The Trends that are Shaping the Current DeFi World.
We all know that the Crypto ecosystem is famous for its volatility and fast pace, but we can still isolate and analyze what the current technological landscape can bring to the table, and extrapolate enough data to make educated predictions about what macro movements we will see in the mid to long term.
A new outlook and new integration for the world of traditional institutionalized finance is coming.
In 2023, the blockchain infrastructure will play a pivotal role in ushering in a new era for institutional-grade finance, driving remarkable growth within the sector.
One of the key catalysts for this expansion is the increasing utilization of tokenized Real-World Assets and the continuous advancements in enterprise-level staking and unsecured lending.
Tokenized Real-World Assets have gained significant traction, with stablecoins emerging as the most successful application.
Market leaders like USDT, USDC, and BUSD have secured their positions among the top seven tokens by market capitalization, and more notably, crypto-native organizations such as MakerDAO have demonstrated their commitment to RWAs by making substantial investments, such as allocating $500 million to US Treasuries and corporate bonds.
Maker DAO has diversified its portfolio further, venturing into other types of RWAs including real estate, invoices, and commercial loans.
The success of these ventures is evident as RWAs now contribute nearly 60% to Maker’s total protocol revenue, underscoring the immense potential in this space, another significant development in institutional finance is the rapid growth of enterprise-level liquid staking,
which is driven by the expansion of the Liquid Staking Derivatives sector.
Companies like Alluvial are at the forefront of establishing enterprise-grade standards for liquid staking, facilitating the connection between institutional capital and Proof of Stake blockchains.
This innovative approach enables token holders to stake their assets and receive collateral-backed tokens, thereby improving capital efficiency, and the market has responded quite positively to this concept, with the proportion of total staked tokens increasing from 21% to nearly 40% within a single year.
The decentralized lending landscape has also experienced remarkable growth, although many existing lending models require over-collateralized debt positions.
Furthermore, on-chain borrowers often lack access to general-purpose credit and as such the complexity and fragmentation across various DeFi platforms and infrastructure have added further challenges, making it difficult to manage positions and generate sustainable yield.
As a result, there is a growing recognition of the potential for unsecured peer-to-peer lending as a more viable source of real yield, with on-chain unsecured lending providing transparency, empowering underwriters to make proactive lending decisions.
Pioneering projects like Maple Finance and Goldfinch are actively working towards providing capital to real-world institutional businesses in a decentralized and efficient manner, however, the DeFi space is not without its challenges and the lack of clear regulations for cryptocurrencies remains a major uncertainty for the industry.
Nevertheless, by making iterative progress in on-chain tokenization and securitization and establishing well-defined guidelines, the sector can navigate these challenges and unlock a wide range of possibilities for real, cash flow-generating activities.
Overall, the progress of institutional developments in DeFi is an inevitable trajectory, while CeFi continues to consolidate its collaboration with traditional financial institutions, which are expected to further explore mature DeFi protocols such as MakerDAO, AAVE, and Centrifuge, with the goal of experimenting with decentralized solutions.
Additionally, one thing that we are already seeing as the Synapse Network, is a surge of startups focused on facilitating the onboarding of traditional financial institutions into the crypto market in a regulatory-compliant manner.
This convergence of characteristics has the potential to create a larger additional layer of finance, particularly in emerging markets where millions of entrepreneurs are currently excluded from the traditional financial system.
This blending of institutional finance with the benefits of blockchain technology opens up new avenues of financial inclusion and economic growth for every player in the field, and we as one of the first projects to understand the profound impact that institutionalizing crypto projects may have for the future of DeFi are very happy to see those kind of developments.
The Critical Role of Ai technology in the Development of Mainstream and blockchain-based gaming.
The role of Artificial Intelligence is poised to have a significant impact on blockchain game development and extend beyond our realm as it bleeds out into the mainstream space.
AI has undergone remarkable advancements, evolving from early research in Natural Language Processing and problem-solving to more recent breakthroughs in data synthesis and Machine Learning, and Its widespread adoption across diverse industries such as healthcare, finance, media, and transportation showcases its potential.
The year 2023 is expected to witness the widespread adoption of AI, with the success of Large Language Model models like ChatGPT serving as prime examples of the prowess of artificial intelligence in the digital space.
The blockchain gaming industry, in particular, stands to benefit greatly from AI advancements, especially in streamlining the traditional game development process and delivering enhanced gaming experiences through Generative AI, since this specific field has been developing for over a decade and has recently advanced to the point where it can mimic and even surpass human capabilities in image, language, and speech recognition.
The market for Generative AI was valued at $8 billion in 2021 and is projected to exceed $63 billion by 2028 and we are excited to witness how it will continue to shape and innovate the industry in the years to come since those changes have already started to affect the specific ecosphere in which Synapse operates.
