The hype and the crypto bull market of 2021 is in the rear view mirror. I have aped into many crypto hypes and lost some money. My experience with dabbling in DeFi and with going down the proverbial rabbit hole of Blockchain tech has helped me develop my own hypotheses and have clarity in my own thoughts in the space.
I categorize the Blockchain tech / tokens into the following themes
Currency / Store of Value : This is a tough one, one has to have blind faith or have wide adoption to pick a horse to bet on. My issue with BTC is it’s fixed supply, making it a zero sum game which goes against the abundance mind set; a system that expands with value generation would be my pick, however I have not found an alternative yet and hence sticking with BTC at this time.
Transaction Layer (Layer 1): Layer that has the potential to push blockchain adoption at scale by tokenizing securities and allowing individuals to control their assets. My bet for this layer is Ethereum (ETH). Ethereum is miles ahead with adoption compared to it’s peers and the developer community is vibrant. I do expect Ethereum leading this area for the next decade.
Scaling Layer for Transactions (Layer 2): Blockchain technologies have to solve the trilemma of Security, Decentralization and Scalability. Layer 2 solutions address scalability developing capabilities on top of Layer 1 (assuming Ethereum based on previous category). There are many Scaling solutions in the works (and some in Production), my favorite is Polygon (MATIC) due to their push for adoption, recent acquisitions and rollout of ZkEvm and their single threaded focus on the Ethereum ecosystem.
Other Competing Transaction Layers (Alt L1’s): There are many other L1 layer technology. Some of the Layer 1’s with a sizable Marketcap are Binance (BNB), Cardano (ADA), Polkadot (DOT), Solana (SOL), Tron (TRX), Avalance (AVAX) and Algorand (ALGO). I believe that the L1 train has left the station and Ethereum is miles ahead. While one can certainly speculate on some of these alternate L1’s, I feel that these will be also ran’s. However, in any industry, there is usually a strong second contender (like in Lyft compared to Uber)– it is anybody’s guess at this who that will be. Most of the alternate L1’s will likely become niche players in the long run
Off Chain Data (Oracles) : Blockchains have access to data within their own chain. When an application needs data from outside the chain, they rely on “Oracles” to fetch that data (example a stock quote). Chainlink (LINK) is the leader in the space and they will continue to be. As far as I can tell, they are way ahead of their competition and will likely become a monopoly.
Inter Chain Transactions : Each Blockchain is it’s own island. Cosmos (ATOM) has built a set of tools/SDK that allows anyone to spin up a Sovereign Blockchain and make these independent Sovereign chains work together via their Inter Blockchain Communication protocol. The long term vision of Cosmos is similar to Ethereum and I see them as one of the strong contenders for the L1 crown (or the second) of the next decade. I am calling Cosmos as a separate category compared to alternate L1’s considering their vision and view of a multi-chain future and their roadmap.
Privacy : Public Blockchains are permission less and transparent. To gain mass adoption, privacy has to be a built-in feature of the Blockchains since many use cases require privacy (for example, a hedge fund or wealthy individuals executing security transactions). Zcash (ZEC) and Oasis (ROSE) are two of the Blockchains that I have been following that are trying to solve this problem. While ZCash has been around for a few years, they cater to a small niche demographics– to gain mass adoption, Zcash/other privacy blockchains have to make their capabilities work seamlessly between L1’s. Oasis has recently partnered with a credit reporting bureau to allow for KYC while keeping PII private.
Meme Coins: Memes come and go all the time. DOGE and SHIB are high profile examples that go up and down depending on the mood and tweet of the world’s richest man. If you are keeping up with the news and social media, good area to speculate with asymmetric bets.
Niche Applications: In the long run, I believe we will see the emergence of use case specific Blockchains/Applications. This is a vast space, while I am familiar with a few names in this space, but have not dived deep enough.