that seems inevitable for the industry, more a case of when. The internet and our digital lives on it are evolving. The latest iteration is just beginning to take shape and will be around for some time — even though Jack Dorsey calls for Web 5.0 and others are chattering about “Web 4.0.” Soon the stages (Web 2.0, Web 2.5, etc.) will become mere reference points similar to that of the phase changes between industrial revolutions (i.e., 1.0 > 4.0).
Please reach out if you’re building a dApp, Web 3.0 infrastructure surrounding the themes above or want to discuss more of our decentralized future.