Although the markets at large are deeply bearish, heavily exacerbated by the oncoming recession, at least those duped by its rumors, and generally being exhausted, many aspects of cryptocurrency are still vital. Of those aspects, NFTs, DeFi, GameFi, and tokenization come to mind.
The initial public reaction to NFTs was disastrous, despite the massive technological potential it brought to the table. Just think about it, a blockchain with enough scalability and computing power that is able to not only decentralize the internet in its current form, but render it completely distributed, is actually a feasible concept to ponder by way of uniquely hashing digital files, documents, snippets, screenshots and artworks, tweets, videos, and whatever file format you could think of. Hell, there's your blueprint for building most of Web 3.0.
But no blockchain in existence could shoulder the internet's data throughput, in the league of zettabytes every year, in its current form with as much convenience in terms of speed. Right off the bat, the Bitcoin blockchain would buckle under this load, with 10 minute delays with each passing block in order for the digital files to enter circulation, assuming you are next on the block. Ethereum would fare better in terms of timings, still not up to today standards though, in addition to the fees attached with both chains with every transaction. Both Ethereum and Hive have layer 2 readily available for development of Dapps that would support the concept of NFTs, but at that point, scalability becomes the next major roadblock to overcome.
GameFi is another field that has seen significant emergence and discussion, scrutiny and limelight, but it ultimately stems from the same concept as NFTs with a different pattern that has become archtypal in-game: establish a hierarchy of items sorted from common to rare, and construct a mechanism such that the more common an item is, the more abundant in supply it becomes. Finally, slap a rudimentary open-market channel between players to foster organic value for the items each according to rarity and availability, features, perks or powers.
Is this sort of GameFi setup sustainable? Surely not. But then again, I find it hard to conceive another pattern that wouldn't integrate rolling the dice in the most decisive moment of the game like Splinterlands does with in its battles, or Axie Infinity with its gambling nature on pets.
It's also hard not to point out those games' inherent overreliance on the constant influx of new players. Without a steady flow, prices and profitability collapses sharply, if not by the larger cryptocurrency markets at play. Not to mention the gateway into those GameFi Dapps is long and expensive, if not complicated for anyone trying to get in. This is a pretty common theme with Hive's onboarding process as well, if we assume that Hive catapults itself in the top 50 coins by market cap.
But you aren't here for any of those things, yeah?
Right. I think that DeFi is the closest thing to a direct attack against the legacy financial system and its traditional banking constructs. One might argue that much more established chain, such as Bitcoin and Ethereum, are also capable of attacking that deprecated system, but what distinguishes DeFi as a whole from those chains in this particular context, however, is its capacity of utility instrumentation and moment-to-moment protocol executions.
Where those protocols come in play is in a scenario where the DeFi token itself is inflationary in nature and hyperinflationary in response to demand and moment-to-moment changes and circumstances. Inflationary tokens, in opposition to its deflationary counterparts, allow for massive userbase expansions and, when utility is in place, allows value to be built upon the DeFi project itself and, subsequently, price appreciation.
Now, I've seen people prop up the DeFi space as prepping up for an explosion in some unknown timeframe, particularly on Hive. I think there are a number of roadblocks and limitations to consider before making such a grandiose claim.
For one, security remains to be a massive hindrance of adoptions for DeFi, especially given the number of flash-loan vulnerabilities, rug-pulled projects, and pump-n-dumps. This is nothing new, as new innovations are always met with bad actors, but they'll never remain the constant in this field, instead, change is going to be. What concerns me, even despite that, is how security is going to be developed on top of such a complex Dapp.
Security, in this context, doesn't just concern plugging potential hacks from happening and patching up vulnerabilities in smart contracts. It also extends to mean the security of the value of your stake in that project. Simply protecting yourself is not enough, and achieving the latter sense requires ample utility to be in place.
The other side concerns the blockchains upon which those Dapps and DeFi projects are built. When a user attempts to enter the ecosystem, acquiring the basal coin is a mush in order to transact inside layer 2 application, and the interface for executions is not often standardized amongst blockchains. For BNB, ETH and Polygon, they are, but for the rest of the field, a standardized interface is direly needed. The technological barrier involved is too much of a tough climb for potential investors that they end up looking the other way, especially when money is at significant stake.
This is why I'm in strong favor of implementing the Rosetta API in the next hard fork, which would not only integrate a fully functional wallet into Coinbase that could execute internal transactions as Keychain would, but also interact with Layer 2 applications right within the website itself, assuming clever use of transaction metadata is exercised.
When the biggest project DeFi has to offer is Pancakeswap and its incredible, bare overreliance on onboarding some podunk projects, churning in pools out of them and churning them out dry, what does it say about the field as a whole? Pancake's CAKE token couldn't even push itself back to its ATH on the second phase of the bullrun when everyone around it did, let alone maintain itself in the markets right now.
Conclusion
DeFi, in its current form, is not ready for an "explosion" yet. Groundbreaking and innovative utility, at least ones that mirror the traditional banks' financial instruments in function, has to be implemented in an approachable package, preferably in a purpose-built blockchain of its own, for the average joe.