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January 23, 2022

What to Watch in Crypto in 2022

The projects, trends, and assets worth paying attention to this year.

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Actionable insights

If you only have a couple of minutes to spare, here's what investors, operators, and founders should know about this year's most exciting crypto trends.

  • Sovereign data could change the internet. Projects like Ceramic allow users to take their data with them across the internet. Two contributors highlighted this open-source protocol, describing how it could change how we build and interact with on-chain applications.
  • Music NFTs are heading for a breakout. It may be the year of the ear. If 2021 saw the proliferation of profile picture NFTs, 2022 could elevate music NFTs. Musicians, fans, and vertical NFT marketplaces like Catalog could all win big. 
  • DAOs may be used to tackle hard problems. DAOs can do more than simply bid for the US Constitution; they may be how the next life-saving drug is developed. VitaDAO, committed to researching longevity, may prove to be a pioneer in the budding "DeSci" movement.
  • The infrastructure phase is ramping up. Existing infrastructure has struggled to keep pace with increasing crypto adoption. Better rails are needed to unlock the next stage of growth. On that front, Pocket Network may prove essential. The multichain protocol facilitates decentralized cloud computing around the world. 
  • Wallets go beyond transactions. Existing crypto wallets like MetaMask have been built to process and track transactions. Increasingly, however, wallets serve as a place to track digital goods and experiences – becoming an extension of identity. That may benefit newcomers like Genesis

I believe it was February 2021 when I first heard the word "Solana." Whatever the context might have been – a conversation or a skimmed article – I can't quite remember. Had I gone any further, I might have learned what Solana was, why it was interesting, and indeed, what a single token cost. I might have discovered that it was a new Layer 1 protocol built for speed at scale, that some of the brightest builders and investors were backing it, and that it was priced at about $6.50. 

The next time I heard about Solana it was late May. Over a walk in San Francisco, David Rosenthal of Acquired shared what he'd learned about it and why it was compelling. That was enough to pique my interest, but regrettably, not enough to buy any. At the time, Solana traded around $27. 

In August, I published a trilogy on the crypto exchange FTX. As part of it, I got to talk to some of Solana's early adopters, including Sam Bankman-Fried and Kyle Samani. SOL hit $33. 

Two weeks later, my friend Packy McCormick published his piece on the protocol. At $70, I finally bought my first Solana tokens and set up a recurring purchase. 

My reason for sharing this anecdote isn't to reveal that I am an idiot. (Though, in this case, I may be.) More so, it's to illustrate how many times we can discuss a topic before it genuinely sticks. Even when it comes from someone you admire and respect, it can take a long time to break through the noise.

Today's piece attempts to short circuit that process for us all. Rather than waiting to happen upon the most exciting projects and trends in crypto this year, I've asked some of the most thoughtful people I know to share the things they're keeping an eye on. Moreover, I've asked them to explain what energizes them about their pick to help us go beyond the sheer recognition.

While this is not investment advice—if you would like proof of how volatile this sector is, you need only review the drawdown over the last few days—by the end of today's piece, I hope you'll have a sense of what's worth paying attention to this year. 

Let's jump in. 

(NB: For real, this is not investment advice. Some of the contributors may have invested in the projects they've identified; some may not have.)

Matt Shapiro, Partner at Multcoin Capital

Building infrastructure using crypto incentives 

Crypto is starting to touch the real world in interesting ways. The technical foundation of crypto has advanced enough that entrepreneurs outside of crypto—with deep domain knowledge and expertise—realize it can be leveraged to disrupt incumbents or outright bend or break the rules of legacy industries. The best example to date has been Helium, which is disrupting wireless networks by using crypto-economic incentives to facilitate the buildout of real-world infrastructure. 

Render Network is another exciting example representing the convergence of digital rendering and crypto. Three-dimensional objects and realistic graphics in movies and videos are extremely computationally intensive. As the metaverse comes into view, those virtual environments will need to be created and rendered, along with millions of avatars and NFT accessories, to populate the digital space. Countless hours of dedicated GPU time will be required to make the metaverse possible.

Crypto-economic incentives are excellent at attracting latent assets, with no marginal cost, to become productive at scale through new marketplaces. Render Network does exactly this and takes advantage of latent GPUs worldwide. Furthermore, as Ethereum moves to a proof of stake consensus mechanism, we expect there to be an entire market of GPUs that will be readily available to render images and videos.

But marketplaces are two-way streets. Simply organizing the supply side doesn't work unless demand is there. Render Network has a unique advantage due to its relationship with Otoy. That company has been at the forefront of rendering software for over a decade. Today, their flagship software solution, Octane Render, is widely considered the best-in-class GPU rendering solution. It is used by major movie studios, including Disney, and tens of thousands of digital artists, including Beeple. Otoy provides Render Network with an embedded user base of customers who currently take their rendering jobs elsewhere, including Amazon and Nvidia.

A forgotten 2017-era token, RNDR is amid a major refresh. The token design is being updated to include staking and governance functionality. The Render Network is moving to Solana for speed and execution and integrating with Metaplex. Other major rendering software solutions, such as Redshift, have joined the Render Network. 

For these reasons, Render Network is positioned to become a core piece of infrastructure bridging web3 and the metaverse.

Structured products

As DeFi evolves, I'm keeping my eye on structured products. DeFi yields have gone down across the board as new capital has entered the space to offset the demand from borrowers. But new capital inflows are not slowing down. They are increasing as traditional asset managers hop aboard, looking to capitalize on inefficiencies and arbitrage opportunities. 

As more capital searches for yield and derivatives protocols continue to launch, structured products are in an interesting spot. For example, covered call option strategies are well established in traditional finance but are generally too complex for most retail investors to understand and quickly execute. The programmability of crypto abstracts away that complexity, making it extremely simple (one click) for long-term holders to generate yield on their assets by writing covered call options.

This segment of the market is evolving rapidly and gaining impressive traction. This includes structured product protocols such as Ribbon and StakeDAO on Ethereum, and Katana and Exotic on Solana. Demand for these products also benefits the underlying option protocols such as Opyn and Hegic on Ethereum, and Zeta and PsyOptions on Solana. It's still early days, but this is a sector to watch in DeFi. 

Find Matt here

Li Jin, co-founder at Variant

Universal basic capital for DAOs

Crypto will be the testbed for running ambitious economic and social experiments that can create a fairer internet than what existed in the web2 world.

In recent decades, income inequality has grown in most developed countries. The idea of universal basic capital (UBC), or universal basic wealth, presents a solution to structural inequality by giving people ownership of assets that appreciate. Examples include Alaska's social wealth fund, which pays out dividends from the state's oil revenue, and Singapore's Central Provident Fund. UBC has benefits over simply redistributing income: basic capital can serve as a safety net that increases bargaining power, grants the ability to take entrepreneurial risks and focus on long-term goals, and alleviates financial anxiety. 

While economists, executives, and political leaders debate how to implement UBC on a larger scale, DAOs are well-positioned to experiment here. According to stats from DeepDAO, the total assets under management (AUM) of DAO treasuries listed on the platform totaled $16 billion in December 2021, up from $400 million in January. A portion of those treasury funds can be earmarked for the DAOs' member bases and invested to earn yield over time. Members could then use these accounts for retirement, education, healthcare, or startup funding. A sample of DAOs experimenting with creating a form of basic income or basic capital is captured in the responses here, including Worldcoin, $ UBI, Impact Market, and smaller-scale experiments such as FWB's artist residency grants or SuperHi's creative basic income.

Crypto gives us a toolset to build new economies and societies. With that comes the opportunity to interrogate how we want those economies to function and what types of societies we can create. I'm excited to watch DAOs consider token design and treasury strategy not just from the perspective of short-term user acquisition or engagement but as the basis for new, fairer worlds.

Find Li here

Aaron Wright, co-founder of Tribute Labs and The LAO

The Great Intermixing

In 2021, we saw web3 emerge thanks to three overlapping core trends: DeFi, NFTs, and the glimmers of social tokens—all stitched together using the cartilage of DAOs.  

In 2022, things will start to get weird. These three categories will continue to grow and promiscuously intermix. DeFi will edge into NFTs on the lending and collateral side. NFTs will flirt with DeFi mechanics. NFTs will bend into membership cards and social communities, with social tokens acting as a community's internal incentive mechanism.  

DAOs and networks of DAOs will continue to flourish, supporting artists, creators, and novel financial products. They will enable an increasing range of open source tooling, sets of IP, and a growing number of public goods. The tooling (and particularly DAO tooling, bridges, zk-tech, messaging, privacy, and storage) will improve and begin to mature, unlocking more and more ways for people to work together in emerging multiplayer modes.  

