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Coinbase Anticipates Significant Rise in Emergent Layer 1 Blockchains and Establishment of Regulated DeFi in Mainstream Finance

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Cryptocurrency exchange Coinbase is witnessing a growing focus on Ethereum competitors, the institutionalization of decentralized finance (DeFi), and non-fungible tokens (NFT).

This week, Surojit Chatterjee, Chief Product Officer at Coinbase, released some predictions for 2022. It noted that while it expects improvements in Eth scalability, with crypto becoming more mainstream, scalability changes for ETH are likely to increase further.

“I am optimistic about improvements in Eth scalability with the emergence of Eth2 and many L2 rollups,” said Chatterjee. He also foresees the rise of new L1s alongside current competitors like Solana and Avalanche. This, in turn, will lead to improvements in the speed and usability of cross-L1 and L1-L2 bridges.

19. Eth like btc will suffer the same law of large numbers problems and while good investments most likely will be harder to attract riskier and more abundant capital flows imo

— CMSMS (@cmsholdings) December 31, 2021

Coinbase predicts that zero-knowledge proof (ZKP) technology will gain increased traction from both users and investors. This has already been observed with Polygon and Starknet. Consequently, new privacy-centric use cases will emerge, bringing more regulatory attention to crypto as KYC/AML could pose a real challenge in privacy-centric networks.

In the realm of DeFi, Coinbase envisions these protocols embracing regulation, having separate KYC user pools and insurance. The growth of regulated DeFi will lead to institutions playing a much more significant role in this sector, as they are attracted to much higher interest-based returns compared to traditional financial products.

17. On DeFi in general we are going to as a community mess with all the tokenomics and revolutionize the sector, it’s clear as day.

— CMSMS (@cmsholdings) December 31, 2021

Regarding NFTs, Chatterjee believes they will continue to expand and become the next evolution of users’ digital identity in the metaverse. “We’ll see creator tokens or fan tokens take more of a first-class seat,” he added.

These user-created metaverses will become the future of social networks and pose a threat to today’s advertising-driven centralized versions of social networks.

In addition to users, brands will also venture into NFTs for marketing and establishing loyalty. Already this year, tech giant Facebook (now Meta) has rebranded itself as a Web3 company, and Coinbase expects other major Web2 companies to join the Web3 and metaverse, but they will be centralized and closed networks.

7/ Crypto fixes this. If Web2 was communism driven by dictatorial regimes of advertising regimes, Web3 introduces capitalism to the internet.

NFTs and fungible tokens are early examples of this – the former allows accumulation of unique items, the latter represents public goods

— Do Kwon (@stablekwon) December 30, 2021

According to Chatterjee, the latest trend of decentralized autonomous organizations (DAOs) will also become more mature and mainstream. However, as more people join DAOs, DAO 2.0 will take its place.

The post Coinbase Predicts Substantial Growth of Newer L1 Chains & Institutionalization of Regulated DeFi first appeared on BitcoinExchangeGuide.

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