Predictions for 2022: The cryptocurrency industry has garnered substantial mainstream attention throughout 2021. These developments pave the way for a brighter future in 2022.
KuCoin Labs recently released a market report. It identifies potential trends and forecasts that may be implemented in the coming months.
Infrastructure constraints remain an issue
Even as competition among infrastructure providers heats up significantly in 2021, there are still significant hurdles that need to be addressed. For example, Ethereum (ETH) remains the top blockchain for dApp development, yet suffers from network congestion and high transaction fees. Many layer-2 solutions address this issue, yet it remains challenging for them to gain long-term traction. This also applies to most “Ethereum competitors”, as they are all still in an immature state today. It is necessary to remove these limitations by 2022 and onwards.
Many expect the launch of Ethereum 2.0 to help ease some of the concerns. Its sharding implementation addresses network congestion, transaction fees, and low throughput. Unfortunately, this rollout will take place in several phases, and it may not reach its final shape in 2022. Other networks – Binance Smart Chain, Solana and Avalanche – will continue to attract users and developers as long as Ethereum remains a bottleneck.
However, it is important to note that layer-2 solutions will follow a similar path to Ethereum. It is only a matter of time until gas prices on these layers begin to rise rapidly, making them a less favorable solution to avoid Ethereum’s transaction fees. Unless developers find innovative solutions, it will also affect any cross-chain bridges using layer-2 networks.
NFT and Metaverse Efforts in 2022
The role of non-fungible tokens (NFTs) in the metaverse will become more apparent in 2022 and beyond. The current NFT market is being segmented into art, collectibles, and gaming. But new initiatives and vehicles using the non-fungible token standard will hit the market. In addition, NFTs will support various metaverse activities, including avatars, virtual spaces, economic activities, etc. In short, the metaverse can help finalize the application scenarios of NFT development, while the non-fungible tokens fuel the metaverse development.
are talking about metaverse, it mainly revolves around gaming today. However, technology has tremendous potential to blur the line between the activities of the real world and the virtual world. Projects building your own, walled-off metaverse is an essential first step in reaching that goal. A major obstacle would be to connect these virtual worlds, which would eventually result in a multi-metaverse.
Two other metaverse trends look forward to include the role of DeFi and cross-chain bridge, Decentralized finance has proven to be efficient and stable, making it a strong foundation for economic metaverse activity. Furthermore, DeFi and NFTs make a solid combination and are applicable to many metaverse use cases. The metaverse equates to user empowerment. Accommodating more diverse assets, products and services paves the way for broader financial inclusion.
Developers can make a lot of progress on the cross-chain bridge front for the Metaverse. The current initiative focuses on a single blockchain, creating the “ecological island” problem. Furthermore, most public chains struggle on the infrastructure front, reducing the appeal of Metaverse projects to leverage their technology. Cross-chain bridges can overcome these challenges and offer improved efficiencies for metaverse, NFTs and decentralized finance alike.
Predictions for 2022: regulatory trends
As in previous years, regulation of the cryptocurrency industry remains an important topic. Most countries around the world have yet to decide on this front. The lack of a clear framework can stifle innovation, which should be avoided at all costs. This industry becomes even more difficult to regulate due to innovative concepts like DeFi, NFTs, Metaverse, etc.
Regulators and policy makers will need to focus on creating a legal framework for the metaverse. The technology has attracted mainstream attention from enthusiasts and many companies. Clear guidelines on what can and cannot be done in the virtual world will help legitimize these efforts. Analysts at KuCoin Labs expect things to improve significantly on this front. Further, the report indicates early implementation of certain guidelines by policy makers. This could affect decentralized identifiers, which are an identification method for a metaverse usable in a variety of activities.
Predictions for 2022: DeFi regulation
Decentralized finance will undoubtedly attract interest from regulators as well. However, protecting investors without compromising on innovation and decentralization remains a major obstacle. Additionally, current regulatory guidelines may not apply to the DeFi industry. As a result, a new regulatory model The SEC, BIS, or FATF may be required depending on the industry’s view.
Furthermore, the governance of the DeFi protocol presents a unique regulatory hurdle. Larger token holders get more voting power, introducing a degree of centralization. to achieve decentralized governance So far proven nearly impossible, yet decentralized autonomous organizations (DAOs) can provide relief. KuCoin Labs expects DAOs to be a major trend in DeFi for 2022, although new mechanisms may emerge.
A final topic to consider is integrating decentralized finance with KYC requirements and user privacy. Some degree of regulatory compliance will need to be found. Permitted DeFi solutions, like Aave Arc, are a trickier approach to this problem. However, the KuCoin team expects both institutional and non-institutional DeFi users to comply with the rules sooner or later. on-chain KYC Might be an option, though developers may explore other ideas this year.
Predictions for 2022: Blockchain Security Outlook
The year 2021 was once again filled with several blockchain security incidents. From DeFi rig pulls to exchange hacks and smart contract exploits, something needs to change in 2022 and beyond. Unfortunately, this is very easy to do, especially since blockchain transactions are irreversible. Additionally, there is no real “protection” for affected users, although insurance protocols may provide a solution.
Code auditing needs to become the norm in the wider blockchain industry in 2022. Very audit trail Firms that have established their presence include CertiK, SlowMist, and others. An audit can help uncover any bugs or issues before smart contracts are deployed in a live environment. As auditing firms become better funded, they will help eliminate more risks in the blockchain industry. However, it is up to the developers and coders to check their code, and not everyone will.
Insurance protocols can provide an additional layer of safety and security. Many such protocols exist in DeFi today, and they mainly focus on mutual fund pools or financial derivatives. Unfortunately, their growth has been hindered by high fees, KYC requirements, cross-chain support, and inefficient capital usage. Still, as per the report, better and more efficient would be needed to attract institutional players. insurance protocol.
There is one final aspect to consider transaction confidentiality, Public blockchains provide pseudonymity, but not privacy or anonymity. Even privacy computing protocols – Manta, Oasis, zkSync, etc. – sacrifice decentralization in favor of computing power. As the wider blockchain and cryptocurrencies grow, the demand for privacy of transactions will increase, which will require more and better privacy computing initiatives.
The Year Can Be Challenging, But Productive
The year 2022 could bring many much-needed changes to the wider industry. The ongoing development to mainstream decentralized technology is an opportunity that deserves attention. But unfortunately, some regulation will be needed to convince this innovation to a mainstream audience. Whether regulators will ultimately make tough decisions is not clear, but they cannot delay these decisions forever.
Industry-wise, it is important to address the existing infrastructure bottlenecks. Innovative ideas such as DeFi, NFTs and Metaverse cannot be realized through existing infrastructure. Huge inefficiencies and high costs need to be eliminated without compromising on decentralization.
There is much to look forward to in 2022, but much more remains to be done.
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