We came from a euphoric bull run in 2021 to an epic bear market in 2022. A lot has changed in this period, with protocol collapses, regulatory bans, code penalties, CeFi removal, high FUD, and bad actors causing contagion across the board. the industry through acts of fraud.

There have been many positive developments in this period that have laid the foundation for blockchain adoption, such as the maturing of the venture capitalist stance and new technologies like Optimism and Arbitrum addressing scaling issues with blockchain, the rise of new categories like platforms decentralized and regulatory clarity in many countries. . Some notable and likely trends are shaping up for 2023.

Related: Web3, Crypto, Cybersecurity, Rural Fintech: Trends to watch out for

Independent value matters

Liquid tokens on a project’s balance sheet can no longer drive valuations; companies and projects need to show tangible value to create free cash flow and take advantage of network effects. Lately, the focus has been on the standalone ability to create value versus buying growth using short-term tokens.

The emphasis is shifting towards user monetization from acquired growth that has proven unsustainable as market cycles change. Investors see principal as claims for future cash flows and earnings (less liabilities) and tokens as value created from future profits or services delivered by the protocol.

Given the relative maturity of the market, many protocols have not mapped out a clear path to sustain value through the future delivery of public services, prompting a change in investor mindset. Investors are now emphasizing income quality, which can increase the value of your capital profile and eventually build token value.

Evolves a “Tokuity” model

Investors like the liquidity associated with the token; its volatility and longevity have been concerning to many. There appears to be a shift from a purely short-term, liquidity-driven stance to long-term value creation models.

Investors would like long-term value creation incentivized by a mix of tokens (short-term liquidity) and equities (long-term incentives), reducing volatility and ensuring long-term thinking, i.e. a new model Tokuity (Tokens + Equity).

Related: Why Your Business Assets Belong on the Blockchain

ETH killers are unfeasible

It was once possible for multiple new players to emerge to overcome Ethereum’s technical deficiencies, slow execution, and market dominance. Many Layer 1 protocols missed their windows of opportunity and failed to drive adoption at scale.

It can be difficult for a new platform to unseat Ethereum as the dominant player as it embarks on many improvements in the coming months. Ethereum and Polygon dominate use cases, consumers, enterprises, and ecosystems. Users and businesses will trade minor technical advantages of other blockchains for security, interoperability, and network effects.

Ethereum, the blockchain that everyone loved to hate in the bull market, now gets the last laugh at “ETH killers”. Most of the Ethereum hating chains have completed or are vying to become EVM compliant (Hedera, Solana, Algorand, Near, etc.). Others like the Phantom wallet (Solana’s wallet) and Trader Joe’s (Avalanche’s DEX) also support the Ethereum ecosystem.

The future is still multichain

Although ETH killers will likely not provide the advantages accrued by the Ethereum ecosystem (including Polygon, Optimism, Arbitrum, etc.), the future will still be multi-chain.

The concept of a “multi-chain” system refers to the use of multiple independent blockchain networks that can interoperate with each other, allowing flexibility in the implementation of applications for different transactions or processes. For example, one blockchain might focus on high-speed, low-cost transactions, while another might focus on security and immutability. For Defi, users will want their collateral on one chain and borrow on another. Porting game assets between metaverses is another use case. A multi-chain system could offer the best of both worlds by allowing different blockchains to work together.

Related: Ethereum’s future role in multi-chain technology

Interoperability is a critical capability required for a true multi-chain world to manifest. However, current bridging technology is fragile, creating security risks and attacks. Blockchains that use bridges to Ethereum create more risk and less value with business use cases.

While niche chains, for example Hedera (optimized for enterprise) or Flow (optimized for metaverse and gaming), can co-exist, the market simply cannot afford the number of layer 1 protocols/blockchains that exist in the mainstream. present. The L1 space is crowded, differentiation is limited, and the market is finite. A multi-chain future requires mature interoperability solutions.

Layer 2 is the new frontier

After the Ethereum ‘merger’, the blockchain landscape is significantly altered by denying competitive differentiation for ETH killers. Ethereum is repositioned as the base layer for settlement under multiple Layer 2 protocols, forming a scalable ecosystem.

Blockchain scaling issues are developing. As enterprise adoption of blockchain grows, we will be entering billions of transactions per day, and even ready-made Layer 2 solutions may not be enough. We will see the rapid evolution of new categories such as decentralized platforms and new forms of roll-ups. These will migrate the action to the blockchain stack while allowing the base protocol to accumulate its own value. The last few cycles were about Layer 1 and infrastructure; now it will be about scalability, interoperability and ecosystem maturity. The layer 1 battlefield is now empty with a handful of survivors; layer 2 is the new frontier.

Decentralized platforms will accelerate ecosystem adoption

For adoption scale, technology must make things easier by lowering barriers for non-technical users, deploying faster dapps, and faster paths to value creation. The new category of decentralized platforms sits between layer 2 chains (Layer 1 chains) and the fractured landscape of dapps and use cases that power a vibrant ecosystem.

A dPlat (decentralized platform) can simulate an effect similar to iOS or Android, shielding the complexities of the Layer 1 and Layer 2 chain and abstracting blockchain functions to make development easier for uses. Many users will not be aware of the complexities of the underlying layer one protocol, and the protocols will be easier to build. The dPlat space is one to watch closely.

concluding thoughts

Layer 2 technologies, robust network effects, regulatory considerations, decentralized platforms, and changing investment prospects will help inherently raw protocols scale adoption and transactions. The next 12 months will bring many positive changes to the ecosystem despite a bull or bear market; Let’s get ready for the new paradigms.