Hashed’s outlook on nine major areas in the new year

Author: Hashed; Compiler: Shenchao TechFlow

Abstract

2023 is A year of resilience. Hashed has been working closely with developers to drive mass adoption of blockchain. This year, Hashed has invested in 26 early-stage industry teams globally.

As a team, Hashed has built relationships with global industry leaders and reflected on the specific Web3 areas they are excited about heading into 2024.

Hashed's 2024 investment themes focus on the sectors they believe will have the greatest impact. In this article, Hashed will look at the nine major areas of blockchain.

They believe that blockchain will play a key role in reshaping the creator's economy and intellectual property rights. There will also be a focus on expansion to Ordinals and BRC-20 tokens, signaling the potential for Bitcoin network expansion. In addition, Hashed will explore the intersection of economic activity and capital markets in blockchain gaming, followed by a deep dive into next-generation finance, including real assets (RWA) and security token offerings (STO). And they expect the industry to mature through permissioned DeFi, an important bridge to regulatory adoption.

Hashed said the synergy between artificial intelligence and blockchain is expected to bring new advancements. They think L2 development is also an exciting part when seeing some ecosystems adopting application-specific Rollups to enhance scalability. The article concludes with an introduction to the crypto-Euro for global financial markets, and the untapped potential of advertising as a tradable asset.

Blockchain will reshape the creator economy and intellectual property rights

With traditional media giants Likewise, the friction of rich creative processes still exists, including but not limited to creating IP derivatives such as webcomics, games, and movies, as well as content with or without AI-generated content (AIGC). These issues have always existed because of traditional media and Entertainment giants have taken a defensive stance on open IP infrastructure.

Open, on-chain and traceable/verifiable intellectual property infrastructure and studios will serve as a foundation to enable content creators and the content creation and consumption process Any stakeholder in the Internet can be immersed in and take ownership of the intellectual property and content, which was possible before the broadcast era, which expanded and weakened the relationship between content creators and consumers. Direct connections and relationships.

As a technology, blockchain will create a paradigm shift in the media and entertainment industry to enable control over any stakeholder in the content creation and consumption process. More transparent and fairer management of IP and royalty/revenue sharing, aiming to create an environment that empowers producers and consumers of creativity in diverse fields ranging from cartoonists, celebrities, athletes, and film directors to animation, film studios, and talent agencies Create a multiplier effect, allowing it to grow into a more influential IP (the next Pokémon or Hello Kitty).

In order to accelerate the transformation of the above model, an infrastructure for intellectual property attribution/certification or an intellectual property open standard needs to be established to flexibly implement licenses that include the complexity of AIGC and royalty plans. Going one step further on the basis of intellectual property ownership and certification, fan-driven intellectual property crowdfunding platforms similar to blacklists, fan-generated ETFs similar to intellectual property (such as webcomic ETFs), bets on the next development of anime series, etc., are all Can be an example of creating a capital market based on on-chain interconnected intellectual property. Of course, an individual or company with high brand identity IP can drive this move faster.

Reference examples: Creative Commons, token-bound NFT license, Pudgy Penguins, Yuga Labs

Ordinals and BRC-20: Revisiting the Bitcoin Ecosystem

While most crypto players are discussing the upcoming Bitcoin Bitcoin Spot ETF, but there is a wave of innovation happening on the Bitcoin network that has been largely ignored by institutions and ordinary investors. We believe Ordinals and BRC-20 technology are a paradigm shift for the Bitcoin ecosystem, demonstrating the long-term sustainable potential of what many consider the most dominant, widely accepted, and secure blockchain.

Ordinals allow various types of data to be engraved on Bitcoin’s smallest unit, Satoshis, and turned into NFTs on the Bitcoin network. This was soon followed by the introduction of the BRC-20 standard, a set of instructions that, when used with Ordinals, allow people to deploy, mint, and transfer these inscriptions as fungible digital tokens on the Bitcoin network. This became very popular in the second half of 2023, increasing Bitcoin’s block size and doubling the average number of transactions per block. As a result, Bitcoin’s average transaction fees have surged about 20 times from what they were in early October, to $37 per transaction.

