Season 13 usually marks the end of all plot lines except for the most absurd. We can lose track of who is mad at whom and for what reason, like characters in long-running soap operas. I believe two themes will shape the blockchain landscape in the coming year, despite the meme-induced fog of propaganda that separates Bitcoin maximalists from Ethereum boosters.
To begin with, Ethereum is the most important aspect of 2022. There is a lot of innovation and essential activity occurring in the Ethereum ecosystem right now in the world of blockchain. For the Ethereum ecosystem, I see three key trends driving growth in the coming year.
In the future, communities, missions, and enterprises will converge into a single entity, the decentralized autonomous organization (DAO). Despite DAOs being around since 2013, I believe 2022 will be the year they become the preferred format for developing new entities. The following year will also be necessary for DAO governance, as people get more comfortable exercising their voting power through stakes and delegating their voting power to experts. As a result, traditional markets could also experience shareholder revolutions in the future.
A second trend will be the continuous integration between mainstream finance and decentralized finance. Previously, I predicted (incorrectly) that with the advent of the Defi ecosystem, at least one central existing centralized finance platform (Ceci) would offer users access to the platform. This prediction for 2022 continues to hold actual (better late than never). As providers strive to meet regulatory requirements without introducing centralization, we’ll also see the emergence of some decentralized identity management components that add a layer of knowing your customer (KYC) to Defi.
The Ethereum ecosystem goal is now visible, and that is most important. Currently, Ethereum is transitioning to Proof of Stake, resulting in users moving from layer 1 to layer 2. In 2022, Ethereum will primarily serve as a platform for interfacing with other blockchains (layer two networks). Ethereum will serve as the foundation for a multichain future.
It should come as no surprise to anyone. Everything on the internet runs similarly. In addition to being the standard networking language for the internet, Transmission Control Protocol/Internet Protocol (TCP/IP) is the common networking language for nearly all private networks. A very heterogeneous world of networks was connected up using TCP/IP early in the internet era, including a host of proprietary enterprise protocols, such as DECnet, Systems Network Architecture (SNA), XNA, NetWare, VINES, and Token Ring, a personal favorite. The protocol wars are described in detail here.
In time, networks standardized until they are all the same now – TCP/IP networks connect other TCP/IP networks today. This will continue.
Just the beginning
In keeping with the second mega-theme of 2022, it is the end of the beginning. Mass adoption will take another 10-15 years if the cloud is any indication. In my opinion, the uncertainty over the platforms upon which this growth will occur and the most significant, most enduring players must now end.
The Ethereum ecosystem itself has been a big winner. There’s still a lot of uncertainty surrounding which ecosystem will win the layer two challenges, but Ethereum’s ecosystem would also win regardless. It is difficult to argue against Ethereum’s dominance in developer skills and participant capital, and I do not think alternative platforms can unseat the king.
“The history of technology ecosystems shows that, once a market enters the mass adoption phase, it’s tough to dislodge the early leaders.”
The second biggest winners are the Ethereum ecosystem’s native market leaders, especially Defi and DAOs, and non-fungible tokens (NFTs). The Ethereum ecosystem has found at least three killer applications that will drive adoption and growth for decades to come. Although mass adoption is still in its early stages, enterprises and DAOs already positioned well in these markets will likely reap the most growth rewards in the coming years.
Once a market has entered the mass adoption phase, it is rare for its early leaders to dislodge it. Although successful new entrants sometimes gain traction, it’s not common. Even after ten or twenty years, the early market leaders still dominate. Today’s biggest DAOs and protocols will look different in 15 years, so trying to imagine what the future will look like will give you a good idea of what will happen. Using this growth rate would be 50-100 times larger today.
Bash-the-regulator might be a fun game to play on social networks, but in reality, everyone wants clear rules. While current conditions seem chaotic, there will likely be positive developments in the coming year because of the regulatory focus on stablecoins and Defi.
Although there will be plenty of other stories to be told during 2022, I do not believe that they will affect the year in its entirety. No good story or prediction would be complete without the villain.
In this story, I have already cast regulators as the white hats. But there are two potential spoilers for 2022. Firstly, zombies. Layer 1 blockchain zombies are sitting on piles of cash, refusing to accept defeat from Ethereum.
The Ethereum killers who failed. They plan to fight off irrelevance with high cash outlays to developers despite irrelevance. Joining ’em makes a lot of sense if you can’t beat them, so I wouldn’t be surprised to see them rebrand as layer two networks. Those activities are already underway; however, expect them to become even more urgent in the coming year.
When it comes to blockchain stories, insiders are the most reliable villains. Many prominent personalities in this industry and often angry memes fuel it. There is always the risk that we will be our own worst enemy. In our industry, we are known for picking fights we can’t win (with government officials, for instance), vicious spats on social media (mostly harmless), and, of course, endless technical fights over obsolete details. Hopefully, we won’t have to go that far.