5 blockchain developments that will bring about innovation to the crypto landscape in 2022
[Written in partnership with Huobi, but the editorial team had full control over the content.]
2021 was a big year for the crypto industry as a number of advancements caused cryptocurrencies and blockchain technology to grow in popularity.
Of those, a few to highlight are NFTs being sold for millions of dollars, the adoption of CBDC, Bitcoin being recognised as legal tender, and Play-to-Earn (P2E) games.
But how exactly do these developments affect the blockchain industry and what can we expect from 2022?
1. CBDC saw more widespread adoption
2021 marks the year when CBDC (Central Bank Digital Currency) was being adopted by more countries including China, Sweden, and the Bahamas.
A CBDC like e-CNY or e-krona is a digital currency that utilises blockchain frameworks to validate transactions.
There is no involvement of physical coins or banknotes. However, unlike cryptocurrencies, CBDCs are issued by the central bank and are universally accessible.
As of now, there are two types of CBDCs being proposed. First is the Retail Central Bank Digital Currency, which is based on the distributed ledger technology that’s traceable, constantly available, and can be used to implement interest rates.
Another is Wholesale CBDC, which, similar to holding reserves in a bank, serves as a buffer, especially in times of economic uncertainty. The reserves can use monetary policy to influence lending and set interest rates too.
It also serves other functions like protecting the user’s privacy, anti-counterfeit through the utilisation of blockchain technology, and enhancing account settlements between the bank and account owner.
We can expect more countries to adopt CBDCs soon as they address issues like liquidity risks, improve cross-border transactions, and boost financial inclusion amongst the general public.
2. NFTs going mainstream and becoming more accessible
NFTs (non-fungible tokens) also saw a surge in popularity last year.
A big example was the collection of digital art by Mike Winkelmann called “the Everydays: The First 5000 Days”, that sold for US$69.3 million on Christie’s, a leading global auction house.
Another was a crypto project called CryptoPunks, where 10,000 unique collectable characters were sold.
Of those, CryptoPunks #3100 was most highly sought after, selling for 4,200 ETH, equivalent to about US$7.58 million, the highest price for a single NFT at that time.
In the span of a year, even household name brands like Nike and Adidas have joined the movement with sneakers and streetwear bundled with NFTs.
Not to mention, there’s the growing global phenomenon of smaller brands launching their own NFTs too.
They’re jumping onto the NFT bandwagon for benefits such as increasing brand awareness, encouraging follower interaction, and creating new brand experiences.
NFTs are also crucial for when the metaverse rolls around as they’re equipped with unique identifiers and proof of ownership.
This year, it would come as no surprise if even more everyday consumer products become inseparable from NFTs, lowering the barriers to entry for even those unfamiliar with blockchain or crypto to own an NFT.
3. Leaps in technologies that bring the metaverse closer to reality
The metaverse is a virtual world that lives on the internet, where users can interact with the digital world via virtual reality headsets from Oculus, Valve, HTC, and more.
One notable instance of a metaverse that’s currently in development is from Facebook. Facebook rebranded to Meta around October 2021 as they shifted their focus more towards developing the metaverse.
The growing popularity of NFTs is even more incentive for metaverse development.
For one, metaverses will allow collectors to display NFTs like an art piece. Some other ambitions for NFTs in the metaverse are for them to represent assets such as clothes, property, and more, which users can interact with accordingly.
As demonstrated by Microsoft with the HoloLens 2 and Mesh, the metaverse can also serve as a place for enhanced productivity and collaboration.
While we might see more demos of the metaverse from companies like Meta, Microsoft, and Vive in the coming months, there is no official information on when this technology will be available for the mass market.
For now, notable use cases appear limited to enterprises such as manufacturers and construction companies. With increased adoption in 2022, this technology could become more affordable and accessible to mass consumers.
4. Widespread adoption of P2E blockchain games
P2E blockchain games also picked up steam last year. One of them was Axie Infinity, which only became popular in 2021, though it was initially released in 2018.