Existing infrastructure is still nascent and lacks accessibility, developer tools, and sophisticated tracking systems. Existing token protocols lack support for third-party extensions, smart contract compatibility, and the BRC-20 module always requires detailed onboarding tutorials. 2024 will be a critical year for the industry to overcome these obstacles and achieve widespread adoption of Ordinals and BRC-20 standards.

We are excited about projects that expand the Bitcoin ecosystem. We foresee this space unfolding like Ethereum decentralized finance in 2020. Ecosystem infrastructure includes lending markets, decentralized exchanges, bridges, aggregators, portfolio management, development tools, tracking infrastructure, and more. Combine these ecosystems with one of the strongest, oldest and most dedicated communities in cryptocurrency and on-chain players that have become smarter and more active in the past few years. Startups or protocols that help build tools for secure and flexible programming of Bitcoin, develop independent indexing infrastructure or wallets, aggregation systems, or even create native Bitcoin metaverses or NFT markets could have a huge impact in 2024.

Reference examples: Bounce Auction, Darewise, Multibit, Ordinals, Ordiswap, Tap Protocol, Trac, UniSat, Xverse.

Economic activities and the booming development of capital markets in blockchain games

Games have always been It is one of the most attractive fields, with more than 3 billion users worldwide conducting economic activities in all media. As blockchain games strive to meet the standards of traditional games and traditional AAA game studios like Nexon and CCP, they have attracted a large number of users. Additionally, the user experience has been meaningfully improved from smart contract wallets to MPC, allowing programmable accounts and security to provide a more seamless experience for users, gamers, and studios.

As the blockchain industry moves towards the growth and maturity stage of mainstream adoption through the infrastructure and user onboarding channels of blockchain games, we foresee that economic activity will Happening in real time in the physical and virtual worlds in the form of fungible and non-fungible tokens, digital identities and social graphs, UGC and adaptations.

More specifically, because DotA was derived from mods built on top of Warcraft 3, which ultimately inspired League of Legends, which has over 150 million active players. Created, FOCG (Fully On-Chain Gaming)/AW (Autonomous World) will create an unprecedented growing virtual economy through its front-end and back-end composability, community governance, and security. We explain it in detail below:

Front-end composability: Modifying the game client to have a new user interface, game art, sounds, or music, or by creating The new client reimagines the gaming experience from the ground up. Rewarding such contributions (i.e. fees awarded to client developers) can be performed transparently and automatically via smart contracts, enabling an automatic and transparent revenue sharing model.

Backend composability: Every object in the game or world, including players, can be individually addressed on-chain by any smart contract, meaning This allows players to truly realize the original promise of smart contracts as a way to form automatically executable agreements between them with complete Turing-complete logic, which some call user-generated logic. The ability to form complex and powerful agreements will enable virtual societies to reach unprecedented levels of political and economic complexity.

Community Governance: When the entire game or world is on-chain, value can be captured automatically and transparently without relying on enforcing third-party market royalties. The community has a say in deciding how value is captured, either by opting out (i.e. switching to or starting a fork) or by voting in a predefined on-chain governance system. The ability to capture value and accumulate it into community-controlled on-chain vaults can serve as a powerful economic flywheel for virtual economies. Capturing value from economic activity within the world can provide stable reserve support for assets and fund community development and contributions, further promoting greater economic activity.

Security: Since FOCG devotes a large amount of computing resources to verifying each transaction, the on-chain game and world will be secure. This will enhance confidence in virtual economic flows

Reference examples: Nexon MapleStory Universe, CCP Project Awakening, The Citadel, Dark Forest, MUD/Lattice, Halliday, ERC- 6551, dfns

The next generation of finance: RWA and equity tokens

The financial landscape is happening A revolution that promises to bridge the gap between the worlds of traditional finance and blockchain technology. This shift is centered around real-world assets (RWA) and equity tokens (products of which are called STOs), including assets that have traditionally existed off-chain and are now being tokenized and integrated into the blockchain ecosystem. It covers a wide range of real-world assets, including real estate, stocks, bonds, and other valuable assets, all of which are compatible through blockchain technology.

