Crypto Processing in 2022: Trends and Risks to Look out for

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Without a doubt, there is not a single financial market that has expanded as rapidly as the crypto market.

The future of money is clearly digital, powered by decentralized blockchain technology. The question is, what can we expect in the near future? Before we delve into the past and future trends, let’s see what kind of crypto services are available.

Enterprise-Grade Crypto Solutions

One of the main obstacles to crypto adoption among merchants is the lack of turn-key crypto solutions.

Despite the fact that crypto payments completely solve the problem of chargebacks, unfamiliarity with what it takes to open up the door to crypto payments remains a stumbling block.

When we overview which regions have adopted crypto payment gateways the most, we clearly see two different adoption forces at work.

On one hand, first-world countries — the Anglo-World and Europe — see crypto payments as innovations. On the other hand, they become necessities in nations struggling with soaring inflation: Venezuela, Colombia, Argentina, Brazil, etc.

Source: Statista.com, crypto adoption among businesses as of March 2021.

Thanks to the tightly regulated EU framework, EU-based crypto gateways are rising in popularity.

According to a Chainalysis study, European countries make up 25% of the global crypto market, at $1 trillion within one year of trading volume.

Let’s take an overview of past trends, both positive and negative, to see where crypto payment gateways will be sought after the most.

Diversification of the Blockchain Ecosystem

For almost a decade, Bitcoin (BTC) itself has held the majority of the market cap within the blockchain space. Based on a Proof-of-Work (PoW) consensus, many have come to view Bitcoin as digital gold, now sandwiched between silver and Tesla, at a $1.13 trillion market cap.

Image credit: 8marketcap.com

Bitcoin's snowballing bull run began at the end of 2020, just as PayPal announced its integration of Bitcoin into its merchant ecosystem, accounting for over 400 million active user accounts.

The impact on the cryptocurrency's price move was nothing less than stellar.

However, just as Bitcoin gained 6x its value by payment processing integration, it was busted by Elon Musk.

The combined FUD (fear, doubt, uncertainty) of his removal of Bitcoin and China's traditional crypto ban caused Bitcoin to tumble by over 40%. This was an important moment for the crypto space.

Elon Musk succumbed to the pressure to portray Bitcoin as eco-dirty due to its energy usage required by the PoW consensus.

One could say that diversification of the blockchain space began there. Up to that point, Ethereum was following behind Bitcoin as a generalist blockchain capable of recreating banking functions thanks to smart contracts.

This unique feature, as a herald of Finance 2.0, made Ethereum as popular as Bitcoin. In fact, YTD (year-to-date), Ethereum has outperformed Bitcoin by over threefold.

Image credit: TradingView.com

Effectively, Ethereum created an infrastructure for decentralized finance, hosting yield farming protocols in the form of decentralized exchanges (DEXes), lending, and borrowing. The total gross value within the smart contract ecosystem has exceeded $100 billion.

Image credit: The Block, source: DeBank

However, although Ethereum pushed the envelope regarding the diversity and number of smart contracts (DApps), it still struggles to transition from Proof-of-Work to Proof-of-Stake consensus.

As a result, its ETH gas fees are exorbitant and off-putting. In turn, this opened a pathway for fully deployed alternative smart contract platforms: Solana (SOL), Avalanche (AVAX), Binance Smart Chain (BSC), Polkadot (DOT), and Cardano (ADA).

All have negligible transaction fees and fast speeds, the best of both worlds as Proof-of-Stake blockchains that use validators instead of energy-hungry PoW miners. Correspondingly, except for ADA, they have all outperformed ETH in the last three months.

Image credit: TradingView.com

With that said, the network effect is still giving Ethereum powerful tailwinds. It has the most developers and DApps.

More so, it enabled a boom of non-fungible tokens (NFTs), which have become a market of their own. OpenSea NFT marketplace alone, hosted on Ethereum blockchain, dominates the space with an impressive 97% market share.

NFTs were the biggest surprise of 2020/21. Coupled with blockchain gaming, they have created an entirely new asset class. Although speculative in nature, they too can be harnessed for play-to-earn (P2E) profits.

This was best exemplified by Axie Infinity, both an NFT marketplace in which players buy Axies as NFTs, and as a tactical, ability-based game in which players engage their NFTs as Axies.

This novel way of fusing blockchain and gaming has made Axie Infinity appear in the Bank of America's list of the most successful NFT projects.

This brings us to the conclusion of the trends overview part. The blockchain space is diversifying across three broad categories:

• Hard digital asset class, often viewed as a hedge against inflation, represented by Bitcoin (BTC).

