First developed in the 1990s, blockchain technology saw a relatively slow adoption rate during its early years. However, interest in blockchain has surged in recent times, especially with the growing popularity of cryptocurrencies and thanks to the rapid digitization triggered by the pandemic.
A report by Fortune Business Insights predicts that the global blockchain market will grow from $7.18 billion in 2022 to $163.83 billion by 2029, just as key blockchain-related concepts such as DeFi, Web3, NFTs, and the Metaverse seem to be rising in popularity alongside it.
Let’s explore some of the blockchain trends that are set to shape the tech world over the next decade.
Decentralized Finance (DeFi) is an emerging financial system that uses blockchain to bypass the traditional global banking industry, making it public and peer-to-peer in nature. Throughout 2020 and 2021, the sector grew significantly, with the amount of parked DeFi volume across all blockchains reaching almost $250 billion in November.
One of the most noteworthy events of 2021 came when El Salvador made the bold move to step away from the conventional banking sector by declaring itself the world’s first nation to adopt Bitcoin as a national currency. The Central African Republic became the second country in the world to follow suit on April 27, with both nations aiming to increase economic growth, boost financial inclusion, and maximize remittances from abroad.
Indeed, international money transfer is one of the many areas that blockchain has disrupted. Many cross-border payment providers, especially in emerging countries, have begun to transition their payment channels to blockchain platforms to achieve cost efficiency, ease of transfer, and more transparency. It is expected that DeFi will continue to grow rapidly in the coming years as more users, organizations, industries, and even governments are realizing blockchain’s potential.
You likely heard the buzzword ‘Web3’ over the last year, but what exactly does it mean? Web3 refers to the next generation of the internet that will be decentralized, open, and run on public blockchains. In its current form, the World Wide Web is overwhelmingly dominated by Big Tech corporations that use personal data for tailored advertising. Web3 advocates claim that the technology will give users back control over their data through decentralized applications. User activity and participation on the platform will be rewarded with tokens that accrue value and can also represent a user’s small stake in the application, democratizing the internet like never before.
The idea of Web3’s future takeover is contested as many tech experts doubt that it will fully replace Web2. However, it is likely that many of its core ideas will be incorporated into the version of the internet as we know it today.
Non-Fungible Tokens (NFTs) are non-interchangeable units of data that are stored on the blockchain and can be sold and traded using cryptocurrency. NFTs often come in the form of digital art, photos, video, and audio andare paving the way for a whole new type of trading. For example, the Bored Ape Yacht Club, an art collection with around 10,000 NFTs in the form of digital ape cartoons, famously sold one piece for $3.4 million in October 2021. As the value of some collections has skyrocketed on NFT marketplaces, they have become very popular with investors interested in the space.
NFTs can also be used as proof of content ownership and origin, an instrumental benefit in the Creation Economy where many creators struggle to monetize and authenticate their digital work. Despite being most associated with the art world, NFTs will be increasingly used to tokenize offline goods and other real asset values such as real estate, as collateral for loans, or even for new business ventures. With the amount of innovation and potential in this space, NFTs have a promising future ahead.
Another category that is set to be dominated by blockchain is gaming. A recentreport by DappRadar and BGA Games revealed that blockchain-based game playing has increased by 2,000% over the past year, making up 52% of total blockchain activity. It’s no wonder that gaming projects such as Axie Infinity (AXS), The Sandbox (SAND), and Illuvium (ILV) have seen a huge increase in value in 2021.
Play-to-earn games allow players to use NFT-based items to earn tokens as rewards for playing. These tokens can then be converted into fiat money currencies on crypto exchanges. Microtransactions, the selling of virtual items in gaming, is already a multibillion-dollar-a-year industry but NFTs go one step further, allowing the buying and selling of items on the blockchain. The maker of these items also can receive royalties for each NFT resold. As such, the demand for tokens to trade and collect virtual characters, clothing, and objects is only likely to increase in the coming years.
The Metaverse is one of the most hyped-up topics in the tech world at the moment, and for good reason. Facebook changed its company name to Meta, Microsoft plans a metaverse workplace service to extend teams, Nike acquired the virtual fashion platform RTFKT, and Barbados set up a metaverse embassy in Decentraland. Yes, the Metaverse is going to be with us for the foreseeable future.
Definitions of the Metaverse vary but the phenomenon is essentially described as an immersive 3D world that users can transport themselves into for work, play, and communication by using a combination of VR, AR, and other advanced technologies. Virtual reality headsets will allow people to control avatars and interact in the Metaverse, while games such as Fortnite and Roblox have already created virtual worlds where users can interact.
Blockchain will be the driving force behind many aspects of the Metaverse, including NFTs, gaming, payment methods, virtual real estate, and even identity authentication.
Layer 1 refers to the base protocol of blockchain, providing the infrastructure for other networks and applications to build on, such as Ethereum (ETH), Solana (SOL), or Avalanche (AVAX). The native cryptocurrencies of Layer 1 networks are used to pay service transaction fees and increase liquidity as their usage increases. The different consensus mechanisms that Layer 1 networks use have varying degrees of security, speed, and decentralization.
Layer 2 builds on top of Layer 1 by using third-party integrations and off-chain solutions, predominantly to enhance scalability, a top priority given the increased adoption of blockchain in the past two years. Layer 2 is also said to further increase efficiency and improve security.
Polygon and the Lightning Network are prime examples of popular Layer 2 networks that can help offload Layer 1 networks like Ethereum (ETH). In fact, Polygon recently announced carrying out over one billion transactions with 2.7 million monthly active users. This points to an increase in Layer 2 solutions used to accelerate Layer 1 in the future.
Most blockchains are independent networks designed for specific uses. However, as blockchain technology has become more widespread, users are struggling to transition seamlessly between different blockchain ecosystems, increasing the need for interoperability.
There are several projects such as Polygon (MATIC) or Polkadot (DOT) working on cross-chain functionality, allowing users to communicate and transfer asset values between different blockchains. New technologies are also being developed that move assets around in the background on behalf of the users in order to optimize their experience.
The world is heading towards a blockchain-powered digital future, and at intive, we have embraced this future by strengthening our capabilities in the space. We collaborate with blockchain startups and enterprises, using our software engineering expertise to drive delivery and rebuild infrastructures.
If you would like to know more about our experience in this area, don’t hesitate to get in touch.