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The crypto investment universe is vast. According to CoinGecko, a leading data aggregator, there are over 13,000 cryptocurrencies in circulation (some more legitimate than others). Among them are tokens issued by projects leveraging blockchain technology to develop use cases beyond peer-to-peer transactions, the mission behind the original crypto, bitcoin.
To help investors identify potential opportunities and broaden their exposure, this article explores six of the latest trends in the crypto ecosystem and provides examples of projects bringing these innovative applications to market.
Smart Contract Platforms
Ethereum brought greater functionality to blockchain technology with the introduction of smart contracts, programs that automatically execute when the terms of an agreement are met. They work on an if/then basis- for instance if one party fulfils their side of a deal, funds held in escrow can be released. A lot of protocols have followed in Ethereum’s footsteps, with Solana, Polkadot and Tron among the most well-established.
The primary benefit of smart contracts is they facilitate trustless interactions by removing the need for an intermediary, which speeds up transactions and reduces costs. They’re also transparent as code stored on the blockchain is publicly visible.
Decentralised Finance
One of the most powerful applications of smart contracts is decentralised finance, commonly abbreviated to DeFi. DeFi is an umbrella term used to describe decentralised apps (dapps) that aim to disrupt the traditional financial system by removing the need for third parties like banks. These dapps deliver a range of financial services, from lending to saving and trading on decentralised exchanges (DEX).
DeFi has also introduced several new products such as yield farming, which allows users to deposit tokens in liquidity pools that facilitate trading on DEXs in return for crypto rewards. Savvy traders shift their funds among pools to chase the highest return, hence the term ‘farming’. Some of the most popular DeFi apps by total value locked, a standard metric used to measure the amount of assets deposited on a dapp, include Aave ($10,846 billion) and Uniswap ($3,6 billion) as of May 24th, 2024.
Artificial Intelligence
The intersection between two cutting-edge technologies like blockchain and artificial intelligence (AI) has the potential to deliver both disruptive and innovative solutions. While it’s early days yet, a sample of projects demonstrating what’s possible include:
The Render Network is the first decentralised GPU rendering platform, which makes the process of generating state-of-the-art graphics quicker and cheaper.
Bittensor is a blockchain platform where developers can host AI models and collaborate, share knowledge and sell their services to consumers.
AI also enhances the performance of blockchain technology. It improves security by processing vast amounts of data to identify fraudulent behaviour and helps protocols scale by managing resources more effectively.
DePIN
Decentralized Physical Infrastructure Networks (DePINs) use blockchain technology to run networks of hardware applications and incentivize participants with rewards paid in crypto. Their main benefit is they improve resilience by eliminating the single point of failure risk associated with centralised systems. By spreading the responsibility for maintenance across multiple participants, the network survives if one fails.
An early example of a DePIN is Filecoin, which launched in 2014. Filecoin allows providers to rent out unused hard drive memory to users who want to store their data, such as non-fungible tokens (NFTs), on a decentralised network. Providers are incentivised to store and retrieve the data because they earn rewards in the form of the platform’s native token, filecoin.
GameFi
Game finance (GameFi) combines gaming and blockchain technology to create an environment where players can earn rewards, for instance by completing levels, which they can spend in-game or exchange for fiat currency (which is why it’s referred to as play-to-earn or P2E). NFTs are also leveraged to represent ownership of assets within games, such as avatars and weapons. Gamefi has already grown exponentially to a value of $22,52 billion (as of May 24th, 2024) according to Forbes magazine. This growth is expected to continue, with consultancy Business Research Insights estimating the market could be worth over $90 billion by 2031.
Axie Infinity, built on the Ethereum protocol, is one of the most well-known games with 342,353 active players in the past 30 days. Inspired by Pokemon, players breed, raise and trade digital pets called Axies (represented by NFTs) and earn Axie Infinity Shards (AXS) or Small Love Potions (SLP). Other popular titles include Pixels and Mavia.
Real World Assets
Tokenised real-world assets (RWAs) are digital tokens issued on a blockchain that represent ownership of an underlying asset, such as shares, commodities, property or collectibles. These tokens make markets more accessible and therefore attract greater liquidity, and they allow for fractional ownership, where multiple investors own shares in a single asset like a piece of art. As a result, this use case represents a significant opportunity for crypto-research by the digital asset manager 21.co predicts that it could be worth $10 trillion by 2030.
A leading project in this space is Ondo Finance, a DeFi protocol that brings institutional-grade products to retail investors. Among the RWAs listed on its website is a tokenized security offering exposure to short-term US government bonds and bank demand deposits (USDY), essentially a stablecoin alternative that pays interest.
Conclusion
Investors seeking opportunities to broaden their crypto exposure should consider the following sectors:
Smart contract platforms like Ethereum provide the infrastructure underpinning the ecosystem.
DeFi delivers a broad range of financial services such as lending, saving and trading without intermediaries like banks.
It’s still early days, but various projects are exploring the intersection between blockchain technology and AI.
DePINs run hardware networks and incentivise participants with rewards paid in crypto.
GameFi allows users to earn rewards from playing games that they can spend in-game or exchange for fiat.
Tokenising RWAs such as shares and bonds, property and collectibles is predicted to be among the most valuable crypto use cases.
