Despite the hype surrounding blockchain technology, it’s still relatively early days for both the platform and the decentralized finance industry. Decentralized finance, or DeFi, is a type of financial product that uses blockchain technology instead of traditional banking platforms.
Due to the rapid emergence of decentralized finance and blockchain technology, you must keep up with the latest developments.
DAOs
A decentralized autonomous organization, or a DAO, is a type of corporate governance structure that uses blockchain technology. Unlike traditional corporate governance structures, which are typically subject to government regulation, a DAO is managed in a decentralized manner. Its members can vote on how their funds are used.
In 2021, Wyoming became the first state to officially recognize a type of corporate governance structure known as a DAO. In the same year, ConstitutionDAO was able to secure a copy of the U.S. Constitution for over $43 million.
In 2022, it’s expected that the rise of decentralized organizations will continue. Due to the increasing number of DeFi protocols that are using a DAO to govern their future, many investors are starting to look into cryptocurrencies such as BitDAO, AAVE, and Maker. Several new NFT-focused organizations are also starting to support collective investment.
Music NFTs
Non-fungible tokens, or NFTs, are unique blockchain records that record the ownership of a digital product. In 2021, the rise of visual arts NFTs has been a major boost for digital artists. Due to the technology’s ability to make digital art uniquely ownable, digital artists have been able to break into the lucrative world of art.
While visual arts NFTs have been around for a couple of years, music is starting to catch the attention of major record labels. Artists such as Nas and Mike Shinoda have already launched music projects using NFTs. Due to the lack of dedicated platforms that cater to the music industry, many existing marketplaces are not well-equipped to handle the influx of new NFTs.
Layer 2 Blockchains
A layer 1 blockchain is a standalone version of Bitcoin, Ethereum, and Solana that’s independent of the rest of the blockchain. It’s designed to deliver two of the three qualities that blockchains are supposed to have: decentralization and security.
Due to the emergence of new layer 2 blockchains that are faster and more scalable than the L1 blockchains, it’s expected that the L1 competitors will have their work cut out to catch up. A layer 2 blockchain acts as a companion to a layer 1 chain, allowing transactions to be performed much more quickly and cheaply.
Increase in Regulations
Due to the increasing number of regulators and enforcement agencies looking into blockchain firms, it’s expected that the scrutiny will become more invasive. It’s also important to note that while blockchain and DeFi have the potential to transform the way financial transactions are conducted, they haven’t yet been fully regulated. For instance, there are still a lot of activities that are illegal in the equity markets that are still being promoted through advertisements on public transportation.
Despite the various factors that can affect the future of blockchain and DeFi, it’s widely believed that the two technologies will continue to evolve at a remarkable rate. In 2022, many new users will be attracted to the platforms that are currently available.