Millions of people (if not more) will be onboarded into crypto via NFTs, opening up new categories of collectors. NFTs will no longer be limited to PFPs, gaming items, the metaverse, and digital art. They'll begin to gobble up other forms of media (where there are no significant headwinds) like fashion and music.

Who knows what happens with prices, but if the web3 ecosystem can attract more capital, the wealth it generates will increasingly be directed towards harder problems, like decentralized science and climate change.

Find Aaron here

Annika Lewis, Grants Program Lead at Gitcoin

Ceramic

Data is everything. It's a precious asset in and of itself, as evidenced by the rise of companies like Facebook and Google. Both have become among the most profitable businesses globally due to the data they garner from their billions of users.

A macro-level shift in data ownership and value capture is afoot. Web3 is bringing about what I call "the de-platforming of data" – that is to say, the decoupling of the application and data layers. These pieces are usually fused under the ownership of a single entity. The de-platforming of data will enable user-controlled data storage: a paradigm shift for users and developers alike.

No one is better poised to usher in this radical shift than Ceramic. An open-source protocol for decentralized applications, Ceramic is building the data rails of web3. For developers, it enables them to build apps without the underlying trusted, centralized database servers that have been required for so long. Ceramic breaks down data silos for end-users and lets them carry their data across platforms. In doing so, it puts control over data in users' hands.

Ceramic is rapidly gaining adoption, with notable projects already building on top of the protocol. With an incredible team at the helm and an enormous blank canvas of a problem space, Ceramic is one to watch in 2022.

Find Annika here

Ken Deeter, Partner at Electric Capital

Multichain 2.0

Last year saw a step-change in the multichain narrative. Ethereum Virtual Machine (EVM) compatibility and prohibitive transaction costs on the Ethereum mainnet allowed competing chains to attract applications and users. However, most of the activity I've seen has been of the copy-and-paste variety – forks and copycats of successful Ethereum projects combined with aggressive liquidity incentives. 

Over the long term, successful competitor chains will attract new types of applications that are both priced out of Ethereum and use the unique architectural advantages of different chains. We are starting to see examples of this with games and NFT marketplaces developing natively outside of Ethereum mainnet, but this space is just getting started.

DeFi tokenomics renaissance

Protocol-owned liquidity, vote-locking, bonds, Curve wars – the DeFi ecosystem has seen rapid innovation in economic design around governance tokens. The set of best practices for these protocols is quickly evolving. New protocols can quickly gain market share because of these more favorable designs and incentives. Early DeFi projects are re-evaluating and refactoring their core economics based on recent innovations. Communities are being disrupted and re-aligned. Over the next year, I think we'll see a clear separation between protocols that can adapt and incorporate these new mechanics and those that remain stuck in their old ways.

Find Ken here

Gaby Goldberg, Investor at TCG Crypto

Wallets as identity

The wallets of 2022 won't be crypto wallets. They'll be native web3 wallets — built for identity, navigation, personalization, and media.

To date, all wallets have been built and designed around transactions. Many wallets are more than three years old and were created solely for buying, trading, and holding tokens. Since then, as the ecosystem has continued to expand, the purpose of the wallet has evolved. As we move into web3 — a more social, open, and interoperable internet — we're seeing more demand for wallets as a place to hold NFTs (see Rainbow or Coinbase Wallet) and multimedia experiences (see Glass, Sound, and Altered State Machine). Put simply, wallets are becoming a place where people want to spend time. Existing wallets will not (and, candidly, cannot) adapt to this new preference in behavior. 

When we think about how this ecosystem-wide shift might occur, we can look to the factors that drove user adoption for previous wallets that reached mass scale. As a case study, MetaMask had 545,000 monthly active users (MAUs) in July 2020. This measure shot up to over 10 million by August 2021, driven by a surge of interest in "DeFi Summer," where yield farming acted as a hook for consumers. At that time, it was an obvious choice for consumers to use MetaMask to take advantage of DeFi yields, as MetaMask was far more accessible (widely supported) than competitors.

We can draw similarities between this example and the web3 ecosystem today. Supply of NFT projects, new yield farming opportunities, and social web3 platforms are all at an all-time high and only growing. Legacy wallets will initially consume new demand. But as the variety of applications, use cases, and behaviors expands, users (and developers) will need integrated wallets more supportive of leveraging on-chain provenance and transporting your digital identity across apps and chains. I'm excited by wallets like Genesis, Bitski, and Sudo for these reasons.

My talented friend and fellow investor Jay Drain said it best: "Right now, crypto wallets look very much like inventories… in the future they will more clearly represent our digital identities by making them composable across the web." I recommend you check out his full piece here

Find Gaby here

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John O'Connell, Investor at True Ventures

Stader Labs

One project I am excited about is Stader Labs. Stader is building the "Amazon of Staking" – making it simple for users to stake their crypto and earn passive income across various strategies depending on user preferences. 

Stader launched on Terra, allowing users to autocompound their LUNA staking rewards to maximize returns while simultaneously distributing their assets across a variety of different validators to encourage further decentralization of the Terra blockchain as a whole. Stader also launched LunaX, a liquid staking derivative of LUNA that allows users to interact with other DeFi applications in the Terra ecosystem. 

Today, Stader manages roughly 6.1 million LUNA (worth ~$490 million at the time of writing) across different strategies. In the future, Stader plans to launch similar products on other blockchains, including Solana and Ethereum. They will also introduce advanced strategies to enhance further the utility of their platform to their growing community.  

(Disclosure: True Ventures is an investor in Stader). 

Altered State Machine

Another project I'm excited about is Altered State Machine (ASM), which is building a protocol to add enhanced AI abilities to NFT projects. ASM recently dropped a project called "Brains." The NFTs are unique artificial intelligences that can be trained and used in different ways.

OpenSea

For example, ASM launched the Artificial Intelligence Football Association (AIFA). Holders can use their Brains to compete in AIFA's play-to-earn video game, alongside special "all star" characters. As Brains are used in games like this one, they develop skills and abilities that make them more useful in the future. Users can also train them passively using ASM's simulation modeling tech. 

In the future, Brains will be able to be used in other DeFi, gaming, and crypto contexts. Holders will even combine Brains to mint NFTs, allowing newcomers to join the ecosystem.

(Disclosure: True Ventures is an investor in ASM). 

Find John here

Andy Weissman, GP at USV

Digital fashion

I am most curious to see what happens in the evolving world of digital fashion. Digital identity is obviously important – 4.5 billion social media consumers already use a digital identity and persona. As Dani Loftus, founder of digital atelier Draup writes

The personas which form the base of your identity are not curated from your physical life but created fully digitally, providing the opportunity for you to self-express in entirely new ways.

What new forms of self-expression will emerge? What new tools and platforms for emerging designers will be invented? What new ways of wearing, sharing, selling, distributing? When you mix these concepts with the core principles of web3—composability, transferability—what happens?

Some names I am watching: Dani Loftus, UNXD, DressX, The Fabricant, Artisans, Charli Cohen, RED DAO, and XXXXTH

(NB: I am friends with some of these brilliant people!)

Find Andy here

Jackson Dahl, EIR at Paradigm

The rise of pseudonymity

I'm excited for more people to explore and build tools for pseudonymity, particularly in the context of web3. While the last decade of the internet has been dominated by real name identity, I believe we're entering a new phase during which pseudonymity will become common, if not dominant, in many mediums. It's worth noting that while there are privacy and security reasons for pseudonymity (which Balaji Srinivasan has discussed extensively), there are other massive implications, including those on social dynamics, identity expression, culture, celebrity, and more. Perhaps most importantly, pseudonymity allows identity to become contextual rather than fixed. In that regard, pseudonymity, unlike anonymity, is a spectrum and a vast design space.

Last year saw a rise of pseudonymous influencers in gaming and crypto, ranging from prominent creators (Dream, Corpse Husband, CodeMiko) to more niche but high engagement thought leaders with identities built around NFTs (Gmoney, Punk 6529, 4156). There are also examples in art and fashion. We will see more join this cadre; people will use multiple identities just as some identities will be made up of multiple people. We've seen glimpses of pseudonymity-at-scale on platforms like Reddit, Discord, Tumblr, and even some parts of Twitter and Instagram.

This trend is not explicitly tied to web3. But NFT-as-identity, on-chain reputation, decentralization, and composability are critical for its development. As we spend more and more of our lives in digital spaces, I expect flexible identity to be a vital ingredient to shaping an ideal future, just as digital money and property rights will be. 

