foreword

Table of contents

foreword

1. Industry background

2. 2022 Annual Review

2.1 Track development

2.1.1 DAO

2.1.2 GameFi

2.1.3 Public chain

2.2 Policy shift

2.3 Ecological exit circle

2.4 Security Risks

3. Under the background of the bear market, the industry continues to build

4. Future outlook: continuous evolution, twists and turns

4.1 Potential track development, bringing continuous circle out

4.1.1 NFT

4.1.2 Gamefi

4.1.3 Socialfi

4.2 The continuous improvement of infrastructure has spawned new applications

4.2.1 Application infrastructure

foreword

epilogue

foreword

secondary title

1. Industry background

Web3 aims to change human production relations, release huge productivity, and provide a broader platform for global entrepreneurs. It contains many very imaginative functions and concepts. In the future, Web3 will shine in the aspects of personal asset confirmation, value transmission, interactive value redistribution, organizational paradigm transformation, etc., and will reconstruct the Internet economy and existing business models.

For the development of Web3, its previous growth mainly has several key nodes: first, the birth of Bitcoin in 2008 brought blockchain technology; second, the birth of Ethereum in 2013 closely combined blockchain and smart contracts , so that it can quickly develop various blockchain applications; the third is that the "liquidity mining" game launched by the lending agreement Compound in 2020 will detonate the DeFi market; the fourth is that in 2021, NFT Summer will go out of the "Crypto" This small circle. These have paved the way for the Web3 industry to improve its infrastructure and attract audiences.

So we see that 2021 is a year of rapid development of the encryption ecosystem and a historic breakthrough: Affected by the macroeconomic environment, Bitcoin hit a record high of 69,000 US dollars; driven by both institutional funds and market sentiment, the total market value of the encryption market It also broke through the US$3 trillion mark; diversified on-chain activities led by GameFi showed prosperity, and on-chain data such as TVL rose steadily. This year, the ecology on the chain exploded rapidly, many emerging public chains rose rapidly, and the number of users increased exponentially.

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2. 2022 Annual Review

Against this background, on the one hand, various tracks in the Web3 field are constantly evolving and developing, and on the other hand, they are also continuing to go out of the circle, and have been recognized by more governments at the national and regional levels. However, security issues brought about by industry development are also constantly emerging , There have been many far-reaching black swan events in the industry. Looking at the major industry events that have occurred in the past year, the main theme of the Web3 industry in 2022 can be summarized by four key words: track development, policy shift, ecological out-of-the-box, and security risks.

2.1 Track development

At the level of track development, DAO, GameFi, and the public chain have all made significant progress.

2.1.1 DAO

The centralized autonomous organization DAO is a digital world organization form based on blockchain technology, which has the characteristics of information transparency, community autonomy, freedom and openness. The flat organizational structure of DAO can integrate scattered individual forces through smart contracts, so that group intelligence can be maximized, thereby avoiding bias and mistakes in central decision-making, and at the same time giving it more advantages in flexibility.

2022 is a year of rapid development of DAO. Constitutional DAO in January, Assange DAO in February, Cult DAO in March... Various DAOs emerge in endlessly. In September, PandaDAO, one of the largest DAO organizations in China, announced its dissolution due to governance structure and management issues. Although the road is tortuous, people are still exploring the perfection of DAO.

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DAO data, picture from deepdao

2.1.2 GameFi

GameFi refers to the presentation of decentralized financial products in the form of games, the gamification of DeFi rules, and the NFT of game prop derivatives. One of the most notable features is that the user's assets become equipment or tools in the DeFi game, and users can obtain benefits or rewards during the process of participating in the game. It is more interactive, experiential, and immersive with users, and it is also more interesting. It not only allows people to see the progress of on-chain finance and the possibility of innovation in social production relations, but also sees the metaverse economy. prototype.

