Andrew Veskimeister, Head of Business at Supplain discusses where is Web 3.0 heading in 2022.
Here are thoughts on blockchain, crypto and web 3.0 and their business uses.
In short, sum up 2021?
2021 was a year of many surprises. The cryptocurrency market showed very high volatility, contrary to established predictions.
Whilst the built-in cyclicality of the Bitcoin algorithm predicted the top of the market last year, it did not arrive, unlike in the stock market. The prevailing view is that the crypto cycle has lengthened, diminishing returns.
However, 2022 should bring more clarity on its cycles.
2022 has had a harsh start and will be very volatile
The most decisive events in 2022 will probably not be with the crypto but with the world economy as a whole.
Is the economy moving forward in the inflation cycle, or will it become deflationary due to central bank activities? The world economy will influence the crypto value proposition in 2022.
Slower growth is likely ahead of us.
Markets are looking for a new equilibrium point, and it is impossible to predict anything definite. If inflation increases, Bitcoin's position as a value holder will improve. In deflation, crypto must find its growth in innovation and the rising number of users.
The most crucial moment for the crypto market is the outcome of the XRP lawsuit, which should happen in 2022. On the one hand, this is crucial for XRP itself but certainly a shaper of the whole sentiment towards crypto.
2022 is also likely to be a year of clarity for the Metaverse and NFT projects, where the real potential of these critical projects emerge. It is undeniable that these sectors will experience further growth.
What happens to Ethereum with ETH 2.0?
I do not see any significant structural changes involved.
Ethereum is the crypto with the most important number of applications, and this position is likely to be strengthened.
At the same time, Ethereum will be greener as miners' computing power ('proof of work' principle) is no longer used to validate transactions. It will now be replaced by a new validation mechanism based on validators backed by stacked Ethereum ('proof of stake' principle). It aims to increase Ethereum's network speed, efficiency and scalability, making it more sustainable.
As demand for Ethereum remains high or even grows, transaction (gas) fees will not fall to zero. However, they will probably decrease. Additionally, we can see them stabilising and the predictability of gas fees increasing.
Recommendations for a novice crypto investor
The first recommendation for novice investors is to organise their investments through a corporate entity. Unfortunately, the Estonian tax system has yet to improve when investing as a private person.
LHV Bank made a giant step favouring Estonian crypto investors last year. I highly recommend using them for smaller investment amounts and in situations where there is no time to delve.
To go further, however, one needs to do more work and learn the mechanisms of crypto. More important than choosing a platform is knowing crypto management methods, such as "cold storage.”
My biggest recommendation before investing in crypto is to spend at least 20 hours educating yourself – this would be the best investment you can make.
Could crypto be a passive investment?
The primary task before starting is to set the investment horizon.
If it is 10+ years, any investment of smaller amounts regularly is a good idea. Doing this will be the surest way to achieve compound interest rate leverage and minimise the risks of delaying investments.
It is necessary to decide the asset class to invest in (property, shares, or crypto). If the answer is crypto, then investing in the top three cryptocurrencies is a relatively risk-free strategy. Alternative cryptos can also be considered depending on the investors' age and the courage to take risks, but this requires more attention and decision-making.
However, no one should be afraid to invest in crypto in a longer time frame as it is a technology that has come to stay. The blockchain is not a fashion trend but an innovative and elegant technology that corrects many of the shortcomings of the open Internet and centralised data processing.
What else could we see happen in the cryptocurrency world?
Social tokens and the DAO are one exciting development to follow in 2022.
Social tokens are a solution that allows different brands and products to use technology to share revenue with their dedicated fans and co-workers. We live in an economy of attention, and communicating the message and rewarding contributions is a significant challenge for businesses in the future.
On the other hand, DAO (Decentralised Autonomous Organisation) is an alternative to corporate governance practices where the founders decide on the day-to-day running of the organisation. Under current best practices, it is delegated to company executive boards. I see new meaning given to the term 'public company' in the coming years.
At present, it is used to characterise public companies due to the transparency of their information sharing. Companies guided by the founders’ ongoing decisions will become public in the future. It makes the whole business much more diverse and dynamic and offers many people the opportunity to have a say in all aspects of its development.
How does this all connect to the real world?
Crypto development has brought both venture capital and talented people to this innovative technology.
I am confident that in 2022, many new projects will emerge that will solve the real problems of the real world – from supply chain solutions to ensure the authenticity of organic products.
It will be an exciting year, and it will not come as a surprise if many such projects take off from Estonia.