Find Jackson here

Richard Chen, GP at 1confirmation

Vertical NFT marketplaces

OpenSea is the biggest winner in our portfolio. While it will continue to be a generational company and the dominant NFT secondary marketplace, I believe vertical-specific marketplaces will carve out niches with better UI/UX, search, and discovery features. SuperRare is a successful example for high-end 1/1 crypto art, but there will be others for categories like photography (Sloika), metaverse land (Metahood), and music (Catalog).

I'll highlight music NFTs in particular. Surprisingly, music NFTs have not exploded yet, unlike other categories like fine art, collectibles, and gaming, but I feel that collector tastes are quickly changing. Catalog, the leading music NFT marketplace, had a breakout month in October, and the volume graphs are reminiscent of what I saw in SuperRare in early 2020 before crypto art exploded. For music, it's a question of when not if.

Find Richard here

Tina He, co-founder of 0xStation

The birth of new “cities”

In 2022, we’ll observe a renewed understanding of the relationships between our identity, contributions, and relationships on the Internet. The most interesting assets are the ones that can create an environment that reinforces our understanding of our new selves. 

Psychological undercurrents have been converging on this point for some time. Both web2 and web3 startups are riding the waves from different directions and through different vehicles. Both believe the democratizing power of tools enables mass consumers to participate in economic activities once gated by a few institutions or corporations. 

Reality becomes increasingly pluralistic and transcendental. Just the “everyone is an investor” thesis has given birth to two startups taking large bets; Party Round and Syndicate are two manifestations of the same conviction. For some newcomers, the earned identity as “investors” has to be accomplished through “contribution” — be it rising through the ranks of a Mirror Write Race and becoming a thought leader or discovering a tactical niche where knowledge compounds. Those who invest together stay together to talk about more investments, plowing a fertile land for new social interactions around shared ownership of an asset.  

The “software is eating the world” thesis is still playing out at a large scale in web2. For most web2 companies, the coherent, frictionless and delightful UX abstracts away the legal piping and institutional alignment accomplished by SLAs, laborious data digitization, and unification of standards. And for web3 companies, these institutions are being created as brand new entities, rapidly earning legitimacy. The former will fight for consumer attention, while the latter will fight to build the guardrails of legitimacy and invite a whole new class of workers to help them get there. 

The most exciting trend in 2022 is seeing how this tale of many cities unfold — giving birth to a class of new workers, citizens, leaders, and infrastructure. 

Find Tina here

Cooper Turley, Full-time DAOs

Music NFTs

The spectrum ranges from independent artists like Daniel Allan and Haleek Maul to Nas and 3LAU. Across the board, artists are tokenizing audio files, offering fans a way to collect their favorite song or record. Here are some of the market leaders:

  • Catalog. As the premiere 1/1 music NFT marketplace, Catalog was the first major platform to tokenize audio files by building on Zora. It features a diverse collection of established artists, up-and-coming acts, and genesis records. With over $2 million in records sold to date, Catalog has established itself as a cornerstone of the music NFT movement.
  • Sound. Hosting a listening party has never been more satisfying. Sound lets musicians share new music by releasing a set of numbered NFTs, which allow listeners to support their favorite artists. Earlier editions are considered more valuable than later ones, incentivizing discovery. So far, Sound has presided over twenty-nine consecutive sellout listening parties, all of which were wrapped up in the first minute of going live. With a growing secondary market, Sound is worth keeping a close eye on.
  • Royal. Giving fans the ability to collect NFTs with a direct claim on royalties, Royal launched its first drop earlier this week. By enabling credit card transactions, Royal seems to have attracted many non-crypto-natives – 40% of participants used that method to join the drop. For those new to web3, Royal presents a promising solution. 

Beyond Music NFTs, the landscape also features a growing number of labels, agencies, and collectives coming together to collect music. Whether you're a fan, degen, or artist, there's something for everyone.

Cooper Turley

For those looking to learn more, check out this piece on the Music NFT landscape. See you on the ground floor!

Find Cooper here

Hanel Baveja, Investor at USV

The emergence of DeSci

To reimagine the structures that make drug development obscure and misaligned today might require a completely orthogonal, non-obvious view: DeSci.

DeSci, or decentralized science, aims to make scientific innovation more open, visible, and frictionless, all the way from publishing to funding. It broadens the idea of what it might look like to be a stakeholder in new scientific IP and brings more new IP to the world by aggregating resources—people and capital—in new ways through DAOs and other web3 structures. Perhaps the most radical vision for DeSci is to empower new and larger groups of stakeholders—patients, researchers, and enthusiasts—with positive market effects that result in cheaper and better products for all.

There are several interesting projects already happening in DeSci, including Molecule, VitaDAO, and others detailed here. I have more questions than answers about this emerging category, which makes me even more excited for what is ahead.

Find Hanel here

Alexis Ohanian, founder of 776

Bored Ape Yacht Club

I'm biased as an early ape holder, and I've converted lots of folks from my old co-founder Garry to my own wife (I bought hers as a gift), but I think we'll even more from BAYC in 2022 that resets our expectations for what NFTs x Culture is capable of.

Find Alexis here

Maria Shen, Partner at Electric Capital

DAOs as the new subreddits

The internet erased geographic boundaries and allowed communities to form around any interest, no matter how niche. Crypto unlocked the ability for anyone to create coordination systems at scale.

DAOs leverage both the internet and crypto to enable tribes of strangers to wield pools of resources for a common purpose. With DAOs, people can now pool resources together and decide what to do with those resources through a governance process. The rate of DAO creation is growing exponentially – what began as a trickle of one or two new DAOs every day has become a torrent. The largest DAOs control a treasury of billions in value, give out grants, and employ large teams. By contrast, the smallest DAOs can be a group of friends who have pooled resources to purchase an NFT.

DAOs provide jobs, give to charity, fund initiatives, contribute to political campaigns, and throw great parties. In the future, we may have as many DAOs as there are subreddits – except rather than just a forum, these organizations will be able to direct resources to ideals they care about.

Find Maria here

David Phelps, Investor at Cow Fund

Ceramic

If you were a scholar in the years before the printing press, there is a decent chance that you were also a voyager—spending the bulk of your days neither reading nor lecturing but traveling library-to-library to study and copy books. You moved, but the books did not. The printing press changed all that, of course: now the books could move so you didn't have to, and a few centuries of revolution would erupt accordingly. But for all of technology's advances, in today's internet, we are mostly pre-printing-press. We can't transfer the people we follow, the kind of media we like, the reputation and audience we've built—our data—as platforms. Like the scholars, we spend our time moving between platforms; the media on those platforms does not.

What would happen if our data were transportable? We should see at least four significant social consequences:

  1. People could track the impact of creative work as it's shared, used, and monetized in the farthest reaches of the internet.
  2. People would share far more data with platforms to improve performance and recommendations since it could improve their experience across the entire web.
  3. People would be incentivized to contribute to public data sets that produced better analytics and social graphs for platforms to innovate on top of. AI could leverage this information to automate many of our daily online tasks.
  4. Platforms would compete to have users port their data and audiences from one venue to another. 

In other words, data portability represents a massive social shift in turning power from platforms to users. Or rather, data portability shifts power from platforms to protocols, as users can only manage and transfer their data on top of universal rails that standardize, validate, and stream this data. Platforms will have to build on top of universal data rails to draw on each other's content and audiences. Still, as Joel Monegro suggested years ago, they also lose their moat as users port their tokens, NFTs, content, followers, and reputation from one to the other. Meanwhile, the moat for data protocols grows fat in letting users port that data in the first place. 

This behavior is what Ceramic enables in developing a data streaming blockchain that lets us own our own data. That means we can monetize our data, set automatic commissions whenever anyone uses it, and earn rewards from platforms competing to win us over. For that matter, we can also track and credential the impact of creative work: imagine writing a song and not only getting paid when others made money playing it at events but enabling others to remix it permissionlessly with proceeds flowing back to you, all while collecting data on its usage that you could use to find professional opportunities while connecting to others with similar taste. In web3, our ability to manage our data will enable us to manage our entire life online. NFTs are only the frontend of how we'll be seen, in the metaverse, as data.

If the 2010s were the decade that Distributed Ledger Technologies (DLTs) enabled sovereign finance, the 2020s will be the decade that offers sovereign data of all types. And we can return to our ancient scholar, wandering library to library in the vain pursuit of sharing and translating each other's texts so that the libraries might eventually resemble one another. In the less poetic web3 data stack, Arweave is something like that library, hosting the books, while protocols like The Graph and Kyve serve like librarians helping to index and query the books we need.