• Smart contract platforms, almost all running on 2nd gen proof-of-stake blockchains, with Ethereum planning to become one as well.

• NFTs, employed as either passive digital collectibles, or harnessed within complex systems such as blockchain games.

  
  

However, although Bitcoin is 1st gen blockchain, this in no way means that it will lag behind.

What's Coming Next for Bitcoin On-Ramp?

The pseudonymous creator of Bitcoin envisioned the cryptocurrency as an unhackable peer-to-peer payment system.

While Bitcoin's blockchain can serve that purpose, other PoW blockchains do it better. Case in point, Bitcoin Cash (BCH) has a 32 MB block size, enabling swift and low-fee transactions compared to BTC.

Fortunately, Bitcoin's scalability issue is not as serious as one would think, all thanks to the Lightning Network. This Layer 2 scalability solution has made huge gains for the past year, exponentially increasing the number of nodes and channels available to offload Bitcoin’s core traffic.

In turn, the Bitcoin network is evolving to one with effectively limitless capacity moving forward. Accordingly, this makes a drastic difference in lowering Bitcoin's transaction fees and upping its speed.

Furthermore, Bitcoin's Taproot upgrade is underway, the most significant one since the last SegWit upgrade in 2017. Taproot has achieved a unanimous consensus among Bitcoin miners and is poised to expand Bitcoin's efficiency and security in terms of privacy.

On the back of Lightning Network, we can expect to see a number of crypto gateways emerging as they interface with CeFi hybrid platforms such as BlockFi.

While Taproot and similar upgrades offer increased security directly on the Bitcoin blockchain, there are other innovations that generate increased security for all Web 3.0 internet users in a more general sense.

Deeper Network allows users to securely connect to Wireless networks on the fly. The Web 3.0 company does this through the launch of the ‘Deeper Connect Pico’, a device the size of a lighter that offers enterprise-level security and easy configuration. Deeper Network is also the first blockchain company to access the Helium Network, offering the first dual crypto-miner in the world through the Deeper Network HNT miner.

This integration is quite profound, as Helium is an IoT (internet of things) focused network, and nowhere is security more relevant than in a world of trillions of interacting ‘things’.

Next Trends to Look out for

The success of alternative smart contract platforms, such as Solana and Avalanche, shows there is a great demand for smart contracts without the enormous ETH gas fees. Although these alternatives are impressive, a new crypto kid is emerging on the block — Radix (DLT).

Built from the ground up to service decentralized finance (DeFi), Radix has gone the furthest to solve the blockchain trilemma. This issue refers to the necessary compromise made between scalability, security, and decentralization. Going by Radix's whitepaper and impressive talent pool, it looks like this trilemma may become invalid.

Radix's momentum is already reflected by the rise of its native crypto, DLT, or ERDX (wrapped DLT as ERC-20 token, equal in value).

Next, the largest players are following in the footsteps of Axie Infinity. Seeing the new market coming from NFTs and blockchain gaming, both Coinbase and Facebook have entered the NFT game.

The social media juggernaut has even changed its name into Meta to fit the new ecosystem of virtual merch in the form of NFTs. On the other hand, Coinbase seeks to dethrone OpenSea as the largest NFT marketplace.

Likewise, TikTok, with its over one billion users, has also entered the NFT game, serviced by Layer 2 solution Immutable X. Simultaneously, the largest gaming retail chain, GameStop, has allegedly partnered with Loopring (LRC), another Layer 2 protocol, to develop an NFT platform for GameStop.

With so many market positionings, gaming tokens will likely outperform many digital assets, including Bitcoin and Ethereum. Some of them are Axie Infinity (AXS), as the current king, The Sandbox (SAND), Enjin Coin (ENJ), Decentraland (MANA), and Illuvium (ILV).

Early Adopters Still Poised for Potential Massive Profits

Many have missed the boat on Bitcoin and Ethereum. They now may yield 2x–3x profits within the next year, but it is not yet too late to join other emerging markets. Alternatives to Ethereum are paving the path to a more affordable and faster smart contract experience. Moreover, there may not be games in the future without being tokenized in some way.

After all, if one has to choose to spend their time in a virtual space, which would it be? A traditional game in which assets can't be sold for fiat money, or a blockchain game?

Because of this revolutionary incentive structure, blockchain gaming + NFTs are the most likely to gain huge traction in 2022. As a cherry on the top, they are then likely to provide ramps to a more traditional blockchain world — Bitcoin.

Vested Interest Disclaimer: The author holds tokens in one of the above-mentioned companies. The opinions in this article belong to the author alone and should not be considered investment advice.