Since then, blockchain games like Splinterlands, The Sandbox, and more, started to grow in popularity as well.
However, one major issue with blockchain games was that the barrier to entry was steep because of the high initial investment required, which could turn away newer players.
For example, in order to play Axie Infinity, you need at least 3 Axies, which could cost somewhere around US$1,000.
But this is where guilds come to play an important role in most blockchain games, especially on Axie Infinity.
With guilds, new players could instead apply for an Axie Scholarship that lets them use Axies owned by other players (referred to as managers) to start. By doing so, new players will not have to fork up money upfront, plus, they get resources to increase their chances of winning and progressing.
Meanwhile, managers receive a cut for lending their Axie to the scholars, presenting a win-win situation for both parties.
Following in the footsteps of Axie Infinity’s model, we could see more blockchain games with guilds crop up this year, benefiting those living in countries with lower incomes or weaker currencies.
Furthermore, encouraging the creation of guilds strengthens the game’s community, which is an important aspect of any game’s longevity.
5. Bitcoin recognised as legal tender in El Salvador
El Salvador became the first sovereign nation to recognise Bitcoin as legal tender last year, enabling its usage for paying debts and financial obligations like tax payments.
It does beg the question though: why did El Salvador adopt Bitcoin as legal tender?
The main benefit of Bitcoin is that transactions can be done relatively cheaply and fast across borders which does not require the involvement of banks, reducing the wire transfer cost from Salvadorans overseas trying to send money back to their families. It also attracts foreign investors to bolster the nation’s economy.
By using Chivo Wallet, a digital wallet that’s officially sponsored by the El Salvadoran government, citizens who create an account for the first time will receive US$30 worth of Bitcoins.
This is to encourage the use of Bitcoin to purchase day-to-day amenities and even meals from McDonald’s, Starbucks, or Pizza Hut.
As El Salvador leads the way in terms of mass market Bitcoin adoption, it could be a case study that convinces more countries to adopt cryptocurrencies as legal tender in 2022.
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Everything mentioned above are just some of the notable developments that took place in 2021.
As we’re only a quarter into 2022 and blockchain is still a relatively new technology, there is plenty of wiggle room for more revolutionary concepts and ideas to pop up.
As Huobi’s research states, blockchain will no longer remain a niche as the advancements from last year have brought the technology into the limelight.
Beyond mainstream attention, enthusiasts are confident that 2022 is the year that blockchain technologies, and by extension, cryptocurrencies, will experience mainstream adoption.
Also Read: 4 benefits of the Microsoft HoloLens 2 for businesses building towards the metaverse
Featured Image Credit: Unsplash/Axie Infinity
How zkEVM can maintain Ethereum’s relevance in the crypto market
[Written in partnership with Huobi, but the editorial team had full control over the content.]
When you hear the word Ethereum, the first few things that come to mind are cartoon monkeys, gas fees, and blockchain technology.
To those unaware, Ethereum is actually the name of the blockchain-based platform, which functions as a digital ledger that helps keep track of transactions.
Unlike Bitcoin, it does not intend to be an alternative to physical currencies like the Malaysian Ringgit, Singaporean dollar, and United States dollar. Instead, Ethereum’s currency, known as Ether (ETH), is used to interact with digital vending machines, which are known as “smart contracts”.
For instance, if you want to buy a car in real life, you will have to pay a car dealer fee, which is around 20% on top of the car’s actual price. However, with Ethereum, you’re paying directly to the “car vending machine” so that it dispenses you a new car, essentially cutting out the middleman.
Ethereum’s Big Problem
Since its inception on July 30, 2015, Ethereum has grown in popularity due to its multitude of applications across several key areas, including finance, arts, gaming, technology and more.
There had been issues where transactions took longer to validate as too many of them were happening at the same time. Moreover, gas fee prices started to escalate rapidly due to increased demand.