But Ceramic is unique not only because it offers universal rails for platforms to build on but because it's what lets us write the books in the library in the first place. Providing the tools to own and manage our data gives us incentives to collect and create new data types that may even still be outside our imagination. That's the huge potential. Not simply that we can own our data online as individuals, but that we can be rewarded for sharing it, collectivizing it, and recomposing it in new communal social structures of which we haven't fully conceived.

Find David here

Chase Chapman, co-founder of Decentology

Token weighted voting

As DAOs become one of the de facto structures in web3, with massive treasuries and millions of members, the stakes for getting things right are much higher. All of this makes organizational design failures in DAOs a considerable risk.

Token-based governance is a well-documented organizational design failure. Not only can tokens be bought and used to manipulate a vote, but token-based voting systems don't account for domains of expertise. For example, an individual with marketing expertise should have more power in a marketing decision. This failing results in the dilution of expert knowledge.

In 2022, I expect to see significant experimentation with governance, slowly moving away from token-based voting and toward other mechanisms that distribute governance power based on merit, required context for decision-making, and expertise. As tokens become less critical for governance, DAOs will be forced to ask themselves what the intrinsic value of a token actually is, which could be a forcing function for exploring new mechanisms that give tokens value beyond governance power.

Find Chase here

Brian Flynn, co-founder of Rabbithole

0xStation

If we're playing the Great Online Game, the next level in the game is trading "social scores" for "contribution scores." I think 0xStation will be pivotal in this transition. The project is building infrastructure to connect talent to the right projects in web3, helping members of the new economy work and play. As these people develop and participate, their accomplishments will show up on the blockchain, creating a log of skills and abilities. Over time, I expect that on-chain reputation to supersede social standing on sites like Twitter, better showcasing the value of a particular individual and the work that they've completed. 0xStation is going to be one to watch here.

Find Brian here

Julia Lipton, founder of Awesome People Ventures

Syndicate

I continue to be more bullish on DAOs. It's still early, but it's clear that DAOs will unlock new types of organizations, projects, and investments that weren't possible before. 

One key player in this space is Syndicate. They make it super easy to create an investment group. Communities are forming overnight to invest in NFTs, DeFi projects, and even startups. Want to buy a hundred crypto covens as a squad or run a DeFi investment fund? Interested in angel investing with your friends? Syndicate is probably your best bet. 

Spinning up a traditional investment fund is expensive, laborious, and legally complicated. Syndicate enables projects, friends, and trustless communities to coordinate capital to invest nearly instantly. We'll continue to see new ways of coordinating labor and capital in 2022, and I'm excited to see what's next. 

Find Julia here

Fiona O'Donnell-McCarthy, Investor at True Ventures

JellyFi

I'm excited to highlight two projects with incredible female co-founders. The first, JellyFi, provides a simple source of liquidity for other DeFi projects. They offer under-collateralized loans in contrast to the typical over-collateralized loans we see in DeFi today.  

Their customers are audited institutional borrowers (DAOs, dApps, and DeFi protocols) that use the liquidity like a revolving line of credit. This structure allows lenders to earn higher returns than over-collateralized DeFi lending platforms.

This excites me because it gives the ecosystem a less burdensome and more efficient form of credit. That will be increasingly critical as high-potential DeFi projects experience growing pains or need to weather temporary setbacks.

JellyFi was founded by four ConsenSys alums, including Charlotte Eli, who worked on a decentralized derivatives trading platform while at ConsenSys. 

(Disclosure: True Ventures is an investor in JellyFi). 

The Dematerialized 

While crypto is currently male-dominated, many women-led projects are capturing our attention and imagination. The Dematerialized, a Net-a-Porter for the metaverse, is one of them. They curate and launch digital and "phygital" fashion in collaboration with existing fashion brands and web3 artists. I bought my first piece of phygital apparel (boots accompanied by a 3D NFT) from The Dematerialized in 2021. The boots are definitely cooler than I am.

Beyond the otherworldly merchandise, I love two key things about the project: its mission to tackle waste in the fashion industry through shifting consumption to digital platforms and its dedication to attracting and onboarding new users to crypto through a familiar user experience. 

DAOs focused on gender diversity

The promise of blockchain technology was one of decentralization and the dismantling of traditional power structures, yet we still see significant gender disparity in the web3 world. HER DAO is a developer collective of female, transgender, and non-binary folks. Their mission is to increase representation in the space and ensure there are diverse perspectives at the table as the revolutionary web3 products are built. One of HER DAO's many initiatives includes offering scholarships for self-identifying women to attend major conferences like ETH Denver. (See you there!)

Boys Club is focused on supporting women and non-binary folks anywhere on their journey from crypto-curious to full degen. They are in the process of transitioning from a club to a DAO. I've been impressed by their ability to attract folks to the space and encourage senior web2 talent to consider careers in web3. I highly recommend popping into their Discord or following them on social media (Instagram and TikTok).

Find Fiona here

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Chris McCann, co-founder at Race Capital

Zeta Markets

Option vaults like Ribbon, Friktion, and Katana are increasing in popularity as they derive their yield from selling options instead of distributing governance tokens as rewards. As projects and users get more comfortable with options, I would be paying attention to the underlying infrastructure which powers these products, namely Zeta Markets

Currently, many of these options products are settled off-market, but just like we saw DEXs bring transparency to spot market exchanges, I predict we'll see the same dynamic play out with options and derivative products.

Saber

Saber is the liquidity engine for Solana. Founded by the Macalinao brothers, it powers both upstream and downstream DeFi applications, including Allbridge and Jupiter. Saber is already doing more than $900 million in monthly volume across its pools.

Similar to Curve, the Saber ecosystem has built out its own governance stack (TribecaDAO), liquidity aggregators (Sunny), stablecoins (Cash) and has open-sourced all of these infrastructure pieces for other projects to re-use on their terms. Similar to the "Curve Wars" in the Ethereum ecosystem, I think we will see a similar dynamic in Solana. It's already being referred to as the "Saber Wars."

Allbridge

It is increasingly clear we will be living in a multichain future, and if that is the case, the bridges which link chains are going to be of enormous importance. One of these bridges is Allbridge which connects the Solana, Ethereum, Terra, Avalanche, Celo, Binance Smart Chain, Fantom, and Polygon ecosystems.

In the five months since Allbridge was launched, Andriy Velykyv and his team have already bridged over $5 billion in assets across various ecosystems. Solana alone has had $1.7 billion in assets bridged to it. 

Find Chris here

Eshita Nandini, Researcher at Messari

Web3: App → Infrastructure cycle 

I expect more focus on web3 infrastructure, shifting us closer towards genuinely decentralized and trustless systems. This piece by Dani Grant and Nick Grossman defines the cycles clearly––"apps beget infrastructure," not the other way around. We've gone through several years of innovation around NFTs, DeFi, dApps, and increasingly became aware that current infrastructure is limiting our ability to decentralize, scale, and provide some of the critical features of web3.

Arguably, this is the most important app to infrastructure cycle for web3 because we've seen Ethereum's network fill up with activity, prompting high gas fees. That's allowed centralized platforms like Opensea and MetaMask to emerge as major winners. Data storage has been crucial to tackle within the infrastructure stack due to the limitation on Layer 1 (L1) storage capacity. That has prompted storage companies to build their own decentralized solutions like Arweave, Filecoin, and so on. On the scaling side, Celestia is one to keep an eye on––it is a data availability layer, which will be extremely important as blockchains scale.

I'm also excited about Pocket Network, which provides a multichain protocol for decentralized cloud computing with the full-node network spread globally. They just closed a $10 million round to focus on expanding node coverage and adoption; this is timely as many developers are entering the web3 space building across different blockchains. In December, Pocket Network raked in $56 million in revenue, up more than 50% from November. Many DeFi protocols and dApps depend on Web2 infrastructure to sustain them, and Pocket Network can provide stable infrastructure for web3 applications.

NFT Financialization Protocols

The NFT market is not slowing down. Coinbase is expected to launch its NFT marketplace soon, and the expectation is that it will only increase adoption.

However, NFTs are mostly illiquid, and if you are not holding something from a blue-chip collection, you're likely not making money. To remedy this, several projects are sprouting up to provide similar primitives to DeFi, allowing for more liquidity through ways such as fractionalizing NFTs or the creation of liquidity pools. Protocols that I am keeping an eye on include Arcade, Fractional, and NFTfi

Find Eshita here

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Actionable insights

If you only have a couple of minutes to spare, here's what investors, operators, and founders should know about this year's most exciting crypto trends.