One more point of interest is that content creation poses a significant bottleneck for AAA game developers, consuming a substantial portion of their budget with top game studios often requiring at least three years to complete production, and predicting consumer trends years in advance of product launch adds further complexity to this already difficult ordeal.
This challenge becomes even more pronounced in the crypto gaming realm, where the focus is on decentralizing gameplay development to players, whose preferences can change rapidly and unpredictably, and at the same time have not seen a true triple-A title yet.
Generative AI emerges as a powerful solution to address these issues, mainly thanks to the ease of access while collecting data on user behaviour.
A properly developed artificial intelligence can infer a lot from a core group of community beta testers across multiple game iterations, and developers can train models to generate unique, tailored content such as levels, characters, and items based on specific demographics.
This procedurally generated content evolves in response to real-time changes in user behaviour, providing players with a diverse and dynamic gaming experience while reducing the need for manual content creation by developers.
Crypto gaming emphasizes engaging users to create their own user-generated content with in-game utility and monetizable potential and while creation tools in games like Minecraft are just scratching the surface, the combination of blockchain and generative AI empowers users to design and monetize assets.
Users can create weapons, items, or collectable cards with unique attributes, rarity, and value, in a similar manner to industry giants like CS Go.
By integrating with the blockchain, these UGC items can be traded, bought, and sold on on-chain marketplaces in real time, adding another layer of interest to already immersive gaming experiences, which opens up new possibilities for in-game asset monetization, while original asset designers can earn royalties on secondary trades.
Game developers are already leveraging various AI technologies, but the integration of generative AI models and their applications can bring about transformative changes.
This integration can not only enhance the game development process but also elevates the overall gameplay experience for players by adding higher stakes and tangible profit to an endeavour that for the most part consists only of entertaining yourself.
Looking beyond gaming, the potential of AI extends to other crypto verticals, with hard fields like predictive risk management, for instance, gaining popularity among trading teams who train generative AI models to simulate different market conditions using synthetic financial data — prices, trading volumes, order book depth, liquidity, and more.
This enables traders to understand and respond to potential risks in various market scenarios more quickly and more efficiently, substantially reducing both the time spent on research and the potential losses of firms utilizing this technology.
AI-powered smart contract auditing is another area worth monitoring since the current auditing process is laborious, inefficient, and expensive.
However, future AI models can be trained on extensive datasets of existing smart contract code, incorporating information about vulnerabilities, bugs, and attack patterns and after thorough data processing and cleaning, these models could automatically analyze and audit new smart contract code inputs without relying too much on human oversight.
The effectiveness of AI solutions heavily relies on perfecting the data collection process, both in terms of quantity and quality of information obtainable, and thus Incentivized Data Marketplaces could shape the future, where decentralized computing protocols like Filecoin and dFinity will see a lot of interest since they could be the base from which AIs are trained.
We can see how the convergence of Artificial Intelligence and blockchain technology is set to redefine the landscape of game development and beyond, with AI’s remarkable advancements, particularly in the field of Generative AI, offering game developers the means to streamline content creation, deliver personalized experiences, and tap into user-generated content with in-game utility and monetization potential.
At the same time, the emergence of Incentivized Data Marketplaces showcases the potential for users, AI, and tokens to collaborate in shaping the future of the industry. As we embark on this transformative journey, the fusion of AI and blockchain holds immense promise, revolutionizing not only the gaming sector but also opening new frontiers of innovation and possibilities across various domains.
AI Technology isn’t the only reason we will see a resurgence in blockchain gaming.
This revitalization, is already there, driven by the adoption of strong intellectual properties and by the improvement of standard onboarding processes.
The success stories of blockchain games like Axie Infinity, The Sandbox, and Blankos Block Party have captivated the industry, showcasing the immense potential of this emerging sector.
However, the true breakthrough lies in the integration of well-known IPs, breathing new life into the gaming experience and attracting the already massive audience focused on mainstream gaming.
Recognizing the power of established IPs, companies such as Nexon, Netmarble, SEGA, Bandai Namco, and Square Enix are actively exploring ways to incorporate their beloved characters and storylines into blockchain games and by leveraging these IPs, developers can tap into existing fan bases, creating a strong sense of familiarity and nostalgia for players while adding the earning capacity of blockchain gaming.
This fusion of blockchain technology and popular IPs not only enhances the overall gaming experience but also opens up exciting opportunities for fan-driven content creation through User Generated Content platforms, a concept that is gaining more and more traction, enabling players to actively participate in shaping the game world by creating their own content using well-known IPs.
For example, the Gundam Metaverse UGC platform allows fans to design and contribute their unique creations within the Gundam universe.
This integration of blockchain technology empowers players to take ownership of their contributions and even monetize their creations, further deepening their engagement with the game and its community in a way that could not be achieved before.
While the utilization of strong IPs is a significant driver of blockchain game adoption, the industry recognizes that addressing high entry barriers is crucial for long-term success and one of the notable challenges blockchain games face is the complexity of wallet creation and asset acquisition.
