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More excitement for NFTs as the industry shows it’s more than just DeFi

Posted by
Ilya Abugov

Week In Review | Week #2, 2021 | by Ilya Abugov

The past week was a tense one. The crypto market experienced some violent price swings, while at a project level there were a number of high-profile resignations. Rivalries may be intensifying. With the industry showing its potential for growth and revenue, communities may no longer be as friendly when it comes to competing projects. 

Competition tends to be good for the end-user, so this may be foreshadowing the long-awaited arrival of truly retail facing applications in the space.

Source: CoinGecko.com

Resignations make some noise

Dan Larimer’s announcement that he is leaving Block.one made the headlines and gave the industry something to talk about. It leaves EOS in a precarious position. Having raised $4B in its ICO, it was considered a major competitor to Ethereum but has lost a lot of ground in 2020.

EOS missed out on the DeFi wave last year, and now with a key figure in its ecosystem, looking to focus on another project, the platform may be in trouble.

Jorge Izquierdo’s announcement that he is resigning as CEO of Aragon One, came after a number of recent departures from the project. The specific reasons for the move are unclear but point to recent governance decisions as to the source of the divide.

It will be important to watch if and how the departures affect Aragon’s relationship with other dapp communities, as its tools are being used by a number of projects.

Two interoperability visions

Cosmos and Polkadot are viewed as the two prime interoperability ecosystems. However, without IBC and parachains, both ecosystems remained just a series of individual blockchains.

Now with the release of Stargate, Cosmos should finally get IBC, and push forward with practical interoperability. While this is only a step in the right direction, if Cosmos is able to realize its hub and spokes vision, it may reassert itself as a formidable player in the L1 race.

Source: Cosmos Network

Polkadot, on the other hand, saw the first parachain deployed on its testnet. Plasm, the project that got it done, offers an interesting mix of L2 scalability and EVM compatibility, that may entice some Ethereum projects to at least give it some consideration.

Source: Plasmnet

Cosmos and Polkadot offer two different approaches to delivering the interoperability, and it will be interesting to see how the two ecosystems coexist in an increasingly competitive L1 space.

Originals vs Memes

The summer of 2020 saw the arrival of a wave of food-meme projects, which were often forked from more established running products. This forced projects to compete for users and liquidity as new platforms tried to offer incentives to attract users to their solutions.

Arguably the biggest rivalry has been between Uniswap and SushiSwap. The latter has gone through a number of controversies including the taken and returned funds by the founder and liquidity vamping.

Source: DappRadar.com

Nevertheless, it appears that SushiSwap has matured into a strong project, one that is ambitious and agile. The 2021 roadmap is full of exciting products and features such as MIRIN, BentoBox, and Miso.

While some are questioning whether SushiSwap “stole” from Uniswap, the challenger team appears to have quickly gone further, and the expected releases could make it a rather special project.

As the thegreenbutton_ analysis shows, SushiSwap may already be overtaking Uniswap. The first exhibits better capital efficiency than the incumbent and given SushiSwaps’ place in the Yearn ecosystem, it may soon see more volume and users as well.

Source: Twitter

This may be a warning bell for all of the long-standing DeFi projects. If meme alternatives continue to evolve at a faster pace, the industry may not care for “who came first”.

Optimistic vs Zk

While Polkadot, Cosmos, NEAR Protocol, Solana, Avalanche, and others are trying to challenge Ethereum’s L1 dominance, there may be some competition brewing within the current leader’s ecosystem.

As Ethereum struggles with scalability limitations and high gas costs L2 solutions have come to the forefront. The two primary paths on Ethereum have been optimistic rollups and zk rollups. With Optimistic Ethereum’s mainnet expected soon, Kain Warwick published a blog post, describing Synthetix’s potential migration path to the L2 solution.

Source: Synthetix

The high-level roadmap shows that Syntehtix will need to maintain both an L1 and an L2 instance for some time as well as deploy a bridge between the two. How quickly and how smoothly the process goes may impact the decision of other projects weighing their L2 options.

The industry is more than just DeFi

While DeFi has taken up a significant amount of headline real estate, plenty of things have been developing outside it as well.

The recent partnership between Animoca Brands and Binance Smart Chain is of particular interest. While Binance has made considerable efforts in the DeFi space, the results have been limited at best to this point.

Given the interconnectedness and TVL of Ethereum’s DeFi ecosystem, it may be hard for BSC to convince projects to migrate. However, the gaming ecosystem is much less developed and may offer BSC a better chance for a foothold.

More excitement for NFTs

The recent auction of Beeple’s NFTs made some headlines, and it looks like the story will have a continuation. Metapurse has acquired 20 of the 1/1 artworks auctioned and is bundling them with some virtual real estate into B.20. The B.20 bundle will be sold on January 23, giving users an option for partial ownership.

With NFT art and collectible pieces selling for substantial amounts at auctions, bundling and fractional ownership may become a trend, in order to create liquidity for high-value items.

Pranksy loading boxes

The new NFT Boxes project from Pranksy is another interesting bundling event. The anonymous collector is a dominant figure in the NFT space, who understands value.

Source: PlayToEarn

Some DeFi projects have already started to embrace NFTs as a way to interact with their communities. It will be interesting to see if NFT bundles find their way into the sector as well, perhaps through aggregators.

The information provided here is for informational purposes only. This is not investment advice and should not be treated as such. Strategic Round Capital and/or the author of this article holds a position in BTC, ETH, YFI.

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