Crypto: Things To Watch For Mass Adoption
In crypto, it is clear we have yet to see mainstream adoption with real-world use cases. In the past decade, crypto has primarily been an investment and speculative asset class. However, we are beginning to see the light at the end of the tunnel where we see some real-world use cases and adoption.
I wanted to share some components of the crypto space I believe will be very important for mainstream adoption.
We need a strong combination of Scalability, Privacy, Interoperability, Composability, Security, and Digital Identity.
Scalability
Over the past 2 years, crypto has made significant progress with scalability. This has primarily been seen with Avalanche and Solana. However, there is still much to be done:
Solana has had problems with chain outages on 7 occasions from over congestion via bots
Avalanche is beginning to grow its subnet ecosystem (something to watch)
Some key items to watch with scalability:
Layer 2 coins
Optimism was first to announce an airdrop coin plan
Metis already has a coin and the cheapest fees
For all L2s, see L2beat.com
Modular Blockchains (Celestia)
“Monolithic blockchains are chains that handle all four functions. Where a modular stack splits up components across multiple layers, monolithic blockchains do everything at the same time on a single layer.” (source)
Modular blockchains scale by splitting up the required functions of a blockchain into multiple layers
They are something new and will be something to watch as scaling becomes ever more important
Related, Metis announced intentions to use Celestia for data availability (here)
Ultimately, we are seeing a combination of vertical (L2) and horizontal scaling (modular, IBC, alt L1s).
Privacy
Realistically, all participants need some privacy to participate with crypto. JP Morgan isn’t going to be a major on chain user if we can see their trades. Or better yet, front run their trades by getting into blocks before them.
Further, part of the Web3 vision is to own one’s own data. This can’t happen unless that data is private - medical history, identity, etc.
But it hasn’t been a major focus by market participants yet.
Recent article: Why Privacy Coins Haven’t Taken Off. The 4 reasons below:
Nobody wants to transact in privacy coins
Privacy isn’t easy yet
Most people don’t care about privacy
To survive a bear attack, you don’t need to outrun a bear — you just need to outrun the person behind you
And though privacy hasn’t taken off yet, there are protocols building privacy tech:
Oasis Network (thread)
Secret Network (thread)
Other privacy tech: Railgun (thread), Hopr, Tornado Cash, among many others
Interoperability & Composability
As we gravitate toward a multi-chain world, the importance of each chain being able to interact with all the other chains will be very important.
It will be important to be able to send assets across chains safely and to use any dApp on any chain. This way, the strengthens of any chain or dApp can be utilize by users on any other chain using any other dApp.
Things to watch:
Increase in bridge connections across chains. Common bridge protocols: Wormhole, cBridge, RenBridge, Synapse, etc
Cosmos connecting to EVM chains through Evmos (thread)
LayerZero: an omnichain interoperability protocol
Thorchain (thread): Thorchain is helping bring cross-chain DeFi to crypto with native to native swaps
Security
Recent hacks show how important it will be to have strong security:
This topic is mainly associated with interoperability. As we begin to use more chains and layer2s, we will need the bridges and connections to be very secure if we intend to move assets across chains or layer2s.
This is a common critique of other chains that ETH maxi’s have. They point out rightly so that ETH is the most secure of smart-contract platforms. There could be potentially a world where ETH is the base layer for other chains purely for security reasons but all execution is on the layer 2 or even other chains like Solana or AVAX.
Identity
We will need people to have their digital identity on the blockchain. Similar to a log in or government ID that we currently have, yet something that is on the blockchain.
This is related to privacy and regulation
Privacy must be developed and adopted on the blockchain for major companies to start using crypto in mass
Regulation is needed so we can have a government official digital identity (passport, birth certificate, etc) and so that major companies have standards to abide by and operate under
We are starting to see real world use cases
Examples include:
Helium: A decentralized wireless infrastructure platform
Hivemapper: blockchain-based global map & crypto miner dashcam for decentralized mapping
Akash: A decentralized peer-to-peer marketplace for cloud compute (thread)
Multicoin Capital has a good article on how real-world use cases are being build with blockchain and crypto
Conclusion
Each component mentioned above will be important for mass crypto adoption. And for full adoption, we really need to see the combination of all of them.
We are starting to see significant development in all these areas and there is a lot to watch as crypto continues to gain adoption and more use cases and capabilities.