At the beginning of 2022, the Web3 game STEPN will explode. After people buy its NFT sneakers, they can earn Token through sports. The huge charm of Move-to-earn has attracted many users to participate, and it has become a monopoly with a market value of over 1 billion US dollars in just 5 months. Its wealth myth set off a new round of crypto game boom, fueled the already cold GameFi and X to Earn tracks, and attracted investors including Zhu Xiaohu and Xue Manzi to buy shoes and experience . Although it eventually declined due to the problem of route planning, as the most popular Web3 typical application this year, it will lead the public foreshadowing of X to Earn to a new height, allowing more people to appreciate the charm of Web3 and GameFi .

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GameFi data, picture from footprint

2.1.3 Public chain

In September 2022, Ethereum, the king of the public chain, completed the "The Merge" upgrade and officially switched to the PoS consensus, taking a key step on the road to Ethereum 2.0 and laying the foundation for subsequent expansion. In the narrative of 2.0, Ethereum is expected to break the performance bottleneck of the industry limited by the underlying public chain, and boost the large-scale application of Web3.

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The latest roadmap of Ethereum, the picture comes from the Internet

In December 2022, the Ethereum Core Developers Conference also finalized the "Shanghai Upgrade" hard fork plan to be carried out in March 2023. This upgrade will release ETH withdrawals pledged by the beacon chain, accompanied by optimization of GAS, Implementation of many EIP improvement proposals for EVM optimization. After its implementation, it will have a certain impact on the industry and become a hot topic of discussion in the near future.

2.2 Policy shift

In terms of policies, some countries and regions have improved their policies and attitudes towards Web3.

The outbreak of the Russia-Ukraine conflict at the beginning of the year brought crypto assets into the spotlight on the world stage. First, the Ukrainian government announced in February that it would accept cryptocurrency donations, and released wallet addresses for Bitcoin and Ethereum. With the spread of the war, the United States and the European Union have imposed sanctions on Russia in many fields. Faced with layers of sanctions, Russia announced in March that it is willing to accept Bitcoin as a payment method for its natural resource exports. One of the best performing assets. During the war, cryptocurrency became a haven for governments and individuals to evade sanctions, more clearly demonstrating its advantages and power of "decentralization, security, and borderless".

In April, the African country Central African Republic announced the adoption of Bitcoin as its legal tender. This is another country that uses Bitcoin as a payment tool after El Salvador. In May, the new Japanese Prime Minister Fumio Kishida announced that he fully embraced Web3. His positive evaluation and layout of Web3 almost raised the development of Web3 to the level of national strategy.

While Web3 is accepted by more countries, regions are also beginning to compete for the geographic center of the global encryption industry.

Today, Web3 is still pioneered and dominated by the United States. Countries and cities such as Japan, Singapore, South Korea, the United Kingdom, Germany, and Dubai have taken the lead, and each has established an initial advantage in the development of the industry. Faced with the status quo of falling in the front row in the Web3 wave, Hong Kong released the "Policy Declaration on the Development of Virtual Assets in Hong Kong" on October 31, which clarified the Hong Kong government's vision to promote Hong Kong's development into an international virtual asset center and actively promote a Series test plan. Immediately afterwards, Ravi Menon, managing director of the Central Bank of Singapore, expressed his hope that Singapore would become a digital asset center at the "Singapore FinTech Week" on November 3. More countries and regions are working hard on policies, trying to seize the opportunity of Web3.

2.3 Ecological exit circle

In the past year, Web3 has become one of the most important innovation ecosystems in the world. While various economies are speeding up to embrace the wave of encryption, Web3 has achieved continuous growth with the help of platforms, brands, and celebrities.

