The five key themes leading the next round of bull market are still inseparable from DeFi and NFT

Author: Jean-Paul Faraj

Source: Bankless

For newcomers to cryptocurrencies, it can be uncomfortable to experience cryptocurrency prices plummeting from highs to lows. Even for second-cycle veterans, seeing the potentially life-altering money dwindling can be equally difficult to take lightly. After all, we're in this field for the technology, aren't we?

Don't get discouraged, bear markets are generally considered to be times when people can get rich. why?

This is because opportunities abound in a bear market to buy quality projects at disproportionately low prices compared to the project's activity, development and utility. Picking the right project won't be easy, but the opportunity is obvious.

This article is not a guide to getting rich, but if you take the time to learn and observe during a bear market, you may have the upper hand in an erratic market.

This article takes a look at the froth on the surface of the cryptocurrency market, and five key themes leading up to the next bull run.

1. Adoption of Layer 2

In the blockchain field, there is a strong call for support for scaling and increasing transaction throughput. During the recent bull run, we have seen a lot of interest and speculation in projects like Solana and other "alternative L1s". This is largely because Ethereum has not scaled properly to handle the bullish demand for its block space.

However, many of these blockchains, while touting incredible speed and throughput, often consistently experience outages or underperform during times of high demand, much to the ire of many users. Ultimately, most projects fail because they are monolithic rather than modular, unable to provide the requisite security, decentralization, and throughput all in a single product.

These L1s are simply not usable at scale, and are pretty obvious (biased opinion, but well supported). So, what are the solutions that provide high throughput, high security, and high decentralization?

That is Layer 2.

Layer 2 solutions enable increased throughput to scale blockchains while inheriting security from the main chain. Solutions like StarkNet and zkSync support "batching", bundling thousands of transactions into a single transaction and publishing it to the main chain (Ethereum). This reduces the cost per transaction by orders of magnitude and increases the speed and total number of transactions that the chain can process.

Why should we care about this? In order for this wonderful technology to enter the mainstream and be adopted as the backbone of the new internet, we need it to be fast, secure, and decentralized.

Layer 2 solutions solve the speed problem, while the main chain provides security.

This will bring a wide range of use cases to the standard we need for widespread worldwide adoption. Examples of this include video games that process thousands of microtransactions per second, media that is shared instantly and cheaply, and currencies that can be traded in the blink of an eye.

Without Layer 2 solutions, it is likely that blockchain will not be able to reach its full potential for a long time. If we want to be adopted, we need to provide a layer to easily handle a large number of applications - Layer 2 can meet this core need.

Currently, Layer 2 solutions like zkSync, Starknet, Polygon Hermez, Optimism, and Arbitrum are all under active development and are already making good progress and will soon reach the baseline for adoption.

2. The maturity of DeFi and NFT

The last bull run was largely driven by DeFi and NFTs. Both are very powerful tools, but they are still in their infancy — especially NFTs.

With the market calming down, now is the time to improve the performance of these products and retest the product for market fit.

So, why is decentralized finance driving the next bull run?

DeFi is an open financial system that allows anyone, anywhere, and any amount of funds to participate.

As Bankless once mentioned: This not only provides a huge opportunity for the "unbanked" people, but also enables all kinds of new financial technologies to grow and mature. The problem is, “Decentralized lending is still in its early stages. It can’t offer everything that centralized lending can, but it can transcend the inefficiencies of traditional finance and leverage the creative minds that Web3 attracts.”

The existing centralized financial system is a giant walled garden controlled by banks and governments. They choose who gets in and who gets how much. It doesn't matter if you meet all their requirements, they can still easily turn you down, and often do.

DeFi lending protocols and services sidestep this permissioned barrier, offering everyone the same financial services that banks currently provide.

It is 100% transparent and trustless. Each can view the other's chip (anonymized by address) and also assess the financial health of the creditor/debtor based on their own criteria. DeFi opens up a window for you into the inner workings of this new age bank, with layers of transparency like never before.

This opens up a world of financial innovation, introducing new utilities, new opportunities, and clarity around everyone involved in finance.

What about NFTs? Aren't they just pictures in Jpeg format? Why can NFT also lead the next round of bull market?

You have a big misunderstanding of NFT. NFT is precisely the Trojan horse of the world of true digital ownership.

In this last bull run, monkey photos and pixel punk ruled the universe. This marks only the beginning and simply demonstrates the basic utility of digital ownership.

When we buy a shirt from a physical store, it's yours and only you own that particular shirt and you have the receipt to prove it. It is "non-homogeneous" in every sense of the word.

But before NFTs, this was not possible in the digital realm. Sure, you can buy X, Y, or Z collections online, but they're stored by the company you're buying them from on servers they rent space. With NFTs, assets live in wallets that you control.

Industries that this technology can and likely will disrupt include gaming, music, and home mortgage and money lending. The range is unimaginably large. Additional products and solutions using this key technology will take us into another bull market.

All in all, keep an eye out for innovations in the NFT space, and for teams working to realize their full potential.

3. Web3 adoption and single sign-on

Single sign-on web3 authentication allows the use of one password and account without attaching personal information to millions of new websites and existing major news outlets and platforms.

