Lightning wallets into users’ profiles, which allows people to cheaply, quickly and seamlessly ‘tip’ one another in exchange for content⁵. More and more open source Bitcoin Lightning wallets are appearing on mobile app stores with better designed user interfaces (e.g. Muun⁶, Pine⁷, BlueWallet⁸). This is coupled with novel ways of acquiring Bitcoin, such as Azte.co’s⁹ ‘mobile recharge’ model voucher product. Western Union is going to need to change its business model – again.

At the same time developers are finding more and new ways in which to make full use the decentralised application functionality of networks like Ethereum, Solana or Avalanche. The decentralised finance (DeFi) field will keep traditional finance (TradFi) people awake later at night as exchanges (e.g. Uniswap¹⁰), lending (e.g. Aave¹¹) and yield farming (e.g. yearn¹²) services pick up new users.

Non-fungible tokens (NFTs), more simply referred to as digital collectibles, have been one of the breakout parts of the digital asset ecosystem in 2021. They have brought in new users, particularly from the entertainment and arts industries, and driven immense activity via platforms like OpenSea¹³. The first iterations of business models seen in this space during 2021 are likely to evolve in the near future. When one throws technically-minded developers together with creatives in art, music and gaming it makes for an eclectic combination.

Gaming is another area where smart contract functionality is being pushed. Gaming has generated more revenue than Hollywood for years¹⁴. Recently, 500 million people tuned in to watch the finals of an eSports tournament¹⁵. Digital asset networks are both providing the infrastructure to support in-game tokens and economies, which undergrid many of these virtual worlds (e.g. Axie Infinity¹⁶). As the lines between meatspace and cyberspace continue to blur¹⁷ be prepared to see changes in how people interact financially in what some people currently refer to as metaverses.

This all comes against a backdrop of continuing technical improvements and evolutions. The Bitcoin network underwent a major upgrade this month – called Taproot – which is aimed at increasing network privacy and security¹⁸. At some point the Ethereum network will make the long-awaited transition to a proof of stake consensus mechanism¹⁹, which will create a new source of returns to those who ‘stake’ ether to run a validator node. Finally, expect greater interoperability²⁰ between digital asset networks as people attempt to make the most of a combination of specialised functionalities offered across different networks.

Thinking about the future of the digital asset ecosystem is difficult because of the unpredictability of open source developer communities coupled with the iterative, trial and error process that characterises the entrepreneurial engine. This is not unique to digital assets though – it is an essential dynamic that new technologies experience throughout their development, commercialisation and diffusion. The last decade saw various ups and downs in the digital asset ecosystem – all of which led to where the space finds itself today – and this will continue as new technical functionality is developed and people run into new problems for which the functionality of digital asset networks provide novel solutions.

⁵ https://blog.twitter.com/en_us/topics/product/2021/bringing-tips-to-everyone
⁶ https://muun.com/
⁷ https://pine.pm/
⁸ https://bluewallet.io/
⁹ https://azte.co/
¹⁰ https://uniswap.org/
¹¹ https://aave.com/
¹² https://yearn.finance/
¹³ https://opensea.io/
¹⁴ https://www.marketwatch.com/story/videogames-are-a-bigger-industry-than-sports-and-movies-combined-thanks-to-the-pandemic-11608654990
¹⁵ https://www.bloomberg.com/news/articles/2021-11-08/tencent-gets-respite-from-crackdown-with-league-of-legends-hits
¹⁶ https://axieinfinity.com/
¹⁷ https://www.wisdomtree.com/blog/2021-11-11/welcome-to-the-metaverse
¹⁸ https://www.theblockcrypto.com/linked/124276/bitcoin-taproot-activated
¹⁹ https://ethereum.org/en/eth2/
²⁰ https://www.wisdomtree.eu/en-gb/blog/2021-11-10/digital-asset-networks-are-like-train-lines

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