Web 3 has become a new highland for social giants: In January, Twitter announced support for the NFT avatar display function; in July, Facebook launched the NFT function to some American creators; in August, Instagram introduced digital collectibles to more than 100 countries and regions Display function; in the same month, Reddit, a forum platform with more than 1.5 billion registered users, conducted a free NFT avatar airdrop, and more than 2.8 million users registered their addresses. In October, Apple updated the overseas version of the AppStore review guidelines, and for the first time formulated NFT and cryptocurrency-related rules for iOS applications. iOS developers will be able to build their own NFT platforms in the Apple ecosystem, and applications can use internal payments to sell and NFT related minting, listing and transfer services.

Of course, all kinds of traditional brands have also begun to put aside their value and gradually explore the gameplay of Web 3, whether it is Gucci, LV, Bulgari, Nike, Adidas, Li Ning and other luxury and sports brands, or BMW, Ferrari, Aston Martin, etc. Auto brands have all tested NFT marketing this year.

Since 2020, Web3 has attracted the attention of many celebrities with the help of NFT. Some traditional entrepreneurs, celebrities, and big Vs have entered the market to buy NFT, and a small number of them have personally issued NFT. By 2022, celebrity involvement in Web3 has deepened. At the beginning of the new year, Jay Chou started his Web3 journey with the "Phanta Bear (Phantom Bear)" NFT; in August, Yi Nengjing published her Web3 manifesto immediately; in October, Stephen Chow publicly stated on social platforms that he would personally recruit Web3 talents; at the end of October Encryption enthusiast Musk officially acquired twitter; even former US President Trump issued an NFT trading card with his own image as the theme in December.

The entry of giant platforms, traditional brands and celebrities has enriched the application scenarios of NFT, and also allowed Web3 to reach more user groups outside the circle.

2.4 Security Risks

While the application value of Web3 has been verified in many fields and continues to go out of the circle, various security incidents in the industry are also occurring one after another, and systemic risks are constantly exposed. According to statistics from the SlowMist archives, there will be 295 security incidents related to the blockchain ecosystem in 2022, with a loss of up to US$3.728 billion. Among them, the collapse of Terra and the bankruptcy of FTX had the greatest impact on the industry. They not only impacted the entire market in terms of assets and prices, but also had a profound impact on industry confidence and regulatory expectations.

In May, Terra, the "leader of calculations", fell from the "altar" within a few days. Because of the huge sell-off of giant whales, UST broke its anchor and caused a run, and the two major encrypted assets LUNA and UST built on the Terra blockchain started a "death spiral" plunge, almost returning to zero, triggering a sell-off and a crisis of trust in the entire encryption industry . Many high-value venture capitals have been hit hard, and the collapsed Three Arrows Capital and the encryption lending platform Celsius have caused even more painful losses to encryption investors.

In November, FTX, the world's second largest encrypted asset exchange, declared bankruptcy, triggering a Lehman moment in the currency circle. FTX and Alameda Research fell into a liquidity crisis due to misappropriation of customer funds, and finally "thunderstorm", which triggered a sharp drop in assets in the currency circle. In the early stage, under the panic of the market, hundreds of coins fell together, and there was a big sale of FTX U in the market. In the end, after FTX had no hope of turning around, Sequoia's investment returned to zero, market makers collapsed, and both long and short contracts exploded. At the same time, the incident has also affected many institutions and projects. Many affiliated companies of FTX have closed down one after another. Singapore’s state-owned investment institution Temasek has lost 275 million US dollars. The wave of customer redemption triggered by bankruptcy has also caused other platforms to fall into trouble. The huge impact it caused has attracted close attention from regulators in many countries and regions. The regulators in the United States, Australia and other places have announced that they will strengthen the supervision of cryptocurrencies.

As the crisis of trust continues to spread in the industry, leading exchanges such as Ouyi have begun to launch the Reserve Proof Product (POR) to prove their innocence. All users can actively query and compare OKX's on-chain wallet address assets and default The user's total assets in the Merkle Tree to verify its asset reserves.

