Coinbase Forecasts Significant Development of Emerging L1 Chains and Institutional Adoption of Regulated DeFi

Cryptocurrency Exchange Coinbase Predicts L1 Chain Growth and Institutionalized DeFi in 2022

Cryptocurrency exchange Coinbase has released its predictions for 2022, focusing on Ethereum competitors, the institutionalization of decentralized finance (DeFi), and non-fungible tokens (NFT). Surojit Chatterjee, Chief Product Officer at Coinbase, shared his predictions in a recent blog post.

Growing L1 Chain Ecosystem and Improved Scalability

Chatterjee predicts that Ethereum’s scalability will improve as Eth 2.0 and many L2 rollups emerge. However, due to the mainstream adoption of cryptocurrencies, ETH’s scalability changes and the emergence of newer L1 competitors, such as Solana and Avalanche, are expected to grow further. As a result, the speed and usability of cross-L1 and L1-L2 bridges will improve.

Emerging Zero-Knowledge Proof Technology

Coinbase predicts increased traction among users and investors in zero-knowledge proof (ZKP) technology, which has already been seen with Polygon and Starknet. With new privacy-centric use cases emerging, regulatory attention will increase as KYC/AML could be a potential challenge in privacy-centric networks.

Institutionalization of Regulated DeFi

Coinbase predicts that DeFi protocols will embrace regulation, separate KYC user pools, and insurance. This growth will result in institutions playing a more significant role in this sector, primarily due to the much higher interest-based returns compared to traditional financial products.

NFTs Will Continue to Expand and Become More Popular with Brands

Chatterjee sees NFTs becoming the next evolution of users’ digital identity to the metaverse. “We’ll see creator tokens or fan tokens take more of a first-class seat,” he added. Brands will also join NFTs for marketing and establishing loyalty. Coinbase sees other big Web2 companies joining the Web3 and metaverse, but they will be centralized and closed networks.

DAO 2.0 Will Take Its Place

As more people join DAOs, the latest trend of decentralized autonomous organizations (DAOs) will become more mature and mainstream. However, DAO 2.0 will replace this trend with more advanced and sophisticated decentralized systems.

Conclusion

Coinbase’s predictions for 2022 highlight the significant changes and growth we can expect to see in the cryptocurrency industry next year. The emergence of L1 competitors, institutionalization of DeFi, and the growth of NFTs and DAOs are some of the trends that will shape the future of cryptocurrencies.