2021 was the year that blockchain came of age; no longer it is a fringe technology. The pandemic brought massive innovation, with DeFi, NFTs, Play to Earn Games; and the fast-growing adoption of the Metaverse. Last year, we witnessed the first Bitcoin ETF making its debut on the New York Stock Exchange, and we are now seeing continued growth in institutional investment and the proliferation of regulated blockchain securities funds and exchange-traded funds. El Salvador announced that it would adopt Bitcoin as legal tender. People are reaping huge rewards through decentralized finance, non-fungible tokens and GameFi. Finally, the creation of new economies with Play to Earn games, is just the beginning of the next evolution of innovation. 

Chainanlysis reports that global crypto adoption grew by over 2,300% since Q3 2019 and over 881% in 2021. In DeFi, we saw the largest and fastest uptake in middle to high-income countries, like the United States, China, Vietnam, the United Kingdom, and Western Europe. In these areas, DeFi dominated by bigger investors, with transactions above $10 million in USD, accounting for over 60% of DeFi transactions in Q2 2021. 

Make no mistake, we are living through, in real time, the reinvention of finance. In DeFi and the Future of Finance,  Campbell Harvey et al. (2021) argue that we will see a new world of Decentralised Finance (DeFi), based on peer to peer interaction,  where  savings, lending and trading are being reinvented without middlemen. Gartner predicts the next decade will see 80% of financial firms go out of business or be rendered irrelevant by new competition, changing customer behavior and advancements in technology. This is the creation of a new financial infrastructure, it is not a recalibration, it is a complete rebuild. 

What are some of the trends we will expect to see in the coming year?

1. DeFi: DeFi will be driven by growth in institutional investors, gaming and the Metaverse. Yield farming, the process of staking cryptocurrencies to earn more as passive income, will  continue to drive the majority of DeFi’s growth and will draw continued institutional investment to the space as well as attracting retail investors who want to generate income from their crypto portfolio.

2. Stablecoins: Stablecoins enabled over $1 trillion in transaction volume over the past year. Their appeal lies in their ability to insulate investors from the price volatility that exists with many cryptocurrencies. The growth in adoption will continue, as institutional investors see Stablecoins as less risky. 

3.  Decentralized Autonomous Organizations (DAOs): Many DeFi projects are managed by DAOs, these move corporate governance to smart contracts and community governance. We will see great experimentation here and a major organization become a legally recognized DAO. 

4. Non-Fungible Tokens (NFTs): NFTs will continue to soar in popularity in art, music, gaming, and influencer fanbases, we will also start to see other ways that NFTs can be used for social impact, including charity, and rewarding communities.

5. All Things Gaming: It is estimated that the global gaming market will amount to 268.8 billion U.S. dollars annually in 2025, up from 178 billion U.S. dollars in 2021. The adoption of DeFi and NFTs in GameFi has only just begun and we will see incredible innovation in this space with community owned economies and on-ramps to the Metaverse.

6. Going Green: Following COP26 Glasgow, there will be a plethora of green blockchains and tokenising carbon offsets and gamification to address climate issues. 

7. Community owned economies: We are seeing the move from corporation first to community first. These communities are decentralized and community governed. This will open-up unexplored terrains of monetizing creative knowledge and skills. ‍The create-to-earn model allows creators to take complete control of the game studios and directly participate in developing the game. This provides the community the opportunity to make in-game assets, create NFTs, and sell them on secondary marketplaces. This is a powerful new way that a creator economy is emerging where players and coders can liberate their one ideas, improve the in-game experience and monetise their intellectual capital. 

8. New Social Networks: We will see the emergence of new social networks between creators and fans. The attention economy will be replaced through Social tokens in the Metaverse to bring a new immersive fans economy. Social tokens  based around a brand, community, or influencer, will allow communities or celebrities to further monetise themselves. They will create bi-directional relationships between creators and consumers with benefits on both sides.  Players are stakeholders. Individuals rather than companies become the agents of innovation in a distributed model of collaboration. This creates the data infrastructure to enable a harmonised, interconnected metaverse that further enables tokenised NFTs to include digital data rights, and to store, track and enforce those data rights. We are still in the early days of this transformation, and the future is in the hands of innovators and creators and the community who support them. 

9. Tokenization of everything: We will start to move to a world where all assets (including mortgages, stocks, art, bank account balances, future earnings, etc.) are tradeable, lendable, and collateralized on the blockchain. 

10. Metaverse: We will see tremendous innovation as people begin to realize how the Metaverse can be used in so many ways to improve collaboration, education, economic opportunities, and social engagement. Outlier Ventures predict that DeFi will finance and develop the growth of the Metaverse and will enable unprecedented levels of financial inclusion globally, and that this will promote inclusion to people who have digital value that is not recognised by the traditional financial system, like gamers, musicians, and artists.
    
    They have coined the term MetaFi which brings together these DeFi principles to the wider Metaverse through a mix of non-fungible and fungible tokens combined with DAOs. We will see the financialization of everything, using MetaFi technologies, value and its flow can be captured in digital assets for everything allowing open free markets to form and young people much more willing to invest and trade in internet culture.
    
    We are not there yet, and this will take time to build and bed down, and this is a signal for traditional financial players to sit up, pay attention and disrupt themselves.

[The author of this article, Dr Jane Thomason, is the Founder of Supernova Data]