The Future of Crypto: Top Trends to Watch
The crypto industry is barely a decade old. After the Bitcoin Protocol was launched early in 2009, it took several years for blockchain to gain traction, and for the first few years crypto was a niche technology, ignored by all but a handful of enthusiasts and early adopters.
That began to change in 2017, when a surge of interest saw both new platforms funded and launched, and a new speculative bubble. After the inevitable Crypto Winter – an extended period of falling prices and low confidence – the coronavirus pandemic provided a new catalyst for further innovation and interest. 2021-2022 brought unprecedented growth, adoption, and awareness, as well as another wave of scandals and a new crash.
Today, crypto is establishing itself as a mainstream technology and a new asset class. While there is still plenty of uncertainty, not least from the regulatory perspective, blockchain’s value proposition is becoming clearer all the time – as are the key use cases, developments and trends to watch over the coming months and years.
Decentralised Finance (DeFi)
The decentralised finance (DeFi) sector arose as Ethereum developers experimented with applications that provided financial services that – unlike the traditional financial sector – did not rely on centralised parties.
These decentralised applications, or dApps, provide a wide range of features. Some of the best-known platforms and protocols were established in the boom of 2017, or shortly afterwards. Functionality offered by the DeFi sector includes:
Decentralised exchanges (DEXs), which enable users to swap tokens trustlessly. Examples include Uniswap and Sushiswap on Ethereum mainnet. Every major blockchain or Layer2 has at least one DEX.
Lending platforms like Aave and Compound, which allow users to borrow digital assets against other tokens they post as collateral.
Stablecoins provide a store of value while allowing users to keep funds on the blockchain for use in DeFi. Centralised, fiat-backed stablecoins include USDT and USDC, while MakerDAO’s Dai is a decentralised stablecoin.
The rise of yield farming has enabled holders to earn on their assets by providing liquidity to these services.
Because DeFi protocols are open, anyone can access these services with just an internet-connected device. As a result, DeFi has proven a killer use case for blockchain, and has attracted a lot of attention from the wider financial sector.
Non-Fungible Tokens (NFTs)
NFTs have also become one of the stand-out success stories for blockchain technology. Non-fungible tokens are unique or limited-edition, indivisible tokens that can be used to represent digital or physical items. While the idea has been around since 2014, when the first NFT was minted, from 2020 they have soared in popularity as a way to trade digital art. A boom in sales and trading volumes accompanied wider interest in blockchain, with some works of virtual art changing hands for millions of dollars.
However, NFTs offer far greater functionality than this. They are a critical technology for Web3 (the name given to the next-generation, decentralised internet), enabling proof of digital ownership and underpinning user-controlled digital identity. As well as representing digital property like images, in-game items, domain names, and more, they can be used as a kind of key for restricted services or exclusive communities, like a subscription or access pass.
NFTs have therefore become one of the fundamental technologies of the metaverse – the immersive, graphical, socially-driven interfaces for Web3 platforms, games, and services. Meanwhile, NFT marketplaces like OpenSea and Blur have become more and more important.
Interoperability
Blockchains are siloed by design. They are built to establish consensus between a set of nodes following exactly the same rules. To maintain security, each blockchain has its own network, and ignores everything that takes place outside of it.
This makes it very difficult for external attackers to compromise the blockchain and process fraudulent transactions. It also means that each blockchain is its own isolated ecosystem. However, it’s vital that chains can communicate with each other, so that liquidity can move around the wider blockchain ecosystem, and dApps can use multiple protocols on different chains. Without that ability, the DeFi world becomes fragmented, each chain its own island.
There are different approaches to interoperability between chains. An important development is the creation of oracle networks, which feed external data into blockchains for dApps to use – whether that information is market data, weather conditions, the outcome of sports or political events, or data from another blockchain. To enhance security, these oracle networks must also be decentralised, otherwise they introduce a single point of failure to dApps.
