In 2022, the crypto industry experienced a bear market caused by the collapse of DeFi and the metaverse boom. This had a significant impact on the confidence of prac-titioners, especially with the LUNA Crash and FTX Collapse. However, despite this, many projects in the industry continue to receive high financing and are still building. This article will discuss the future development of web3 and some representative projects, and it also serves as a summary of web3 investment research internship experience.

First of all, it is worth paying attention to Ethereum Layer2, which includes Arbitrum, Optimism, StarkNet, zkSync, Immutable X, Aztec, Scroll, and more. These projects received high financing even during the bear market. StarkNet received $100M in funding, Optimism received $150M, Immutable X received $200M in March 2022, zkSync received $200M in November 2022, Aztec received $100M in December 2022, and Scroll received $50M in March 2023. The fact that those projects obtained high financing during the bear market reflects the favor of capital to those, making that the most noteworthy direction.

On Arbitrum, it is dominated by DeFi derivatives, and the total value locked (TVL) has reached the bull market levels. The derivative protocols GMX, Gains Network and Dopex are the cornerstones of Arbitrum ecology.

The Optimism is another thriving Layer2 ecosystem, with its TVL catching up to Arbitrum due to the excellent operations of the Optimism team and the incentive of the token $OP. In February 2023, Optimism introduced the Superchain concept, and Coinbase became the first Optimism ecosystem member to use its technology to launch its own Layer2, Base.

StarkNet and zkSync are the representatives of ZK Rollup, whose ecological development is currently lagging behind Arbitrum and Optimism.

Immutable X is built based on StarkEx, a Layer2 that focuses on the Metaverse,GameFi field. Its representative games are Illuvium and Gods Unchained. Aztec, on the other hand, is a Layer2 that focuses on privacy.

Apart from Ethereum Layer2, another track worth considering is Layer1 represented by Aptos and Sui. Both Aptos and Sui are Layer1 based on the Move language. In 2022, Aptos and Sui respectively received financing of $350M and $300M. Currently, both ecosystems are still in the early stages of development.

In the centralized exchanges(CEXs), the transaction volume for derivatives is much larger than for spot. However, due to the limitation of infrastructure, the transaction volume for derivatives is much smaller than for spot on-chain. With the development of Layer2, such as Arbitrum and Optimism, the on-chain transaction volume for de-rivatives is expected to experience significant growth. At present, the representative derivatives protocols are GMX, Perpetual Protocol and Gains Network, while the options protocols are Dopex and Lyar.

GMX is currently the protocol with the highest TVL on Arbitrum, and has been in high growth since its launch in 2021. GMX provides liquidity by combining funds such as BTC, ETH and USDC into GLP, with traders as counterparty. Transactions are aggregated in the form of oracle (chainlink) quotes to achieve 0 slippage. Liquidity providers can cast GLP to provide liquidity to earn fees and funding rates. GMX controls risk by setting a trader open position limit, making it a 100% margin Contracts for Difference (CFD) that effectively reduces the risk for liquidity providers.

Perpetual Protocol has been fully migrated from Ethereum Mainnet to Optimism. Perpetual Protocol V2 is based on the derivatives developed for Uniswap V3, where liquidity provider can provide concentrated liquidity, similar to Uniswap V3 and offer up to ten times leverage.

Due to the high return and controlled risk of GLP in GMX, there are many yield op-timization protocol based on GLP, such as Jones DAO and Rage Trade. Jones DAO expands the return by adding leverage to the GLP, but also expands the corresponding GLP volatility risk. Rage Trade, on the other hand, reduces the volatility risk of GLP by short hedging the risky assets, such as BTC and ETH, within GLP.

Since on-chain liquidity is more fragmented and cannot provide sufficient liquidity like CEXs, DeFi protocols based on LayerZero omni-chain technology have great potential for development. These protocols can aggregate omni-chain liquidity and provide better depth. Currently, based on LayerZero protocols include Radiant, Avault, Rage Trade, etc. Radiant is a omni-chain lending platform, capable of pledging and lending assets on different chains. Rage Trade can enables its users to recycle the liquidity they used on other protocols on its platform.

Web3 needs mass adoption to go mainstream. Currently, Web3 is in the infrastructure construction stage, and there are several directions of Web3 infrastructure con-struction as follows:

Social

Social is a track that can accommodate billions of users, and the underlying social protocols represented by Lens Protocol and CyberConnect are one of the important directions for Web3 mass adoption. There are already some Web3 social applications based on Lens Protocol, such as Lenster and Phaver.

DAO

In Web3, more and more DAO organizations will emerge in the future, and the con-struction of the underlying facilities of DAO is very important. The tools to help DAO creation are Syndicate, the tools to handle DAO funds are Genosis Safe, and the financial platform Utopia based on it, DAO organizations commonly used tools such as EthSign, Snapshot, etc.

Metaverse

Entertainment is an important direction for Web3, and metaverse games can allow users to spend their time in Web3. At present, the underlying facilities of metaverse are mainly some Layer2 and game platforms that focus on game extensions, such as Immutable X, Gala, etc. In addition, players in metaverse usually take the form of DAO organizations, and currently famous game DAO organizations are Treasure DAO, Yield Guild Games(YGG), Merit Circle, etc.

NFTFi

NFT is an important part of Web3, but NFT is usually less liquid. Improving the liquidity of NFT is the next trend, and there are currently NFT AMM protocols such as SudoSwap, fragmentation protocols such as Tessera, lending platforms such as ParaSpace, and crowdfunding platform such as Partybid.

In conclusion, the crypto industry faced a bear market in 2022, but despite this setback, many projects in the industry continued to receive high financing and were still building.The crypto industry is still full of opportunities and promises for the future.