To attract a wider audience, developers and infrastructure providers are actively working to streamline the onboarding process, with the gaming industry expecting to witness the gradual advancement of streamlined onboarding tools picking up a higher pace in 2023.
Blockchain infrastructures will offer convenient mobile Software Development Kits that can simplify the creation and management of wallets, reducing the friction associated with accessing blockchain games.
Specialized multi-chain enabled wallet services dedicated to the gaming sector, such as Sequence and Face Wallet, will collaborate with blockchain gaming companies to enhance accessibility and provide seamless user experiences.
These advancements aim to make the process of entering the blockchain gaming world as user-friendly as possible, ensuring that players can focus on enjoying the games rather than dealing with technical complexities, in a bid to remove from the start a problem that has often plagued the DeFi ecosystem.
Moreover, infrastructure companies are actively contributing to improving the user experience in blockchain gaming with projects like Immutable X, for instance, having recently introduced Immutable Passport, an initiative designed to streamline onboarding and provide a unified experience for players across various blockchain games.
By creating a standardized and user-centric approach, these collaborations between infrastructure providers and game developers pave the way for a more seamless and enjoyable gaming journey.
In conclusion, the revitalization of blockchain gaming hinges on the integration of strong IPs and the improvement of onboarding processes.
By incorporating beloved IPs from popular franchises, developers will be able to tap into existing fan bases and create immersive experiences that resonate with players while simultaneously, efforts to simplify access and enhance user experiences through streamlined onboarding tools and specialized wallet services will significantly reduce entry barriers and foster mass adoption.
As the industry progresses, the fusion of blockchain technology and strong IPs will continue to shape the future of gaming, offering exciting opportunities for players and creators alike and shaking the monopolies that a few giants have on the mainstream industry.
Will the Next Big Social be born on the blockchain?
Each day the integration of b3 elements into digital identity systems brings us closer to finally achieving a decentralized social platform.
The current digital identity landscape faces various challenges that hinder its effectiveness with problems like fragmentation, for example, creating a lack of cohesion and accuracy in personal identification as individuals have multiple identities across different platforms.
Privacy and security concerns arise from the need to provide sensitive information to establish digital identities, making individuals vulnerable to identity fraud and financial crimes, while Botting has become a true issue in all of the current social media landscapes.
Centralized control by platform service providers further limits users’ control over their own identities, with many scandals arising every year over the improper usage of user data.
Blockchain technology offers promising solutions to address these issues all at once, since by utilizing private wallets and verifying digital identity through token ownership or NFTs, blockchain-based identity systems enhance accuracy, reliability, and user control.
Users can consolidate their multiple online identities into a unified, self-sovereign entity, empowering them with autonomy over their digital presence, while also protecting their encrypted data.
One such example can be CyberConnect, for instance, which is actively developing a decentralized social graph protocol that enables users to create composable, self-sovereign identities using Web3 Status Tokens and CyberConnect Profiles.
In addition to token-based solutions, other approaches like Decentralized Identifiers and Verified Credentials are used by Ethereum-based projects such as Disco and Orange Protocol showcasing once more the great alternatives that we have to the current data storage methods.
These tools complement the concept of Soulbound Tokens and offer alternative methods for creating and managing digital identities, but to ensure optimal security and privacy, a combination of on-chain and off-chain solutions may be necessary for the long term.
Moreover, advancements in data storage solutions that prioritize privacy and partial decentralization, as well as seamless integration between different identity layers, will further enhance digital identity systems while doing away with many of the problems currently plaguing the social network we are using to connect with each other.
The implementation of Web3 digital identity holds immense potential for decentralized social platforms with being able to easily connect with like-minded individuals, form communities, and engage in activities such as using DeFi protocols, owning NFTs, or participating in blockchain games.
This new form of identity can seamlessly integrate with preexisting systems, paving the way for a unified and interoperable digital identity framework that will unlock numerous business opportunities.
The trend towards decentralized social networks has been evident throughout the year, as seen in the significant number of projects focused on this domain in hackathons and other similar contests.
Lens Protocol alone has spun off over 60 projects in this category, showcasing the diverse attempts to build a robust social graph, with notable projects like Farcaster and DeSo having also secured substantial funding, reflecting the growing interest in decentralized social platforms.
In the coming years, we can anticipate the initial development and launch of blockchain-based social applications that leverage network effects through a shared social graph, fostering a more decentralized and user-centric social experience, and from what we have seen until now, 2023 will plant this budding seed in the mind of many.
About Synapse Network
Synapse Network is developing a cross-chain investment and start-up acceleration ecosystem based on blockchain technology to give everybody an equal chance to contribute to great upcoming projects and to do so early on. We are bridging the gap between the traditional & crypto market. The idea of the Synapse Network technology goes beyond the standard offer of launchpads available on the market, becoming a true technological brand providing tech solutions.
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