After 2021, we entered an era of cryptocurrency where people stopped talking only about financial decentralization and started broadly discussing the tokenization of everything, in part through non-fungible tokens (NFTs).
This shift represents a critical perspective that should guide three theses for the next bull market. To fully understand these theses, it is crucial to understand that everything is given. Money is data. Your engagement with a brand is a given. Your credentials are data. The ticket to your favorite show is made up of data.
Since 2021, the ecosystem has increasingly started to store a large part of this data in the form of fungible tokens, NFTs and timestamps on the blockchain, which in this context acts as a data repository.
While not all data needs to be on the blockchain, the ability to place data on the blockchain radically transforms the way we store, share, and use data for automated and secure instructions and transactions.
Re: non-financial blockchain use cases. pic.twitter.com/lYZFprXAry
– vitalik.eth (@VitalikButerin) May 27, 2022
And it seems that this prospect of tokenizing everything is coming to Bitcoin. This gives rise to the first thesis.
Ordinals and similar protocols continue to grow, as Bitcoin becomes a network for multi-asset (or multiple data types)
In January 2023, Casey Rodamor made the Ordinals protocol public, which, in short, allows the permanent insertion of any type of file into the Bitcoin blockchain.
In less than a year, the community has already carried out experiments in which music, works of art, journalistic articles and even video games are registered on the first global blockchain.
The Ordinals protocol was not the first to allow this, but it is the one that has gained the most popularity. And everything indicates that it is a flame that will not go out.
More than just a technical protocol, a culture and a mindset have been created in which more and more builders see Bitcoin as a canvas for the creation of other projects and applications, and nothing can stop the cultural movements well established.
But remember: not everything needs to be stored 100% on-chain, as this is expensive and, for some applications, inefficient.
Therefore, protocols such as Taproot Assets – which allow the creation of other assets – on the Bitcoin network but in a way that keeps most information off-chain, will be essential.
Crypto will break out of its bubble and finally reach the common man via layer 2 blockchains
Those who were active during the 2021 bull market recall that $50 transaction fees on Ethereum were almost the norm, not to mention spikes, like Yuga Labs’ Otherside NFT mint, where users paid up to ‘to six Ether (ETH) per transaction.
It’s simple: if the blockchain is not invisible, it will not reach the general public. And expensive and slow transactions make blockchain very visible.
This is why layer 2 blockchains – designed to scale layer 1 blockchains – will be so crucial to the next bull market.
Although they have been around for years, neither they nor the market were mature enough to rely on them during the last cycle. On the one hand, many companies and developers were not convinced that Layer 2s were stable enough to handle a large influx of the general public. On the other hand, there was also the problem that, in the excitement of the moment, people acted without really studying and understanding.
The number of projects unnecessarily on Ethereum was large, and the reasons varied: it was cultural, because some companies didn’t even know what secondary layers were, or simply because everyone was building on Ethereum.
Today, with all the lessons learned and the calm that has settled with the bear market, it is clear that the construction mentality is much more mature, and the “job to be done” by blockchains has become much clearer for those who build. .
And the icing on the cake will be the implementation of EIP-4844, which is expected to take place in a few months on the Ethereum network, and will further reduce the transaction costs of layer 2 networks, making them even more invisible and robust in order to attract. and build loyalty among the general public.
But there’s no point in infrastructure being invisible if people can’t connect to it and businesses can’t build on it. However, the solution is already there!
Abstraction solutions will be the primary gateway and retention mechanism for traditional users and large enterprises on Web3.
The big problem is that with the tokenization of everything, in some cases decentralization is more of a hindrance than a help.
If the topic is Bitcoin (BTC) custody, the theme of decentralization is relevant. However, when the topic turns to tokenized tickets or a company’s loyalty credentials, the value is not in the decentralization of the system. Therefore, simplifying the user experience by abstracting away complex processes, such as creating a semi-custodial wallet with social login or eliminating concerns about gas fees, makes perfect sense and necessary.
Abstraction solutions were the missing bridge so that the crypto universe did not continue to be a technical environment reserved for technically competent people ready to tackle various challenges and complex journeys. But now they’re ready to shine!
And it’s not about ending decentralization, but about having an option. Those who wish to remain 100% decentralized can do so, but those who do not now have the option. This thus prevents the crypto ecosystem from dying in the famous abyss of innovation. Because beautiful infrastructure is useless if people can’t connect to it and move around easily on a daily basis.
Not often talked about is the importance of these abstraction solutions for traditional businesses to also be able to join Web3 effectively. How many companies currently have a team of developers capable of programming in blockchain languages, like Solidity? Making it easier for manufacturers to get started is also crucial.
Breaking down blockchain’s journey to integration into four phases, we could say that account abstraction solutions, along with the advancements mentioned in the second thesis, will propel Web3 into its penultimate phase – with infrastructure improved, fewer technical manufacturers and brands join the game, and the number of applications, projects and use cases multiply, attracting the attention of the general public.
Currently, it appears that major blockchains will increasingly be seen as multi-asset consensus platforms in the next market cycle and less as currencies. The crowning achievement will be the quest for scalability, which will make the layers more invisible and less complex for users to navigate and for businesses to integrate. Welcome to Ethereum and Bitcoin Phase 2.
Lugui Tillier is the commercial director of Lumx Studios, a Web3 studio that counts among its investors BTG Pacual Bank, the largest investment bank in Latin America. Lumx Studios has already had Web3 files with Coca-Cola, AB InBev, Nestlé and Meta. The author holds investments related to Ordinals Protocol, although none are named in this article.
This article is intended for general information purposes and is not intended to be and should not be considered legal or investment advice. The views, thoughts and opinions expressed herein are solely those of the author and do not necessarily reflect or represent the views and opinions of Cointelegraph.