  • Sovereign data could change the internet. Projects like Ceramic allow users to take their data with them across the internet. Two contributors highlighted this open-source protocol, describing how it could change how we build and interact with on-chain applications.
  • Music NFTs are heading for a breakout. It may be the year of the ear. If 2021 saw the proliferation of profile picture NFTs, 2022 could elevate music NFTs. Musicians, fans, and vertical NFT marketplaces like Catalog could all win big. 
  • DAOs may be used to tackle hard problems. DAOs can do more than simply bid for the US Constitution; they may be how the next life-saving drug is developed. VitaDAO, committed to researching longevity, may prove to be a pioneer in the budding "DeSci" movement.
  • The infrastructure phase is ramping up. Existing infrastructure has struggled to keep pace with increasing crypto adoption. Better rails are needed to unlock the next stage of growth. On that front, Pocket Network may prove essential. The multichain protocol facilitates decentralized cloud computing around the world. 
  • Wallets go beyond transactions. Existing crypto wallets like MetaMask have been built to process and track transactions. Increasingly, however, wallets serve as a place to track digital goods and experiences – becoming an extension of identity. That may benefit newcomers like Genesis

I believe it was February 2021 when I first heard the word "Solana." Whatever the context might have been – a conversation or a skimmed article – I can't quite remember. Had I gone any further, I might have learned what Solana was, why it was interesting, and indeed, what a single token cost. I might have discovered that it was a new Layer 1 protocol built for speed at scale, that some of the brightest builders and investors were backing it, and that it was priced at about $6.50. 

The next time I heard about Solana it was late May. Over a walk in San Francisco, David Rosenthal of Acquired shared what he'd learned about it and why it was compelling. That was enough to pique my interest, but regrettably, not enough to buy any. At the time, Solana traded around $27. 

In August, I published a trilogy on the crypto exchange FTX. As part of it, I got to talk to some of Solana's early adopters, including Sam Bankman-Fried and Kyle Samani. SOL hit $33. 

Two weeks later, my friend Packy McCormick published his piece on the protocol. At $70, I finally bought my first Solana tokens and set up a recurring purchase. 

My reason for sharing this anecdote isn't to reveal that I am an idiot. (Though, in this case, I may be.) More so, it's to illustrate how many times we can discuss a topic before it genuinely sticks. Even when it comes from someone you admire and respect, it can take a long time to break through the noise.

Today's piece attempts to short circuit that process for us all. Rather than waiting to happen upon the most exciting projects and trends in crypto this year, I've asked some of the most thoughtful people I know to share the things they're keeping an eye on. Moreover, I've asked them to explain what energizes them about their pick to help us go beyond the sheer recognition.

While this is not investment advice—if you would like proof of how volatile this sector is, you need only review the drawdown over the last few days—by the end of today's piece, I hope you'll have a sense of what's worth paying attention to this year. 

Let's jump in. 

(NB: For real, this is not investment advice. Some of the contributors may have invested in the projects they've identified; some may not have.)

Matt Shapiro, Partner at Multcoin Capital

Building infrastructure using crypto incentives 

Crypto is starting to touch the real world in interesting ways. The technical foundation of crypto has advanced enough that entrepreneurs outside of crypto—with deep domain knowledge and expertise—realize it can be leveraged to disrupt incumbents or outright bend or break the rules of legacy industries. The best example to date has been Helium, which is disrupting wireless networks by using crypto-economic incentives to facilitate the buildout of real-world infrastructure. 

Render Network is another exciting example representing the convergence of digital rendering and crypto. Three-dimensional objects and realistic graphics in movies and videos are extremely computationally intensive. As the metaverse comes into view, those virtual environments will need to be created and rendered, along with millions of avatars and NFT accessories, to populate the digital space. Countless hours of dedicated GPU time will be required to make the metaverse possible.

Crypto-economic incentives are excellent at attracting latent assets, with no marginal cost, to become productive at scale through new marketplaces. Render Network does exactly this and takes advantage of latent GPUs worldwide. Furthermore, as Ethereum moves to a proof of stake consensus mechanism, we expect there to be an entire market of GPUs that will be readily available to render images and videos.

But marketplaces are two-way streets. Simply organizing the supply side doesn't work unless demand is there. Render Network has a unique advantage due to its relationship with Otoy. That company has been at the forefront of rendering software for over a decade. Today, their flagship software solution, Octane Render, is widely considered the best-in-class GPU rendering solution. It is used by major movie studios, including Disney, and tens of thousands of digital artists, including Beeple. Otoy provides Render Network with an embedded user base of customers who currently take their rendering jobs elsewhere, including Amazon and Nvidia.

A forgotten 2017-era token, RNDR is amid a major refresh. The token design is being updated to include staking and governance functionality. The Render Network is moving to Solana for speed and execution and integrating with Metaplex. Other major rendering software solutions, such as Redshift, have joined the Render Network. 

For these reasons, Render Network is positioned to become a core piece of infrastructure bridging web3 and the metaverse.

Structured products

As DeFi evolves, I'm keeping my eye on structured products. DeFi yields have gone down across the board as new capital has entered the space to offset the demand from borrowers. But new capital inflows are not slowing down. They are increasing as traditional asset managers hop aboard, looking to capitalize on inefficiencies and arbitrage opportunities. 

As more capital searches for yield and derivatives protocols continue to launch, structured products are in an interesting spot. For example, covered call option strategies are well established in traditional finance but are generally too complex for most retail investors to understand and quickly execute. The programmability of crypto abstracts away that complexity, making it extremely simple (one click) for long-term holders to generate yield on their assets by writing covered call options.

This segment of the market is evolving rapidly and gaining impressive traction. This includes structured product protocols such as Ribbon and StakeDAO on Ethereum, and Katana and Exotic on Solana. Demand for these products also benefits the underlying option protocols such as Opyn and Hegic on Ethereum, and Zeta and PsyOptions on Solana. It's still early days, but this is a sector to watch in DeFi. 

Find Matt here

Li Jin, co-founder at Variant

Universal basic capital for DAOs

Crypto will be the testbed for running ambitious economic and social experiments that can create a fairer internet than what existed in the web2 world.

In recent decades, income inequality has grown in most developed countries. The idea of universal basic capital (UBC), or universal basic wealth, presents a solution to structural inequality by giving people ownership of assets that appreciate. Examples include Alaska's social wealth fund, which pays out dividends from the state's oil revenue, and Singapore's Central Provident Fund. UBC has benefits over simply redistributing income: basic capital can serve as a safety net that increases bargaining power, grants the ability to take entrepreneurial risks and focus on long-term goals, and alleviates financial anxiety. 

While economists, executives, and political leaders debate how to implement UBC on a larger scale, DAOs are well-positioned to experiment here. According to stats from DeepDAO, the total assets under management (AUM) of DAO treasuries listed on the platform totaled $16 billion in December 2021, up from $400 million in January. A portion of those treasury funds can be earmarked for the DAOs' member bases and invested to earn yield over time. Members could then use these accounts for retirement, education, healthcare, or startup funding. A sample of DAOs experimenting with creating a form of basic income or basic capital is captured in the responses here, including Worldcoin, $ UBI, Impact Market, and smaller-scale experiments such as FWB's artist residency grants or SuperHi's creative basic income.

Crypto gives us a toolset to build new economies and societies. With that comes the opportunity to interrogate how we want those economies to function and what types of societies we can create. I'm excited to watch DAOs consider token design and treasury strategy not just from the perspective of short-term user acquisition or engagement but as the basis for new, fairer worlds.

Find Li here

Aaron Wright, co-founder of Tribute Labs and The LAO

The Great Intermixing

In 2021, we saw web3 emerge thanks to three overlapping core trends: DeFi, NFTs, and the glimmers of social tokens—all stitched together using the cartilage of DAOs.  

In 2022, things will start to get weird. These three categories will continue to grow and promiscuously intermix. DeFi will edge into NFTs on the lending and collateral side. NFTs will flirt with DeFi mechanics. NFTs will bend into membership cards and social communities, with social tokens acting as a community's internal incentive mechanism.  

DAOs and networks of DAOs will continue to flourish, supporting artists, creators, and novel financial products. They will enable an increasing range of open source tooling, sets of IP, and a growing number of public goods. The tooling (and particularly DAO tooling, bridges, zk-tech, messaging, privacy, and storage) will improve and begin to mature, unlocking more and more ways for people to work together in emerging multiplayer modes.  