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3. Under the background of the bear market, the industry continues to build

After decades of development, the prototype of the Web3 ecology has emerged, forming a development pattern in which Bitcoin is the value consensus, Ethereum is the main underlying infrastructure, multiple chains coexist, and applications are fully rolled out. Market Research Future's forecast shows that by 2023, the value of the Web3 blockchain technology field will exceed 6 trillion US dollars.

According to Coincarp statistics, there will be 1984 financings in the Web field in 2022, with a total financing of 42.03 billion US dollars, an increase of 40.7% over last year. The growth of traditional VC’s investable track is limited, and the difficulty of fundraising has become an industry consensus. In addition, the constant political conflicts in the macro environment and high inflation have further led to the downturn in investment sentiment. But in 2022, Web3 has become the focus of VCs. In addition to Sequoia Capital’s launch of a Web 3 investment fund with a scale of over US$500 million in February, Japan’s Softbank, Kollak, Singapore’s Temasek, Microsoft, Tencent, BlueFocus, etc. Traditional investment institutions and industry giants have also begun to invest heavily in the Web3 field, staking the land. Crypto Fund Research data shows that in the first half of 2022 alone, there will be 107 new investment funds related to Web3, with a total amount of 39.9 billion US dollars.

On the other hand, Rapid Innovation’s survey report on 200 executives of the world’s top 500 companies in early 2022 shows that: 94% of the top 500 executives surveyed said they have blockchain project plans; 89% of executives believe that Web3. 0 Innovation will define business activity for the next 100 years; respondents see “blockchain” technology as having enormous potential to transform the world economy, and Fortune 500 companies aim to keep pace. Web3 has huge development potential and opportunities. In order to conform to the future development trend, major companies such as Spotify, YouTube, and Microsoft have launched corresponding Web3 talent recruitment plans. In addition, the development of the industry has stepped into the fast lane, and Web3 projects or institutions in the circle are also continuously recruiting talents. The Web3 field is beginning to face challenges at various levels such as organizational development and talents.

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The status of talents in the blockchain field, the picture comes from Ouyi's "Global Blockchain Talent Report"

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4. Future outlook: continuous evolution, twists and turns

4.1 Potential track development, bringing continuous circle out

At present, Web3 is still in the niche circle. The three types of NFT, Gamefi and Socialfi tracks have great potential to go out of the circle, but they have not ushered in a real explosion. In 2023, with the development and improvement of these potential tracks, Web3 will play a greater potential in the circle.

4.1.1 NFT

According to a report released by market consulting firm Acumen Research and Consulting in 2022, the global NFT market is expected to reach US$212 billion by 2030, with a compound annual growth rate of 33.7% between 2022 and 2030.

In terms of application scenarios, NFT is an important component of Metaverse, Web3, and Gamefi, but in 2022 it will only be a PFP-style image hype that is relatively prosperous. By 2023, it may be in music NFT, digital twins, or item verification. There is a relatively good application and development. In addition, as an excellent marketing medium, more brands will try NFT marketing.

In 2022, major social platforms such as Twitter, Facebook, Instagram, and Reddit will successively support NFT functions displayed on their platforms. Among them, after the Reddit airdrop, more than 2.8 million users have registered addresses, but 99% of them only own it ’s NFT but did not participate in the transaction. As NFT continues to penetrate into this part of social users, NFT will be more popular in the application population. And, such large social platforms are also exploring NFT in depth, and may test the waters to support transactions within the NFT platform or issue NFT projects. In this way, relying on natural user groups and application scenarios, it will further boost NFT Applications. Therefore, in 2023, the application scenarios of NFT will be more abundant, and more user groups outside the circle will be reached.

4.1.2 Gamefi

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The number of game Dapps, the picture comes from DappRadar

Previously, Axie and Stepn each led a wave of upsurge. Stepn gained millions of registered users in a short period of time, and even attracted the participation of many users outside the circle, allowing everyone to witness the great power of Gamefi. The Gamefi boom in 2021 has caused a financing boom on this track. By 2023, a batch of high-quality and large-scale production games that have been developed for 1-2 years will be launched. The new chain game will learn from the former model to iterate on game mechanism and token design It's better, and it's worth looking forward to both in terms of graphics and gameplay.

