2021 has been an eventful year for Bitcoin and the wider blockchain community. The decentralised currency has transitioned from a speculative asset to a widely accepted token that spans popular culture and investment decisions.
In this article:
- The institutional adoption of Bitcoin
- Bitcoin goes green
- NFTs set to explode
- Web 3.0 powered by NFTs and crypto
- Blockchain in the metaverse
Riding this wave, Bitcoin and Ethereum have recorded their highest ever prices this year. Within the Ethereum ecosystem, we're also seeing alt-coins like Solana and Polkadot power through the indices exponentially.
Over on the NFT spectrum, we are just scratching the surface. The wider potential of this asset class — especially its applications across Web 3.0 technologies and Metaverse — seem virtually limitless.
With rising chatter about Bitcoin's potential to become the most valuable global asset in 2022, the world’s eyes are firmly trained on crypto and its peers in the blockchain ecosystem.
Here are five trends to look out for the in crypto space in 2022.
The institutional adoption of Bitcoin
In September 2021, El Salvador made headlines when it became the first country to adopt Bitcoin as legal tender.
In addition, the country has set in motion a plan to build a 'Bitcoin City' near the Conchagua volcano, where geothermal energy will be harnessed to power the city and its crypto mining operations.
In Australia, the country is preparing for a massive overhaul of its crypto regulations, with a new licensing framework and a retail central bank digital currency in the pipeline.
Federal Treasurer Josh Frydenberg said the government planned to legislate "the largest reforms to our payments systems in a quarter of a century".
Across the ocean, we are likely to see the Eurozone roll out its crypto regulations — the Markets in Crypto-Assets (MiCA) framework, which defines digital assets as “digital representations of value or rights which may be transferred and stored electronically, using distributed ledger technology or similar technology".
In the banking sector, Morgan Stanley (NYSE:MS) became the first large US bank to offer its wealth management clients access to Bitcoin funds.
Early in the year, even the world’s largest asset manager, BlackRock (NYSE:BLK), Inc took baby steps by introducing crypto exposure in two of its funds.
Looking ahead, as more countries and organisations begin to accept and adopt crypto, the snowball effect will compel institutions to explore how they can embed this emerging industry into their financial system and economy.
Bitcoin goes green
In turn, the surging demand for Bitcoin has become a growing concern for environmentalists globally, as crypto mining — especially bitcoin mining — is energy-intensive by design and relies on the efforts of a decentralised array of high-performance computers (known as miners) across the world, which consume an unsustainable amount of energy.
Shockingly, Bitcoin has a carbon footprint comparable to that of New Zealand, producing 36.95 megatons of carbon dioxide annually, according to Digiconomist’s Bitcoin Energy Consumption Index.
2022 will see several large cryptocurrencies like Bitcoin and Ethereum looking for greener solutions, with the possibility of transitioning to a less energy-intensive proof-of-stake consensus algorithm from its existing proof-of-work blockchains.
Promisingly, several tech companies have joined hands in a collaborative mission to create greener cryptocurrencies and make the blockchain more energy-efficient in the near future.
NFTs set to explode
NFTs were one of the major game-changers in the blockchain world for 2021 and are still expected to be one of the most disruptive technologies in the new year.
Revix investment analyst Brett Hope Robertson says NFTs and the ecosystem around them are a key trend to watch in 2022.
“The NFT space is developing into areas that help many, from individual artists to companies and everything in between," he explained.
“It’s an exciting development that has created a marketplace for digital properties, and we can see from the NFT volumes being traded that this is not a passing fad.”
What's more, the Frankfurt School Blockchain Centre (FSBC) says the market for tokenised assets in Europe will grow to $1.5 trillion within the next three years.
Tokenisation refers to the method of assigning unique digital tokens that represent ownership to any kind of digital asset — be it equities, real estate, debt, bonds, copyrights, art or collectables.
Looking ahead, 2022 will see an augmented NFT 2.0 model, which will be less about art and more about utility, gaming and gaining access to super exclusive and desirable communities.
Web 3.0 powered by NFTs and crypto
Presently, Web 2.0 is powered by disruptive technologies such as mobile internet and social networks.
But Web 3.0 breaks ground into a new frontier, adopting new facets like blockchain and deep web technologies.
These are designed to give users control of their data and make the internet more decentralised, verifiable and secure.
The ethos surrounding Web 3.0 aligns with what the inventor of the internet, Dr Tim Berners-Lee, thought the third generation should be.
He believed no permission should be needed from any central authority to post on the web, there should be no central controlling node and no single point of failure, nor should anyone have a ‘kill switch’ on the internet.
“This also implies freedom from indiscriminate censorship and surveillance,” says Berners-Lee.
Coined by Ethereum Co-founder Gavin Wood, Web 3.0 has garnered a lot of attention.
This new iteration of the internet is powered by blockchain technology, where people control their data and bounce around from social media to email to shopping using a single personalised account, creating a public record on the blockchain of all of that activity.
Cryptocurrencies and NFTs have a leading role to play in this transition, where the tokenisation of all entities will be supported by NFTs and crypto will become the backbone of decentralised tender.
Robertson adds: “Expect to see huge advances in Web 3.0 technologies and cryptocurrencies that support these technologies.
"This is going to be a huge growth area to watch in 2022.”
Blockchain in the Metaverse
The Metaverse has been a hot topic recently, with Facebook and Microsoft both staking claims in this potential online virtual universe, powered by augmented and virtual reality technologies.
The term was coined by Neal Stephenson in his cult science fiction novel 'Snow Crash', where he envisioned virtual, lifelike avatars who congregate in realistic 3D virtual reality environments.
Notably, crypto, NFTs and the wider blockchain technology will be key to growing the metaverse, where ownership of identity, utilities and access to environments will be at the crux of this virtual world.
Goldman Sachs (NYSE:GS) senior equity analyst Rod Hall said it is the only technology that can “uniquely identify any virtual object independent of a central authority,” and this ability to identify and track ownership will be crucial to how the metaverse functions.
Apart from crypto being the potential tender, NFTs will also play an integral role in forming identity, community and social experiences in the metaverse.
Interestingly, this will allow like-minded individuals to form communities that share experiences, develop parallel economies and create content together.