Millions of people (if not more) will be onboarded into crypto via NFTs, opening up new categories of collectors. NFTs will no longer be limited to PFPs, gaming items, the metaverse, and digital art. They'll begin to gobble up other forms of media (where there are no significant headwinds) like fashion and music.

Who knows what happens with prices, but if the web3 ecosystem can attract more capital, the wealth it generates will increasingly be directed towards harder problems, like decentralized science and climate change.

Find Aaron here

Annika Lewis, Grants Program Lead at Gitcoin

Ceramic

Data is everything. It's a precious asset in and of itself, as evidenced by the rise of companies like Facebook and Google. Both have become among the most profitable businesses globally due to the data they garner from their billions of users.

A macro-level shift in data ownership and value capture is afoot. Web3 is bringing about what I call "the de-platforming of data" – that is to say, the decoupling of the application and data layers. These pieces are usually fused under the ownership of a single entity. The de-platforming of data will enable user-controlled data storage: a paradigm shift for users and developers alike.

No one is better poised to usher in this radical shift than Ceramic. An open-source protocol for decentralized applications, Ceramic is building the data rails of web3. For developers, it enables them to build apps without the underlying trusted, centralized database servers that have been required for so long. Ceramic breaks down data silos for end-users and lets them carry their data across platforms. In doing so, it puts control over data in users' hands.

Ceramic is rapidly gaining adoption, with notable projects already building on top of the protocol. With an incredible team at the helm and an enormous blank canvas of a problem space, Ceramic is one to watch in 2022.

Find Annika here

Ken Deeter, Partner at Electric Capital

Multichain 2.0

Last year saw a step-change in the multichain narrative. Ethereum Virtual Machine (EVM) compatibility and prohibitive transaction costs on the Ethereum mainnet allowed competing chains to attract applications and users. However, most of the activity I've seen has been of the copy-and-paste variety – forks and copycats of successful Ethereum projects combined with aggressive liquidity incentives. 

Over the long term, successful competitor chains will attract new types of applications that are both priced out of Ethereum and use the unique architectural advantages of different chains. We are starting to see examples of this with games and NFT marketplaces developing natively outside of Ethereum mainnet, but this space is just getting started.

DeFi tokenomics renaissance

Protocol-owned liquidity, vote-locking, bonds, Curve wars – the DeFi ecosystem has seen rapid innovation in economic design around governance tokens. The set of best practices for these protocols is quickly evolving. New protocols can quickly gain market share because of these more favorable designs and incentives. Early DeFi projects are re-evaluating and refactoring their core economics based on recent innovations. Communities are being disrupted and re-aligned. Over the next year, I think we'll see a clear separation between protocols that can adapt and incorporate these new mechanics and those that remain stuck in their old ways.

Find Ken here

Gaby Goldberg, Investor at TCG Crypto

Wallets as identity

The wallets of 2022 won't be crypto wallets. They'll be native web3 wallets — built for identity, navigation, personalization, and media.

To date, all wallets have been built and designed around transactions. Many wallets are more than three years old and were created solely for buying, trading, and holding tokens. Since then, as the ecosystem has continued to expand, the purpose of the wallet has evolved. As we move into web3 — a more social, open, and interoperable internet — we're seeing more demand for wallets as a place to hold NFTs (see Rainbow or Coinbase Wallet) and multimedia experiences (see Glass, Sound, and Altered State Machine). Put simply, wallets are becoming a place where people want to spend time. Existing wallets will not (and, candidly, cannot) adapt to this new preference in behavior. 

When we think about how this ecosystem-wide shift might occur, we can look to the factors that drove user adoption for previous wallets that reached mass scale. As a case study, MetaMask had 545,000 monthly active users (MAUs) in July 2020. This measure shot up to over 10 million by August 2021, driven by a surge of interest in "DeFi Summer," where yield farming acted as a hook for consumers. At that time, it was an obvious choice for consumers to use MetaMask to take advantage of DeFi yields, as MetaMask was far more accessible (widely supported) than competitors.

We can draw similarities between this example and the web3 ecosystem today. Supply of NFT projects, new yield farming opportunities, and social web3 platforms are all at an all-time high and only growing. Legacy wallets will initially consume new demand. But as the variety of applications, use cases, and behaviors expands, users (and developers) will need integrated wallets more supportive of leveraging on-chain provenance and transporting your digital identity across apps and chains. I'm excited by wallets like Genesis, Bitski, and Sudo for these reasons.

My talented friend and fellow investor Jay Drain said it best: "Right now, crypto wallets look very much like inventories… in the future they will more clearly represent our digital identities by making them composable across the web." I recommend you check out his full piece here

Find Gaby here

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John O'Connell, Investor at True Ventures

Stader Labs

One project I am excited about is Stader Labs. Stader is building the "Amazon of Staking" – making it simple for users to stake their crypto and earn passive income across various strategies depending on user preferences. 

Stader launched on Terra, allowing users to autocompound their LUNA staking rewards to maximize returns while simultaneously distributing their assets across a variety of different validators to encourage further decentralization of the Terra blockchain as a whole. Stader also launched LunaX, a liquid staking derivative of LUNA that allows users to interact with other DeFi applications in the Terra ecosystem. 

Today, Stader manages roughly 6.1 million LUNA (worth ~$490 million at the time of writing) across different strategies. In the future, Stader plans to launch similar products on other blockchains, including Solana and Ethereum. They will also introduce advanced strategies to enhance further the utility of their platform to their growing community.  

(Disclosure: True Ventures is an investor in Stader). 

Altered State Machine

Another project I'm excited about is Altered State Machine (ASM), which is building a protocol to add enhanced AI abilities to NFT projects. ASM recently dropped a project called "Brains." The NFTs are unique artificial intelligences that can be trained and used in different ways.

OpenSea

For example, ASM launched the Artificial Intelligence Football Association (AIFA). Holders can use their Brains to compete in AIFA's play-to-earn video game, alongside special "all star" characters. As Brains are used in games like this one, they develop skills and abilities that make them more useful in the future. Users can also train them passively using ASM's simulation modeling tech. 

In the future, Brains will be able to be used in other DeFi, gaming, and crypto contexts. Holders will even combine Brains to mint NFTs, allowing newcomers to join the ecosystem.

(Disclosure: True Ventures is an investor in ASM). 

Find John here

Andy Weissman, GP at USV

Digital fashion

I am most curious to see what happens in the evolving world of digital fashion. Digital identity is obviously important – 4.5 billion social media consumers already use a digital identity and persona. As Dani Loftus, founder of digital atelier Draup writes

The personas which form the base of your identity are not curated from your physical life but created fully digitally, providing the opportunity for you to self-express in entirely new ways.

What new forms of self-expression will emerge? What new tools and platforms for emerging designers will be invented? What new ways of wearing, sharing, selling, distributing? When you mix these concepts with the core principles of web3—composability, transferability—what happens?

Some names I am watching: Dani Loftus, UNXD, DressX, The Fabricant, Artisans, Charli Cohen, RED DAO, and XXXXTH

(NB: I am friends with some of these brilliant people!)

Find Andy here

Jackson Dahl, EIR at Paradigm

The rise of pseudonymity

I'm excited for more people to explore and build tools for pseudonymity, particularly in the context of web3. While the last decade of the internet has been dominated by real name identity, I believe we're entering a new phase during which pseudonymity will become common, if not dominant, in many mediums. It's worth noting that while there are privacy and security reasons for pseudonymity (which Balaji Srinivasan has discussed extensively), there are other massive implications, including those on social dynamics, identity expression, culture, celebrity, and more. Perhaps most importantly, pseudonymity allows identity to become contextual rather than fixed. In that regard, pseudonymity, unlike anonymity, is a spectrum and a vast design space.

Last year saw a rise of pseudonymous influencers in gaming and crypto, ranging from prominent creators (Dream, Corpse Husband, CodeMiko) to more niche but high engagement thought leaders with identities built around NFTs (Gmoney, Punk 6529, 4156). There are also examples in art and fashion. We will see more join this cadre; people will use multiple identities just as some identities will be made up of multiple people. We've seen glimpses of pseudonymity-at-scale on platforms like Reddit, Discord, Tumblr, and even some parts of Twitter and Instagram.

This trend is not explicitly tied to web3. But NFT-as-identity, on-chain reputation, decentralization, and composability are critical for its development. As we spend more and more of our lives in digital spaces, I expect flexible identity to be a vital ingredient to shaping an ideal future, just as digital money and property rights will be. 