4.1.3 SocialFi

SocialFi aims to provide users with benefits and transparency through financialization and the influence of social networks, that is, the perfect combination of Social Network and Money Effect. It builds a complete and self-consistent economic system for users, and everyone can get more benefits through the financialization and tokenization of their social influence. It can solve many existing problems of Web2 social networking, including but not limited to: Web2 social relationship is attached to a centralized platform/closed ecosystem + created content is stored on the platform + user data is owned by the platform + profit model is allocated by the platform + creation value cannot be reflected. Its market space is broader than that of Gamefi, because some people may not play games, but everyone cannot escape the circle of social networks.

In 2022, Vitalik proposed the concept of soul binding, adding a new solution to decentralized social networking, which will form the user's own credit system, leading one of the hottest narratives on the SocialFi track: DID/reputation track . With the accumulation of more and more data on the chain, there will be more potential scenarios for SocialFi in the future, such as Web3 intelligent airdrops, IDO, DAO governance, etc. In 2022, there will be a lot of financing on this track. It is believed that with the emergence of new agreements in the future and the increase in the number of actual real users brought about by going out of the circle, SocialFi, which has more application advantages, will exert a strong potential for going out of the circle.

4.2 The continuous improvement of infrastructure has spawned more Web3 applications

At present, the development of Web3 is still in the early stage, which is mainly limited by the imperfect infrastructure and the performance bottleneck of the underlying public chain. On the one hand, Web3 needs powerful and solid underlying facilities to provide players with richer consumption choices, developers with a more complete development environment, a more objective and comprehensive anchoring system for value evaluation, and a more comprehensive anchor system for public participation. Products with low rates and higher performance become the hub linking the real world and the Web3 space. On the other hand, applications in the emerging technology field require strong underlying infrastructure as technical support. Only when the development of the infrastructure reaches a certain critical point can its performance be able to germinate some early applications. The continuous improvement of industry infrastructure and the continuous advancement of the Ethereum 2.0 route in 2022 may promote the on-chain migration of more Web2.0 business model products in the new year, as well as the emergence of new business models driven by products and incentives .

4.2.1 Application infrastructure

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Changes in the number of smart contracts, the picture comes from the Alchemy report

In 2022, many institutions and projects still insist on polishing products and bringing forth new ones. Ouyi's public chain, NFT market, Web3 wallet, and strategic trading series products are constantly iteratively upgraded. Its Ouyi NFT market has become the most comprehensive 0-fee multi-chain aggregation platform, dedicated to solving the cross-chain interoperability faced by the NFT market Difficult, high-quality NFT production threshold, incompatibility of various trading platforms, and insufficient trading depth and single selection. Only by building the infrastructure in a steady and steady manner can we contribute to the application of Web3 and help it take off.

4.2.2 Public Chain Ethereum

At present, the public chain cannot meet practical commercial applications in terms of scalability, transaction efficiency, security, etc., which determines that it cannot support large-scale commercial applications. After the performance problem of the underlying public chain is resolved, there will be more product chain migrations of Web2.0 business models.

epilogue

epilogue

Looking back on 2022, on the one hand, various tracks in the Web3 field are constantly evolving and developing, and on the other hand, they are also continuing to go out of the circle, and have been recognized by more governments at the national and regional levels. Although security issues brought about by industry development continue to emerge, there is a consensus in the Web3 field It is still strong, and people's enthusiasm for construction has not diminished. It can be said that the industry is moving forward amidst turmoil, and hope is bred amidst changes. Under the baptism of the bear market and black swan events, the industry's prospects will become more and more clear. In the future, with the development of the potential track, Web3 will play a greater potential in the circle, and the gradual improvement of its industry infrastructure will also give birth to more Web3 applications.