2020–2021 was the year of revelation and a wake-up call for the mainstream crypto market. A say mainstream because I was part of it. While many early adopters, developers, founders, and investors of the crypto market went through multiple bear markets — the mainstream market has just woken up to the giant. With it, hype and noise come into the picture. What really was getting my attention was the question of why now? Crypto i.e. BTC (Bitcoin) has been around for over a decade but why now?

In this article, I will outline my theses and predictions for the 2022 crypto market inspired by Ryan Selkis’s (founder of Messari) detailed report on the whole crypto market, investment narratives, theses, and predictions. But first, we need to really understand the “why now”?

After March 2020, I was dumbfounded about how much money existed in the system and how much easy it was to just print money as much as you want (Brrrr). Perhaps decoupling of US dollar from gold in 1971 had this in mind — print when you have to. But did this really save us? If we look at long-term trends the collapse in institutional trust is higher than ever, it’s now a miracle to retire at 65 without needing to work. More taxes are on the way due to rising debts. Public debt, inflation, and interest rates are increasing scared to say — exponentially.

This is how Ryan Selkis starts his 165-page report as well — and points to crypto as an exit vote. A potential bet to freedom. Crypto is a belief system. Much like the belief systems we have in the current government, US dollar currency, and trillion-dollar brands like Apple, Amazon, Microsoft.

But we started questioning our belief systems as any healthy living person would do. And found the answer in crypto, web3, DAOs, and what some like to call the new ownership economy. An economy where we own the platforms we create, work and play on. No more to the platforms that we use as rented lands — a bet to own a piece of the future.

In the How To Win Future report by a16z they put very openly what the current system is about. We live in the world of Big Tech that created the illusion of the idea that we are the owners of these platforms for a long time — while productizing us in every way possible. It’s in a way sarcastic that this idea is presented by one of the best performing VC firms of the web 2.0 era, a16z. My conclusion is if they see it as inevitable then we need to pay attention too.

Especially by end of 2021, we could see the new wave of technologies coming to fruition around the so-called web3. Web3 makes systems that are stronger and more equitable. Allows for fair and equal participation. Most importantly — ownership. Today you can join any DAO by introducing yourself in their Discord channel and looking for ways to contribute. No one will judge you by your name, resume, or past experience. You have a fair shot at becoming part of something you truly care about — regardless of your age and location. One of the most exciting parts of web3 is that the talented, motivated, and bright young generation is taking on increasing responsibilities with confidence and passion. We are no anymore constrained by limitations provided by our superiors or people with more experience. Just knowledge and projects created in this ecosystem are astonishing. It is happening at a speed I don’t know how to keep up. Quantity is equally as important as quality here.

Despite all the hype in 2020 and 2021, we are still early. We are in the 1997–98 era compared to internet user growth. Obviously, given the current access to markets (including existing tech, capital, and talent), the curve should move a lot faster, and hence we need to step up and adjust equally fast or faster.

Web3 activity is moving rapidly. Whether you’re here as a missionary or a mercenary, you’ll find that one of the primary unifying forces behind this movement is the belief that decentralized technologies with embedded financial incentives (a good shorthand for Web3) offer a compelling, often lucrative, alternative to our decaying legacy institutions.

Whereas most technologies tend to automate workers on the periphery doing menial tasks, blockchains automate away the center. (Vitalik Buterin)

Prediction: Interest rate hikes due to inflation will curb the speed of growth of crypto assets and possibly impact the speed of adoption as well. Less money coming in, fewer people are attracted from investor and developer perspectives. Definitely don’t expect a crypto-winter but expect a lot of hype getting sucked in. I firsthand saw this in the AI ecosystem between 2016–2018. A lot of hyped-up companies that got investment with a lot of promises silently closed their doors. But real ones came out stronger. So a coming year or two will be the test of grit and persistence more than anything. The ones with real use-cases and strong communities of users and developers will continue to grow. There is nothing new in there.

Web3 despite the expected slow down in the general market is an unstoppable force in the long term. Below I’m highlighting some of the explanations that helped me understand web3 from a more profound perspective:

The rented land concept is so powerful that people start seeing the realities. It felt like we have all been working for large tech companies. Anything we built or did on their platform basically meant we were working for them. Shopify vs. Amazon is a good example of this. With Shopify, you own your stores and all the content and distribution. With Amazon, a seller doesn’t even own the users (not even their email addresses) who bought from them. Web3 takes Shopify to a next level — where store owners also own a piece of Shopify.

Ryan Selkis is pointing out in his report that ingredients are already here:

Eric Peters at One River Capital put it very bluntly in a post, he states that the young generation is tired of legacy solutions and looking to disrupt or bankrupt these Giga corps. The best part is they don’t need permission to do it and they have little to lose so motivation is very high. They don’t want to be taken advantage of anymore — this generation is coming to the table with their own terms and solutions.