Find Jackson here

Richard Chen, GP at 1confirmation

Vertical NFT marketplaces

OpenSea is the biggest winner in our portfolio. While it will continue to be a generational company and the dominant NFT secondary marketplace, I believe vertical-specific marketplaces will carve out niches with better UI/UX, search, and discovery features. SuperRare is a successful example for high-end 1/1 crypto art, but there will be others for categories like photography (Sloika), metaverse land (Metahood), and music (Catalog).

I'll highlight music NFTs in particular. Surprisingly, music NFTs have not exploded yet, unlike other categories like fine art, collectibles, and gaming, but I feel that collector tastes are quickly changing. Catalog, the leading music NFT marketplace, had a breakout month in October, and the volume graphs are reminiscent of what I saw in SuperRare in early 2020 before crypto art exploded. For music, it's a question of when not if.

Find Richard here

Tina He, co-founder of 0xStation

The birth of new “cities”

In 2022, we’ll observe a renewed understanding of the relationships between our identity, contributions, and relationships on the Internet. The most interesting assets are the ones that can create an environment that reinforces our understanding of our new selves. 

Psychological undercurrents have been converging on this point for some time. Both web2 and web3 startups are riding the waves from different directions and through different vehicles. Both believe the democratizing power of tools enables mass consumers to participate in economic activities once gated by a few institutions or corporations. 

Reality becomes increasingly pluralistic and transcendental. Just the “everyone is an investor” thesis has given birth to two startups taking large bets; Party Round and Syndicate are two manifestations of the same conviction. For some newcomers, the earned identity as “investors” has to be accomplished through “contribution” — be it rising through the ranks of a Mirror Write Race and becoming a thought leader or discovering a tactical niche where knowledge compounds. Those who invest together stay together to talk about more investments, plowing a fertile land for new social interactions around shared ownership of an asset.  

The “software is eating the world” thesis is still playing out at a large scale in web2. For most web2 companies, the coherent, frictionless and delightful UX abstracts away the legal piping and institutional alignment accomplished by SLAs, laborious data digitization, and unification of standards. And for web3 companies, these institutions are being created as brand new entities, rapidly earning legitimacy. The former will fight for consumer attention, while the latter will fight to build the guardrails of legitimacy and invite a whole new class of workers to help them get there. 

The most exciting trend in 2022 is seeing how this tale of many cities unfold — giving birth to a class of new workers, citizens, leaders, and infrastructure. 

Find Tina here

Cooper Turley, Full-time DAOs

Music NFTs

The spectrum ranges from independent artists like Daniel Allan and Haleek Maul to Nas and 3LAU. Across the board, artists are tokenizing audio files, offering fans a way to collect their favorite song or record. Here are some of the market leaders:

  • Catalog. As the premiere 1/1 music NFT marketplace, Catalog was the first major platform to tokenize audio files by building on Zora. It features a diverse collection of established artists, up-and-coming acts, and genesis records. With over $2 million in records sold to date, Catalog has established itself as a cornerstone of the music NFT movement.
  • Sound. Hosting a listening party has never been more satisfying. Sound lets musicians share new music by releasing a set of numbered NFTs, which allow listeners to support their favorite artists. Earlier editions are considered more valuable than later ones, incentivizing discovery. So far, Sound has presided over twenty-nine consecutive sellout listening parties, all of which were wrapped up in the first minute of going live. With a growing secondary market, Sound is worth keeping a close eye on.
  • Royal. Giving fans the ability to collect NFTs with a direct claim on royalties, Royal launched its first drop earlier this week. By enabling credit card transactions, Royal seems to have attracted many non-crypto-natives – 40% of participants used that method to join the drop. For those new to web3, Royal presents a promising solution. 

Beyond Music NFTs, the landscape also features a growing number of labels, agencies, and collectives coming together to collect music. Whether you're a fan, degen, or artist, there's something for everyone.

Cooper Turley

For those looking to learn more, check out this piece on the Music NFT landscape. See you on the ground floor!

Find Cooper here

Hanel Baveja, Investor at USV

The emergence of DeSci

To reimagine the structures that make drug development obscure and misaligned today might require a completely orthogonal, non-obvious view: DeSci.

DeSci, or decentralized science, aims to make scientific innovation more open, visible, and frictionless, all the way from publishing to funding. It broadens the idea of what it might look like to be a stakeholder in new scientific IP and brings more new IP to the world by aggregating resources—people and capital—in new ways through DAOs and other web3 structures. Perhaps the most radical vision for DeSci is to empower new and larger groups of stakeholders—patients, researchers, and enthusiasts—with positive market effects that result in cheaper and better products for all.

There are several interesting projects already happening in DeSci, including Molecule, VitaDAO, and others detailed here. I have more questions than answers about this emerging category, which makes me even more excited for what is ahead.

Find Hanel here

Alexis Ohanian, founder of 776

Bored Ape Yacht Club

I'm biased as an early ape holder, and I've converted lots of folks from my old co-founder Garry to my own wife (I bought hers as a gift), but I think we'll even more from BAYC in 2022 that resets our expectations for what NFTs x Culture is capable of.

Find Alexis here

Maria Shen, Partner at Electric Capital

DAOs as the new subreddits

The internet erased geographic boundaries and allowed communities to form around any interest, no matter how niche. Crypto unlocked the ability for anyone to create coordination systems at scale.

DAOs leverage both the internet and crypto to enable tribes of strangers to wield pools of resources for a common purpose. With DAOs, people can now pool resources together and decide what to do with those resources through a governance process. The rate of DAO creation is growing exponentially – what began as a trickle of one or two new DAOs every day has become a torrent. The largest DAOs control a treasury of billions in value, give out grants, and employ large teams. By contrast, the smallest DAOs can be a group of friends who have pooled resources to purchase an NFT.

DAOs provide jobs, give to charity, fund initiatives, contribute to political campaigns, and throw great parties. In the future, we may have as many DAOs as there are subreddits – except rather than just a forum, these organizations will be able to direct resources to ideals they care about.

Find Maria here

David Phelps, Investor at Cow Fund

Ceramic

If you were a scholar in the years before the printing press, there is a decent chance that you were also a voyager—spending the bulk of your days neither reading nor lecturing but traveling library-to-library to study and copy books. You moved, but the books did not. The printing press changed all that, of course: now the books could move so you didn't have to, and a few centuries of revolution would erupt accordingly. But for all of technology's advances, in today's internet, we are mostly pre-printing-press. We can't transfer the people we follow, the kind of media we like, the reputation and audience we've built—our data—as platforms. Like the scholars, we spend our time moving between platforms; the media on those platforms does not.

What would happen if our data were transportable? We should see at least four significant social consequences:

  1. People could track the impact of creative work as it's shared, used, and monetized in the farthest reaches of the internet.
  2. People would share far more data with platforms to improve performance and recommendations since it could improve their experience across the entire web.
  3. People would be incentivized to contribute to public data sets that produced better analytics and social graphs for platforms to innovate on top of. AI could leverage this information to automate many of our daily online tasks.
  4. Platforms would compete to have users port their data and audiences from one venue to another. 

In other words, data portability represents a massive social shift in turning power from platforms to users. Or rather, data portability shifts power from platforms to protocols, as users can only manage and transfer their data on top of universal rails that standardize, validate, and stream this data. Platforms will have to build on top of universal data rails to draw on each other's content and audiences. Still, as Joel Monegro suggested years ago, they also lose their moat as users port their tokens, NFTs, content, followers, and reputation from one to the other. Meanwhile, the moat for data protocols grows fat in letting users port that data in the first place. 

This behavior is what Ceramic enables in developing a data streaming blockchain that lets us own our own data. That means we can monetize our data, set automatic commissions whenever anyone uses it, and earn rewards from platforms competing to win us over. For that matter, we can also track and credential the impact of creative work: imagine writing a song and not only getting paid when others made money playing it at events but enabling others to remix it permissionlessly with proceeds flowing back to you, all while collecting data on its usage that you could use to find professional opportunities while connecting to others with similar taste. In web3, our ability to manage our data will enable us to manage our entire life online. NFTs are only the frontend of how we'll be seen, in the metaverse, as data.

If the 2010s were the decade that Distributed Ledger Technologies (DLTs) enabled sovereign finance, the 2020s will be the decade that offers sovereign data of all types. And we can return to our ancient scholar, wandering library to library in the vain pursuit of sharing and translating each other's texts so that the libraries might eventually resemble one another. In the less poetic web3 data stack, Arweave is something like that library, hosting the books, while protocols like The Graph and Kyve serve like librarians helping to index and query the books we need.