Another big topic that is often in the news is privacy and data. Companies like Meta, Amazon, and Google pretty much own your identity. They know everything about you - your password, date of birth, SSN, and every move you make on the Internet.

They say it's safe, but how many times has your data been compromised? It's basically Westworld-level data collection, and most people just acquiesce to it happening because there's no better solution.

The data collection market is worth billions of dollars, and that's how these companies make their money. Research by Datamation found that:

"In 2021, the global data collection market was valued at USD 1.66 billion. It is estimated that this figure will reach USD 8.21 billion by 2028, at a CAGR of 25.6%."

These trillion dollar companies are selling your information. Not just random data about a woman (25, white, living in Ohio), but your name, your email, your location, the products you bought, etc.

Web3 single sign-on solves this problem. It allows companies to collect data, understand your preferences, and provide you with personalized information they think you will be interested in, but more importantly, while keeping your data safe.

They can only have this data with your permission.

The future, as I see it, is this: Create a web3 wallet/identity and link it to any of the 100 websites you have an account with. When you visit any website, click a button - "Sign in with web3 wallet" - and you're ready to go. One password rules them all, while protecting your data and identity, making the Internet easier and more secure for you.

4. The rise of GameFi

Currently, in a traditional gaming environment, players either pay up front, on a monthly basis, or buy digital assets in a free-to-play game.

However, no matter which game the player is playing, every action they take and every item/character they acquire is not their own. It's stored in the game, and if the player stops playing or pays, it dies in a server beyond their control. Current game studios often have strict terms of service that prohibit players from making any "real money transactions."

This means that all the time the player puts into the game and all the value in the game universe is not theirs. The current system doesn't allow players to take advantage of it, and if they try to get around the rules, they risk getting permanently banned.

The time is ripe to disrupt this market. GameFi allows players to own the time and money they put into blockchain games with verifiable NFTs, which will create opportunities for games and players.

We may soon be living in a world where moms stop saying "why waste your time playing games" and instead say "I don't understand what Jimmy does with these games, but he buys his own .”

The gaming industry is currently more profitable than all other media industries combined, it's just that gamers are left out of the equation. Web3 gaming is not a fairytale fantasy, but a reality in the making.

However, there is still a lack of playable finished products for web3 games. But in this bear market, we should be looking at games that are playable and have strong communities.

Some of the games I'm currently following are:

• Influence: Space Strategy MMO Game
• Parallel: Sci-Fi Card Game
• Loot Realms: Massively Multiplayer On-Chain Economic Knight Game
• Guild of Guardians: Mobile RPG Game

5. Music NFT

It's harder than ever for an artist to make a living these days, even though it's easier than ever to get your music out there.

Why? Put simply: Streaming services and record labels take most of the money, leaving artists with pennies.

As an artist, you have to be one of the lucky few to get picked up by a record label, or earn content revenue through social media algorithms. However, even with content creator income, you need to be at the top of the industry to be sustainable.

In Web3, artists can better monetize their music through new monetization avenues, closer ties to the community, and fuller ownership of their music.

NFT monetization can be achieved in different ways

1. Sell exclusive membership NFTs that give fans special access to artists, such as watching VIP shows, getting limited-edition merchandise, and video calls with artists
2. The NFT that is divided into sales revenue will be divided into a certain proportion from their future sales profits. This gives artists the freedom to work without being subject to the plethora of red tape that comes with working with labels and streaming services.

ownership of music

The issue of music ownership by artists is at the heart of the current market. The record labels own most of the profits, the streaming services only provide a small cut, and the record labels take the lion's share, leaving very little for the artists in the end.

With NFT and web3, artists can release music in NFT form, whether it is a single or an entire album, allowing your fans to buy music directly from you instead of through a record label.

closer community

Through web3 certification and NFT, artists can use a small number of fans to sustain life continuously. You don't need a global audience to buy your world tour - you just need 100 loyal fans.

Gramatik, for example, has long been a supporter of the cryptocurrency blockchain and empowering artists to own their own music catalog and create freely.

Freeing content creators to create how they want, where they want, while owning their users.

In web3, artists and content creators are no longer tied to the platform on which they build their audience, or rely solely on advertising as a source of income.

Being able to provide their followers with a basic and potentially free NFT that gives them access to a content creator's private website, content, Discord, and community can also bring these content creators closer to their community, bringing their Followers bring to any new platform and unlock new unique web3 monetization opportunities.

A long way to go, a long way to go

Web3 is still in its early stages. We need a lot of development and UX design to push us to the next level.

We still need bigger breakthroughs to support this growing ecosystem:

• Layer 2 solutions are fully operational and provide the base layer with the ability to support greater transaction volumes, facilitating mass adoption and greater utility

• Ethereum successfully merged, turning off Proof of Work (PoW), and moving to Proof of Stake (PoS)

• Introduce new users to these platforms and products with a user experience comparable to the web2 experience we enjoy today

We don't know when the next bull run will come. But we are coming out of the bear market, and the adoption of Layer 2, the maturity of DeFi and NFT, the adoption of Web3 and single sign-on, the rise of GameFi and the development of music NFT will lead us into the next round of bull market.