Solutions like Chainlink and Razor Network provide oracle networks to achieve this aim. Chainlink’s cross-chain interoperability protocol (CCIP) goes a step further, linking different chains and allowing developers to build multi-chain apps. Ultimately, such cross-chain solutions will power meaningful retail adoption. Regular users won’t care which chain they are connected to; they just want to use a DeFi app and be connected automatically to the best chain.
Privacy And Auditability
Privacy and anonymity have always been important themes for the crypto community. Bitcoin has strong connections to the Cypherpunk movement, which advocates the use of strong encryption as a means of addressing financial surveillance and the loss of privacy that arises in the use of digital platforms.
However, blockchains are a transparent public record of transactions, and can be audited by anyone. Bitcoin is not anonymous, as many criminals have found out, and funds can be traced as they are moved from address to address. Other cryptocurrencies are designed to offer enhanced privacy solutions. Monero, for example, uses ring signatures (a special form of cryptography) to obscure the trail of transactions. However, this has been so effective that Monero has been widely adopted as a currency for illegal transactions on the darkweb. Some regulators have banned it, leading many exchanges to delist it.
Other solutions allow opt-in privacy, meaning that transactions are obscured from the public, but can be selectively revealed to other parties if the user wants.
As crypto gains traction, the privacy implications will only become more significant. Anticipating this, Litecoin – one of the earliest and still most popular cryptos – recently added the option for confidential transactions.
The Growing Impact Of Crypto
There’s no question that crypto and blockchain had an impact on the financial sector and the wider economy. Just a few case studies include:
The role of bitcoin as a hedge in the recent banking crisis. As both retail traders and institutions realise their money may not be safe in banks, many have allocated a portion to BTC, which they can fully control and which has a limited supply, making it potentially resistant to inflation.
NFTs have had cross-over appeal, with mainstream auction houses, galleries, brands and influencers exploring the technology.
Institutions, including investment banks and hedge funds, are exploring opportunities in the DeFi space. More and more banks and brokerages are offering exposure to crypto assets, too.
Numerous countries are exploring blockchain-based central bank digital currencies (CBDCs), and even rolling out pilot schemes.
Navigating The Crypto World
The adoption of blockchain is like that of any successful technology. It tends to start slowly, before a period of rapid innovation and adoption, before the rate of growth again slows. At this point in the ‘S curve’, it has become a part of everyday life. Email, the internet, e-commerce, mobile phones, and social networking all followed the same pattern.
In five to ten years time, blockchain will have progressed through this adoption curve and will be embedded in the apps and services we use every day. Many people will not even realise (or care) they are using crypto. It will just be built in.
However, the growth of the crypto, blockchain and Web3 sector means there are opportunities for those who are prepared to upskill and forge a new career for themselves. As a starting point:
Learn all you can about blockchain and crypto.
Understand how your existing skill set can be used in the crypto world. Are you a developer, marketer, communicator, graphic designer, lawyer, and so on – and what roles are available for each of these? Check LinkedIn and other popular jobs sites to see what opportunities are out there for someone like you.
Upskill using online courses, internships, entry-level jobs, or part-time work/gigs, or by engaging with relevant online communities. For example, as a developer, you might build on your familiarity with one or more programming languages by exploring smart contract development and learning Solidity. As a marketing specialist, you might check out some of the strategies and methods that are popular in the crypto world, such as the importance of airdrops and Crypto Twitter.
If you’re looking to invest in new projects, then having a basic understanding of crypto technology is vital, as well as knowing how to do due diligence on different projects and organisations. That can be quite a different process than in the traditional investment sphere, for various reasons.
It’s quite normal for individuals and teams to remain anonymous, for instance, though a doxxed team doesn’t necessarily increase a project’s chance of success. On the other hand, the emphasis on building engaged communities via platforms like Discord means that you’ll probably have far more direct access to the team than you ever would in TradFi, so you can ask questions and even get involved in helping out if there are suitable roles.