Ever since people began to understand what blockchain technology is and how it can be used in new and interesting ways, innovations have continued to increase rapidly. Blockchain itself is a huge attraction to the crypto space, even for people and companies who aren’t necessarily looking to invest for gains. Here we’ll discuss some key blockchain implementations you should be watching in the next year.

#1 - Interoperability

As of today, the crypto world is largely siloed. It’s not very easy or cheap to make data transfers from one place to another to get your asset where you want it. Even something you’d think would be simple like moving between the two largest chains, Bitcoin and Etherum, is not possible because the blockchains have different protocols, different security, and are completely independent of each other. Right now, transferring data between chains is like trying to eat a hotdog off the television—impossible.

Thus the creation of cross-chain solutions is front and center as a priority in the coming year as desire increases for interoperable layer-1 solutions like Cosmos, layer-2 solutions like Polygon, and dApps that can interface with multiple chains. Cross-chain interoperability makes it easier to integrate and consolidate your assets. But, as with many hitches in new technology, cross-chain communication is a hurdle for a reason. Creating interoperability that still maintains security is a tough problem. Smooth and standard ways of cross-chain connecting may still be a way off.

#2 - Scalability

The twin problems of interoperability and scalability tie closely together. While one exacerbates the other, new solutions to either issue can ease the other as well. If interoperability can be reached, scalability will become easier. Some of the current challenges, especially on the larger blockchains like Ethereum and Bitcoin, are network congestion, high network fees, and low throughput. As more people try to make more transactions on-chain, the slower and more expensive it becomes for anyone to get their data transferred.

Ethereum is hoping to combat this problem by moving to a proof-of-stake consensus, which developers hope will allow for faster and cheaper transactions. Another hopeful layer-2 solution is zk-rollups, which allow for some of the data to be processed off-chain. Vitalik Buterin says with zk-rollups, a smart contract “only has two tasks: processing deposits and withdrawals, and verifying proofs that everything happening off-chain is following the rules.” Bitcoin is also working on layer-2 scalability with things like the Lightning Network, which uses payment channels to conduct transactions partially off-chain as well. The crypto world will be on the lookout for more solutions like these.

#3 - Tokenization

Tokenization is the concept of taking a real-world asset like real estate—or a Maserati—and allowing the ownership of the physical asset to be tied to a digital token that is then recorded on the blockchain. There are several benefits of doing this. One is to make ownership transparent, secure, and immutable. By documenting a deed or title on the blockchain, it’s secure, cannot be stolen, but also viewable at the same time. Another benefit could be the ability to fractionalize ownership. For example, smart contracts can be used to pay out real estate distributions to anyone who owns tokens for the property, without the need for an intermediary to manage the process. No matter who trades ownership tokens or how many they hold, the payments would be executed automatically by the smart contract without the overly complicated tracking and validation that would make it difficult with traditional methods.

Tokenizing can also lower the bar to investing while also verifying necessary investor requirements. Smart contracts can enforce geography requirements for assets that may be restricted to a certain country or location. Asset details and real-world data can also be placed into the smart contract through oracles so investors can easily view and analyze potential investments, marketplaces can adhere to regulations and verify KYC for accredited investors, and traditionally illiquid assets can function with a little more liquidity because they are tokenized.

#4 - Decentralization

The DeFi ecosystem has been having a heyday for the last year, and it looks like that will continue. The momentum is still strong and keeps bringing more new developers and users into the space every day. Even though the cryptosphere is generally perceived as “decentralized” compared to legacy institutions and services, there are still plenty of centralization hazards like private blockchains, centralized exchanges, top-down governance, and lopsided coin distribution.

DeFi projects aim to dismantle those centralization hazards, which is a big reason why so many people are interested in it and growing the ecosystem. Decentralized autonomous organizations (DOAs) are becoming more desirable to govern projects and blockchain protocols. Plus, Web3 is gearing up to be one of the next big steps in restructuring the internet in a decentralized way. Using blockchain and smart contracts to rebuild permissionless versions of every Web2 structure can change the way everyone uses the internet daily.

#5 - User experience

Crypto adoption is quickly on the rise, but one of the ongoing challenges for new users is the learning curve for usability. Making blockchain technology easier and less confusing for new users to interact with will improve overall satisfaction for current users and also attract those who have been reluctant to step into the crypto world because it’s “too hard to figure out.” Many of the most-used apps and services are improving their user experience (UX) but there’s still a long way to go for smaller and newer projects that are launching with difficult and cumbersome UX. They’re all vying for users who are willing to take the time necessary to learn functionality in the ecosystem, but that can be accelerated with increased ease of use.

#6 - Other blockchain trends to Watch

Many other interesting things are happening in the blockchain world like digital identity, which aims to allow people to take control of their personal information and keep it out of the hands of big tech and in their own custody on the blockchain. 

Supply chain management is another hope for the future of blockchain as large companies look to streamline and update old paper-heavy manual tracking processes that complicate supply chain movements. Tracking products on a blockchain would make custody more transparent.

Blockchain-as-a-service (BaaS) is another implementation to look for as companies begin to utilize blockchain cloud services in similar ways to how SaaS has been used. NFTs are likely to continue their popularity as well—where they’re going and where they’ll end up is still unknown, but many people are hopeful that long-lasting use cases will emerge. 

Public blockchains will likely increase their strength in the space as DeFi continues to explode. This is in contrast to central bank digital currencies (CBDCs), which, of course, are a private blockchain use case that is likely imminent.

What these blockchain trends could mean for the future

More people are moving into the crypto space and beginning to educate themselves on the fast-growing number of solutions and implementations on various blockchains. 

Developers are continuing to work on improving usability and solving security and centralization problems. It may be the case that fewer people will need to understand the nuances and differences between various blockchain implementations as solutions become more holistic and standardized. Much like the internet, smartphones, and computers today, when the underlying technology is solid, standardized, and easy to use, people can adopt it without needing in-depth technical understanding of how it works.

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Michael Hearne

Michael Hearne is the CEO of Decentral Publishing and the host of the Uncensored Crypto docuseries.