What makes this era truly special is the active participation of major traditional financial players like JPMorgan Chase, Goldman Sachs, KKR, Hamilton Lane and others. These financial institutions are paving the way to bring physical assets to the blockchain, heralding big changes to come in the industry. Meanwhile, blockchain protocols like MakerDAO, Securitize, Chainlink, Maple Finance, Goldfinch, Ondo Finance, and Backed Finance are at the forefront, leading the digital transformation as crypto-native currencies, seamlessly adapting to RWAs and STOs.

In this case, two broad categories are shown: infrastructure-centric and asset-centric. Infrastructure-focused projects are laying the foundation for this new financial ecosystem, creating the protocols, security measures, and platforms that support the future of RWAs and STOs. Asset-focused projects, on the other hand, aim to deeply vertically position specialized assets.

We strive to explore both categories in a balanced way. While we recognize the significant potential of asset-focused efforts, our relative focus is tilted toward infrastructure development. We believe that building robust and secure infrastructure for tokenization and transactions is the cornerstone of this financial revolution.

In the early stages of the RWA and STO revolution, we saw seamless integration and integration with existing Web2 services while adeptly navigating the complex global regulatory environment. There is a lot of potential for growth in the project through partnerships with major Web2 entities. Currently, the market is primarily focused on U.S. Treasury-related products and tokenization of underlying assets. However, we recognize that there is considerable opportunity in projects exploring areas such as derivatives tokenization and securitization, adopting more inclusive strategies to embrace a wider range of asset classes and financial products. Our assessment will also include regulatory elements such as compliance, risk management and due diligence, as well as operational elements such as efficient ramp-up and ramp-down processes, market accessibility and scalability. These aspects are critical to bridging the gap between decentralized finance and traditional finance, laying the foundation for a more integrated and resilient financial ecosystem.

Reference examples: MakerDAO, Securitize, Chainlink, Maple Finance, Goldfinch, Ondo Finance, Backed Finance

Permissioned DeFi drives regulated institutional adoption

The 2020-2021 period saw the rise of centralized financial protocols, making cryptocurrencies accessible to the masses as Investable asset classes. However, a series of events occurred in 2022 where some bad behavior by several centralized players quickly tainted the entire industry, leading to widespread sell-offs and leveraged liquidations, allowing 2023 to witness the emergence of powerful DeFi innovations such as Shared Pooled perpetual DEX and peer-to-peer money market.

We expect that the DeFi space in 2024 will see transformative developments on the institutional front. Unlike fully decentralized products (e.g. GMX, Lido, Morpho, etc.), we see allowed DeFi projects introducing a controlled access model into their protocol design, prioritizing issues related to regulatory compliance, privacy, and security .

The main driver for the rise of permissioned DeFi protocols is the increasing emphasis on regulatory compliance. Permissioned DeFi platforms that prioritize compliance and institutional structured onboarding are expected to benefit as governments seek to integrate cryptocurrency and blockchain operations into regulatory frameworks. One approach is to implement KYC or KYB verification procedures, supplemented by zero-knowledge technology to protect customer privacy. With these access controls, protocols can reduce the risk of unauthorized transactions and potential vulnerabilities, thereby increasing the likelihood of welcoming institutional capital.

Institutional capital drives the development of traditional financial markets, and we expect that with the right infrastructure and protocols in place, these capital flows will be more suitable for interaction on the chain.

In the lending world, institutions are unlikely to consider leveraging if they must sacrifice the capital efficiency of overcollateralized assets. But for mortgage lending to evolve, appropriate credit rating infrastructure will be needed to capture on-chain footprints, risk management and accurate asset price predictions. Institutions also emphasize downside protection and hedging capabilities, so insurance markets that price on-chain risks are key. Institutions with existing crypto assets may be looking for ways to generate revenue. If so, we expect enterprise-grade platforms with permissioned capabilities, such as proven validator sets or security-focused infrastructure providers, to be particularly attractive.