But Ceramic is unique not only because it offers universal rails for platforms to build on but because it's what lets us write the books in the library in the first place. Providing the tools to own and manage our data gives us incentives to collect and create new data types that may even still be outside our imagination. That's the huge potential. Not simply that we can own our data online as individuals, but that we can be rewarded for sharing it, collectivizing it, and recomposing it in new communal social structures of which we haven't fully conceived.

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Chase Chapman, co-founder of Decentology

Token weighted voting

As DAOs become one of the de facto structures in web3, with massive treasuries and millions of members, the stakes for getting things right are much higher. All of this makes organizational design failures in DAOs a considerable risk.

Token-based governance is a well-documented organizational design failure. Not only can tokens be bought and used to manipulate a vote, but token-based voting systems don't account for domains of expertise. For example, an individual with marketing expertise should have more power in a marketing decision. This failing results in the dilution of expert knowledge.

In 2022, I expect to see significant experimentation with governance, slowly moving away from token-based voting and toward other mechanisms that distribute governance power based on merit, required context for decision-making, and expertise. As tokens become less critical for governance, DAOs will be forced to ask themselves what the intrinsic value of a token actually is, which could be a forcing function for exploring new mechanisms that give tokens value beyond governance power.

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Brian Flynn, co-founder of Rabbithole

0xStation

If we're playing the Great Online Game, the next level in the game is trading "social scores" for "contribution scores." I think 0xStation will be pivotal in this transition. The project is building infrastructure to connect talent to the right projects in web3, helping members of the new economy work and play. As these people develop and participate, their accomplishments will show up on the blockchain, creating a log of skills and abilities. Over time, I expect that on-chain reputation to supersede social standing on sites like Twitter, better showcasing the value of a particular individual and the work that they've completed. 0xStation is going to be one to watch here.

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Julia Lipton, founder of Awesome People Ventures

Syndicate

I continue to be more bullish on DAOs. It's still early, but it's clear that DAOs will unlock new types of organizations, projects, and investments that weren't possible before. 

One key player in this space is Syndicate. They make it super easy to create an investment group. Communities are forming overnight to invest in NFTs, DeFi projects, and even startups. Want to buy a hundred crypto covens as a squad or run a DeFi investment fund? Interested in angel investing with your friends? Syndicate is probably your best bet. 

Spinning up a traditional investment fund is expensive, laborious, and legally complicated. Syndicate enables projects, friends, and trustless communities to coordinate capital to invest nearly instantly. We'll continue to see new ways of coordinating labor and capital in 2022, and I'm excited to see what's next. 

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Fiona O'Donnell-McCarthy, Investor at True Ventures

JellyFi

I'm excited to highlight two projects with incredible female co-founders. The first, JellyFi, provides a simple source of liquidity for other DeFi projects. They offer under-collateralized loans in contrast to the typical over-collateralized loans we see in DeFi today.  

Their customers are audited institutional borrowers (DAOs, dApps, and DeFi protocols) that use the liquidity like a revolving line of credit. This structure allows lenders to earn higher returns than over-collateralized DeFi lending platforms.

This excites me because it gives the ecosystem a less burdensome and more efficient form of credit. That will be increasingly critical as high-potential DeFi projects experience growing pains or need to weather temporary setbacks.

JellyFi was founded by four ConsenSys alums, including Charlotte Eli, who worked on a decentralized derivatives trading platform while at ConsenSys. 

(Disclosure: True Ventures is an investor in JellyFi). 

The Dematerialized 

While crypto is currently male-dominated, many women-led projects are capturing our attention and imagination. The Dematerialized, a Net-a-Porter for the metaverse, is one of them. They curate and launch digital and "phygital" fashion in collaboration with existing fashion brands and web3 artists. I bought my first piece of phygital apparel (boots accompanied by a 3D NFT) from The Dematerialized in 2021. The boots are definitely cooler than I am.

Beyond the otherworldly merchandise, I love two key things about the project: its mission to tackle waste in the fashion industry through shifting consumption to digital platforms and its dedication to attracting and onboarding new users to crypto through a familiar user experience. 

DAOs focused on gender diversity

The promise of blockchain technology was one of decentralization and the dismantling of traditional power structures, yet we still see significant gender disparity in the web3 world. HER DAO is a developer collective of female, transgender, and non-binary folks. Their mission is to increase representation in the space and ensure there are diverse perspectives at the table as the revolutionary web3 products are built. One of HER DAO's many initiatives includes offering scholarships for self-identifying women to attend major conferences like ETH Denver. (See you there!)

Boys Club is focused on supporting women and non-binary folks anywhere on their journey from crypto-curious to full degen. They are in the process of transitioning from a club to a DAO. I've been impressed by their ability to attract folks to the space and encourage senior web2 talent to consider careers in web3. I highly recommend popping into their Discord or following them on social media (Instagram and TikTok).

Find Fiona here

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Chris McCann, co-founder at Race Capital

Zeta Markets

Option vaults like Ribbon, Friktion, and Katana are increasing in popularity as they derive their yield from selling options instead of distributing governance tokens as rewards. As projects and users get more comfortable with options, I would be paying attention to the underlying infrastructure which powers these products, namely Zeta Markets

Currently, many of these options products are settled off-market, but just like we saw DEXs bring transparency to spot market exchanges, I predict we'll see the same dynamic play out with options and derivative products.

Saber

Saber is the liquidity engine for Solana. Founded by the Macalinao brothers, it powers both upstream and downstream DeFi applications, including Allbridge and Jupiter. Saber is already doing more than $900 million in monthly volume across its pools.

Similar to Curve, the Saber ecosystem has built out its own governance stack (TribecaDAO), liquidity aggregators (Sunny), stablecoins (Cash) and has open-sourced all of these infrastructure pieces for other projects to re-use on their terms. Similar to the "Curve Wars" in the Ethereum ecosystem, I think we will see a similar dynamic in Solana. It's already being referred to as the "Saber Wars."

Allbridge

It is increasingly clear we will be living in a multichain future, and if that is the case, the bridges which link chains are going to be of enormous importance. One of these bridges is Allbridge which connects the Solana, Ethereum, Terra, Avalanche, Celo, Binance Smart Chain, Fantom, and Polygon ecosystems.

In the five months since Allbridge was launched, Andriy Velykyv and his team have already bridged over $5 billion in assets across various ecosystems. Solana alone has had $1.7 billion in assets bridged to it. 

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Eshita Nandini, Researcher at Messari

Web3: App → Infrastructure cycle 

I expect more focus on web3 infrastructure, shifting us closer towards genuinely decentralized and trustless systems. This piece by Dani Grant and Nick Grossman defines the cycles clearly––"apps beget infrastructure," not the other way around. We've gone through several years of innovation around NFTs, DeFi, dApps, and increasingly became aware that current infrastructure is limiting our ability to decentralize, scale, and provide some of the critical features of web3.

Arguably, this is the most important app to infrastructure cycle for web3 because we've seen Ethereum's network fill up with activity, prompting high gas fees. That's allowed centralized platforms like Opensea and MetaMask to emerge as major winners. Data storage has been crucial to tackle within the infrastructure stack due to the limitation on Layer 1 (L1) storage capacity. That has prompted storage companies to build their own decentralized solutions like Arweave, Filecoin, and so on. On the scaling side, Celestia is one to keep an eye on––it is a data availability layer, which will be extremely important as blockchains scale.

I'm also excited about Pocket Network, which provides a multichain protocol for decentralized cloud computing with the full-node network spread globally. They just closed a $10 million round to focus on expanding node coverage and adoption; this is timely as many developers are entering the web3 space building across different blockchains. In December, Pocket Network raked in $56 million in revenue, up more than 50% from November. Many DeFi protocols and dApps depend on Web2 infrastructure to sustain them, and Pocket Network can provide stable infrastructure for web3 applications.

NFT Financialization Protocols

The NFT market is not slowing down. Coinbase is expected to launch its NFT marketplace soon, and the expectation is that it will only increase adoption.

However, NFTs are mostly illiquid, and if you are not holding something from a blue-chip collection, you're likely not making money. To remedy this, several projects are sprouting up to provide similar primitives to DeFi, allowing for more liquidity through ways such as fractionalizing NFTs or the creation of liquidity pools. Protocols that I am keeping an eye on include Arcade, Fractional, and NFTfi

Find Eshita here