For example, the Ethereum blockchain platform ran into congestion issues when a decentralised application called Cryptokitties was introduced in 2017. The game took the crypto industry by storm, accounting for around 10% of the total transactions on Ethereum, increasing gas fee prices at that time.
Due to the constant network congestion problems, many people in the crypto space opted to use other blockchain platforms instead, due to lower gas fees and network congestion.
The solution
To alleviate the transaction congestion problems mentioned above, Ethereum 2.0 (ETH2.0) was developed to address the shortcomings of Ethereum 1.0 (ETH1.0). To elaborate further, ETH1.0 can only achieve up to 45 TPS, while ETH2.0 is expected to achieve up to 100,000 TPS.
Not only that, but by switching from a Proof of Work (PoW) to a Proof of State (PoS) consensus protocol for confirming transactions, the Ethereum Foundation claims that ETH2.0 will use up to 99.95% less energy when compared to its predecessor.
With that in mind, mining on ETH2.0 will have a much smaller environmental impact than mining on ETH1.0.
In addition to what was mentioned, another way to address the congestion problem is by using Layer 2 scaling solutions such as Optimistic (OP) Rollup and Zero Knowledge (ZK) Rollup.
Based on research done by Huobi, both Layer 2 scaling solutions can achieve significantly higher TPS. Unfortunately, they are not without their drawbacks.
Withdrawing funds from the OP Rollup scaling solution will take exactly 1 week, while withdrawing from ZK Rollup takes only several minutes. Another thing is that the latter can conduct 10 times more transactions at once, while having lower gas fees than OP Rollup.
While it may sound like ZK Rollup is the better solution, it is much harder to implement, and it’s not compatible with most decentralised applications. This is why 70% of the Layer 2 market opted to adopt OP Rollup instead.
Why zkEVM will change everything
A new solution is currently being developed called the Zero Knowledge Ethereum Virtual Machine, or zkEVM. This has the benefits of both ZK Rollup and OP Rollup, such as having high TPS, fast withdrawal time, and compatibility with current EVMs.
Using a new algorithm called “Plonk Zero Knowledge Proof”, zkEVM can produce proofs significantly faster, while utilising less computation resources and storage. As a result, the chances of the Ethereum network encountering network congestion will be much smaller.
But how does it benefit the average user? For one, low computational resource consumption equates to significantly lower gas fees for the user to pay. Secondly, if you need to make a withdrawal, there is no need to wait for a week for the withdrawal to be approved.
Because the solution is also more efficient, network congestion is less likely to happen. Having said all that, the Ethereum blockchain could once again be an attractive platform for exchanging crypto assets for most users.
zkEVM can be implemented in 1 of 2 ways
At the time of this writing, there are 2 main strategies when it comes to developing a zkEVM solution. The first strategy is to develop a solution that fully supports existing EVM opcodes, in order to ensure maximum compatibility with existing development tools and ecosystems.
The second strategy, on the other hand, involves developing a new EVM, allowing it more flexibility as it would not have to adhere to the constraints of existing opcodes. Because it is made completely from scratch, adapting it to existing systems needs a little more work.
While both the strategies mentioned function slightly differently from one another, their goals are fundamentally the same.
Currently, organisations like Hermez and zkSync 2.0 are developing zkEVM that utilises the first strategy, while AppliedZKP focuses on the second strategy instead.
As zkEVM is still in active development, we can expect more strategies to pop up in the near future.
Lessons learnt from developing zkEVM could be adapted to other cryptocurrency platforms
The zkEVM has the potential to completely revolutionise the Ethereum blockchain platform, giving users and developers more options to work with. The research and lessons learnt could be used to benefit other similar blockchain platforms as well.
Huobi stated that development for Layer 2 scaling solutions will not stop there, as there will always be a way to make the blockchain platform more efficient.
- Learn more about blockchain technologies here.
Also Read: Building a blockchain project? Win co-investment from 20+ VCs in this US$5mil prize pool.
Featured Image Credit: Matter Labs