The permissioned DeFi model will be the first step for regulators to adopt it. In the long term, this enables the industry to benefit from scale in a controlled and structured way.

Reference cases: Alluvial Finance, Blueprint Finance, Centrifuge, Fortunafi, Fractal Protocol, Maple Finance.

The integration of AI and blockchain

Outside of the encryption industry, artificial intelligence is 2023 takes over. This presents a challenge to technologists and pioneers: how to maintain a neutral and composable network infrastructure as we make democratizing progress.

Blockchain offers a promising avenue for mitigating control and governance-related challenges in powerful technological and economic systems. By decentralizing governance, increasing transparency, and improving data privacy, blockchain can help create a more equitable, responsible, and inclusive AI ecosystem.

The convergence of AI and blockchain technology represents a synergy that has huge potential to reshape various industries. AI, with its ability to analyze huge data sets and make intelligent predictions, can improve efficiency and decision-making processes within blockchain networks. On the other hand, blockchain provides a decentralized and secure platform for storing and managing data, which can solve some of the challenges related to AI, such as data privacy and security issues. Together, these two technologies create a powerful framework that can revolutionize industries from finance to healthcare.

Substantial progress in blockchain services through AI is reflected in the enhancement of smart contracts. Smart contracts are self-executing contracts with contract terms written directly into the code. AI can be integrated into analyzing the conditions and outcomes of smart contracts, making them more adaptable to changing circumstances. This dynamic combination not only ensures the accuracy of contract execution, but also allows for the automation of complex decision-making processes within the blockchain ecosystem.

Deep learning models such as Midjourney and Stable Diffusion may become protocols similar to the media version of ChatGPT, where original content and IP holders can pledge their assets (NFT , game items, photos, papers, iconic designs, etc.) to prove ownership and originality, a portion of the revenue generated by the product can be distributed as loyalty compensation. This will ease IP ownership issues for content generated by AI engines and open up new markets for content creators.

By 2024, more builders will use these technologies to empower decentralized open source networks with good governance, completely changing our production and consumption way of digital experience. The seamless integration of blockchain and AI is more than the sum of their respective advantages, but a multiplicative synergy with outstanding features in each product. Incentive-compatible AI-powered products and sustainable protocol design will transcend existing web2 applications.

Reference cases: Worldcoin, Lovo AI, Zettablock, Gensyn, Modulus labs, Ritual.net

Leading the evolution of L2 by embracing application-specific rollup (L3)

2023 is a time for expanded L2 availability. As Arbitrum experienced explosive growth and companies created their own rollup solutions using the OP stack, numerous L2 solutions began to emerge. Viral launches of services like GMX and Friend.Tech herald the potential for wider adoption of L2.

Application-specific rollups (L3) that leverage their own high-performance CPUs for computation will have a greater impact in 2024 to build on this momentum. Vitalik Buterin emphasized in his 2020 Rollup-centric roadmap that Ethereum needs to solve scalability issues in terms of data and computational scalability. Data scalability is expected to be gradually addressed through the implementation of EIP-4844 and sharding. However, computing scalability is mainly solved by Rollup. Layer 3 proposes a practical solution for computing scalability by continuing to provide settlement and composability within Rollup, relying on a common layer for dispute resolution, and maintaining the same level of security as the base layer.

However, this is a trade-off. Although it runs applications efficiently at lower cost and with high performance, it sacrifices composability with other applications on Rollup. Nonetheless, applications that benefit more from having their own ecosystem (e.g. dYdX, Ronin, etc.), providing their services in a more controlled environment, are better suited to application-specific rollups. With we anticipating the launch of several well-funded games and social apps in 2024 targeting mass adoption, L3 will be well positioned to deliver high-quality games, host large volumes of text, images, and videos to large numbers of users simultaneously. social services, as well as order-based exchanges that handle large volumes of traffic from traders.

Which part of the infrastructure layer will benefit the most? Possibly a sequential layer project that manages validator computation and ordering, as well as a layer that enhances composability between different application-specific rollups. In addition, products aimed at minimizing miner extractable value (MEV) in application-specific convolutions, privacy solutions to curb centralized verification nodes, and solutions to quickly build high-performance verification nodes with application-specific rollups are expected to witness Significant progress.

