After 2021, we have entered a cryptocurrency era where people no longer just talk about financial decentralization, but begin to broadly discuss the tokenization of everything, thanks in part to non-fungible tokens (NFTs).
This shift represents a critical perspective that will guide three themes for the coming bull market. In order to fully understand these arguments, it is crucial to understand that everything is data. Money is data. Your interactions with your brand are data. Your credentials are the data. The ticket to your favorite show is data.
Since 2021, ecosystems have increasingly begun storing much of their data in the form of fungible tokens, NFTs, and timestamps on the blockchain, which in this case acts as a data repository.
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While not all data needs to be stored on a blockchain, the ability to place data on a blockchain fundamentally changes the way we store, share, and utilize data to enable automated and secure instructions and transactions.
Re: Non-financial blockchain use cases. pic.twitter.com/lYZFprXAry
—vitalik.eth (@VitalikButerin) May 27, 2022
The prospect of tokenizing everything seems to be coming to Bitcoin. This leads to the first argument.
Ordinal and similar protocols continue to grow, and Bitcoin becomes a multi-asset (or multi-data type) network
In January 2023, Casey Rodamor publicly released the Ordinals protocol, which in a nutshell allows any file type to be permanently inserted into the Bitcoin blockchain.
In less than a year, the community has been experimenting with music, artwork, news articles and even video games being recorded on the world’s leading blockchain.
The Ordinals protocol is not the first to allow this, but it has gained the most attention. And everything shows that this is a flame that will not go out.
It is more than just a technical protocol, it is a culture and way of thinking. More and more developers see Bitcoin as a canvas for creating other projects and applications. Nothing can stop a mature cultural movement.
But remember: not everything needs to be stored 100% on-chain, as this is very expensive and inefficient for some applications.
Therefore, protocols such as Taproot Assets, which can create other assets on the Bitcoin network, but in a way that keeps most of the information off-chain, will be crucial.
When it comes to the storage costs of first-tier blockchains, it seems likely that second-tier blockchains will shine.
Cryptocurrency will burst through the bubble and eventually reach the hands of ordinary people through the second-layer blockchain
Those who were active during the 2021 bull run remember that $50 transaction fees on Ethereum were almost the norm, not to mention peaks, as when Yuga Labs minted the Otherside NFT, users paid up to 6 Ethereum (ETH). every transaction.
It’s simple: if blockchain wasn’t invisible, it wouldn’t become mainstream. And expensive and slow transactions make blockchain attract more attention.
This is why Layer 2 blockchains, designed to scale Layer 1 blockchains, are critical to the next bull run.
Although they have been around for many years, neither they nor the market have matured enough to build on them in the last cycle. On the one hand, many companies and developers don’t believe that Layer-2 is stable enough to handle the influx of mainstream. On the other hand, there is also a problem that people take action in the excitement of the moment without much learning and understanding.
The number of unnecessary projects on Ethereum is high, and the reasons vary: it’s cultural, because some companies don’t even know what layer two is, or just because everyone is building on Ethereum.
Now, with all the lessons learned and the bear market calming down, it’s clear that the build mentality is more mature and blockchain’s “job to be done” is becoming clearer to those who are building.
The most important is the implementation of EIP-4844, which is expected to be implemented on the Ethereum network within months and will further reduce transaction costs on layer 2 networks, making them more invisible and powerful to attract and retain mainstream audiences .
But there’s no use having infrastructure that’s invisible if people can’t connect to it and companies can’t build on it. However, the solution is already here!
Abstraction solutions will become the primary gateway and retention mechanism for consumers and large legacy companies on Web3
The biggest problem is that as everything becomes tokenized, decentralization becomes more of a hindrance than a help in some cases.
If the topic is Bitcoin (BTC) custody, then the decentralized topic is relevant. However, when the topic turns to tokenized tickets or company loyalty vouchers, the value does not lie in the decentralization of the system. Therefore, simplifying the user experience by abstracting complex processes—such as creating a semi-custodial wallet with social login capabilities or eliminating worries about gas fees—makes perfect sense and is necessary.
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Abstract solutions are the missing bridge so that the crypto world does not continue to be a technical environment exclusive to technically skilled people who are willing to face various challenges and complex journeys. But now, they’re ready to shine!
It’s not about ending devolution, it’s about having a choice. Those who want to remain 100% decentralized can do so, but those who don’t now have an option. In this way, it can prevent the crypto ecosystem from dying in the famous innovation gap. Because no matter how grand the infrastructure is, it means nothing if people can’t easily connect and navigate in their daily lives.
What’s not often discussed is the importance of these abstract solutions for traditional companies to effectively join Web3. How many companies currently have development teams that can program in blockchain languages like Solidity? Making it easier for builders to get started is also crucial.
Dividing the journey of blockchain into the mainstream into four stages, we can say that account abstraction solutions and the advancements mentioned in Paper 2 will push Web3 into the penultimate stage – as the infrastructure improves, people joining the game There are fewer technology builders and fewer brands, and the number of applications, projects, and use cases has multiplied to attract mainstream attention.
As of today, it appears that major blockchains will increasingly be viewed as platforms for multi-asset consensus in the next market cycle, rather than currencies. The most important gem will be the pursuit of scalability, which will make the layers of user navigation and enterprise integration more invisible and complex. Welcome to the second phase of Ethereum and Bitcoin.
Luigi Tyrell is the Chief Commercial Officer of Lumx Studios, a Web3 studio whose investors include BTG Pactual Bank, Latin America’s largest investment bank. Lumx Studios has previously worked on Web3 cases with Coca-Cola, Anheuser-Busch InBev, Nestlé and Meta. The author holds investments related to the Ordinals protocol, although no investments are mentioned in this article.
This article is for general information purposes only and is not intended to be, and should not be construed as, legal or investment advice. The views, thoughts, and opinions expressed here are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.
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