All of the above and much more make the case for web3 ever more compelling. We are at the inflection point — the transformation of the global economy. Where money and labor will be one combo, not separate. It will be hard to predict where it will lead to except only see the tsunami coming and you know for sure it won’t be the same again.

I like to call it the economy where everyone will have the fair choice to have a “skin in the game”.

Web3 is a large encompassing term that basically covers all aspects of crypto. Digital cryptocurrencies, smart contract computing platforms (Layer 1–2), decentralized hardware infrastructure (video, storage, sensors, 5G, etc), NFTs (Non-fungible Tokens), DeFi, the Metaverse and DAOs (community governance — Decentralized Autonomous Organizations).

This could be the year of DAOs. 2021 was the year it got a lot of attention and there is a lot of noise out there. Companies like Dapper recently bought a DAO and they want to create a platform for these DAOs to have access to different tools to run these organizations. As Dapper made NFTs accessible to mainstream (NBA Top Shot and Crypto Kitties) they will try to do the same with DAOs.

A DAO due to its nature will need tools much more effective and productive than the current ones used by centralized peers to perform. Collaboration tools, voting protocols, and more. How do you make sure the work that needs to be done gets done without oversight as we know it in centralized companies? It will be interesting to see how different projects tackle this challenge in 2022.

NFT tooling space is the one to look for according to Ryan Selkis. Not the individual NFT space that exploded in 2021.

Marketplaces, financialization primitives, creator tools, community-oriented business models, and decentralized identity management/reputation management systems are all in their infancy. That core infrastructure will be one of the hottest areas of investment in 2022.

These smart contract solutions will open the world to experiments that will be critical for long-term success. Crypto funds are going to have a lot of opportunities as many niche products and solutions will come in place. Bitcoin or Ethereum is not going to be the main topic of discussion. We will need solutions with great UX that will bring the mainstream user-base to web3 according to Ari Paul.

“This is the cycle where crypto use cases unrelated to bitcoin’s were finally validated and achieved meaningful adoption…In previous cycles, it made little sense to be a sector specialist in crypto. Defi and NFTs were basically nonexistent 4 years ago. Most other “sectors” didn’t meaningfully exist as such. “Decentralized file storage”, “smart contract platforms”, “privacy” and other “sectors” by which crypto coins were often segmented were arbitrary and arguably nonsensical…Now, being a defi yield farmer or NFT speculator, is arguably a full-time job, and you need, or will soon need, a small team just to keep up with one of those segments.”

Crypto’s $3 trillion of liquid value creation in 10 years rivals other venture-backed startups combined.

Funds now investing millions in medium-sized deals. Hedge funds plan to deploy 7% of their assets into crypto within 5 years, and pensions are starting to buy direct, too! It will be hard to ignore crypto for those who could manage to do it for various reasons. Too big to bypass such an asset class in the days of hedge funds not even rivaling returns in the crypto space. We might consider them even losers of the last 10 years. We can learn a lot from Warren Buffett given his pedigree but not how he approaches this new suite of opportunities. The young generation is looking to create and grow wealth versus preserving it like Buffett. The new capital and funds looking to be the Buffett of the web3 world. The institutions are in the game already.

According to Dove Metrics, we saw $8 billion of private investments across 423 deals in Q3, nearly half of the $17.8 billion invested since the start of the year, which was already more than the previous six years combined. Nearly 90% of the largest deals in crypto’s history have happened this year, and that’s excluding the Coinbase direct listing. About 75% of the funding was deployed into infrastructure and centralized services, and that was before the FTX and DCG announcements and potentially imminent Binance funding announcement.

My favorite from the report is on DeFi which I tend to agree with and will write more on that in the coming weeks. Finance is the working engine of the economy and once DeFi figures out scaling solutions to our everyday needs then game over for current bankers. Uniswap is a great example. It’s a decentralized exchange (DeX) and a DAO that’s owned by its users. Everything is transparent living on a public blockchain. You can even copy the code and run your own server if you would like. Owners are the users themselves — the community of users, developers, and investors made Uniswap what it’s today. We don’t need to put a customer-hat in the meetings anymore and think like them because the users are the ones running the show.

Personally, I don’t recognize a year I was not looking forward to more. I have always been thinking that I missed web 1.0 and web 2.0 (the first one I was not even in school) but now we are in the web 3.0 movement. Perhaps the term will evolve throughout 2022 and I might have a better explanation myself. The question is what makes you stay on the sidelines vs. being part of it? If it’s fear of not knowing anything then this is the best time to start. If you don’t take meaningful risks the new ownership economy will not reward you.