Reference examples: Radius, Cartesi, Espresso, Astria, Automata, AltLayer

For global Financial markets offer euros and dollars in crypto form

The stablecoin ecosystem has grown into a massive market worth approximately $130 billion by the end of 2023, with Tether’s USDT issuance is approximately US$90 billion. A big reason for USDT's success is that it is the first stablecoin targeted at the financial market in the blockchain space, but we believe that, especially in 2024, stablecoins will undergo a major shift as they shift towards targeting specific user groups and Customized solutions designed for purpose. This shift will include consideration of factors such as onshore versus offshore objectives, compliance levels and base currency selection. While it remains unlikely to see federal-level stablecoin laws in the U.S. next year, we think we will continue to see attempts to disrupt existing dominant products.

Currently, the stablecoin market is dominated by USD-based options such as USDT, USDC, and DAI. The US dollar has a virtual monopoly on currency denominations in the financial markets formed in cryptocurrencies, and at the same time, instead of using secondary or tertiary reserves, people in countries that need strong currency support are turning to the most proven reserve currency of all - the US dollar. currency. Meanwhile, Tether is now one of the largest buyers of U.S. Treasuries, ranking in the top 15 in terms of holdings even when compared to all countries holding U.S. Treasuries, indicating the use of U.S. dollars as a currency online or outside the U.S. without the U.S. How great is the need for a fully regulated and authorized medium of exchange.

In 2024, we will continue to see different ways to realize the disruptive potential of USD-denominated stablecoins (aka crypto Eurodollars), and in In a market dominated by USDT and USDC, competitors will continue to enter the market. In the process, we will see the emergence of stablecoin issuers providing specialized services for financial markets, B2B payments, C2C remittances, etc., which have so far been handled by a single stablecoin. At the same time, user experience innovation will emerge in the end-user-facing space, leading to more stablecoin-based services, including new banks, cards, and API tools that compete with or collaborate with existing fintech applications.

While the uses of stablecoins are diverging, the future application of crypto-EUR/USD will be characterized by disrupting the major players that dominate these traditional financial markets. Builders working on stablecoin LEGO in the current fintech landscape will have huge potential to ultimately create a stablecoin-based financial market that includes primary and secondary markets, derivatives, and foreign exchange markets.

Reference examples: Circle, First Digital, StraitsX, Mountain Protocol, REAP, BasedApp, Bleap

The impact of blockchain on the digital advertising market

Blockchain technology is expected to revolutionize the advertising industry and solve the privacy and efficiency issues that have long plagued the traditional online advertising model. . Advertising, a mainstay of internet business, has been criticized for monopolizing user data. However, the emergence of Web3, which emphasizes autonomy and privacy, presents a new paradigm.

In Web3 applications, relying on server-side data storage or client-side cookies to obtain user information becomes redundant. The transparency of blockchain, whereby all transaction data is stored and accessible, provides a powerful database for analyzing and identifying potential customers, greatly improving advertising efficiency. For advertisers, this means a more straightforward targeting process, as wallet information shared across various media platforms can be used to serve relevant ads to users even if they are browsing on different platforms. This approach is particularly advantageous given previous limitations imposed by privacy laws on advertising effectiveness.

This shift to Web3-based advertising models is expected to break the monopoly of large companies in the advertising market and pave the way for a more competitive and diverse media landscape. the way. By minimizing intermediary fees, both media outlets and advertisers stand to gain significantly. In addition, the possibility of futures markets for advertising breaks and keywords, leveraging their value that fluctuates over time, can introduce new dynamics into the capital market and provide opportunities to hedge market fluctuations.

In addition, user privacy remains the most important issue. Advanced encryption technologies are being developed to provide users with the option to hide their transaction data, thereby maintaining their privacy when using these services. This balance between efficient advertising and privacy protection is the cornerstone of a blockchain-powered advertising future, leading to a vibrant and fairer market for all stakeholders in the industry.

Reference examples: Brave Browser, Hypelab, Persona, Slise