After the year 2021, a new era in cryptocurrency emerged, shifting the conversation from financial decentralization to the tokenization of everything. This shift has led to three key theses for the upcoming bull market. To fully understand these theses, it is important to recognize that everything can be seen as data. Money, brand engagement, credentials, and even tickets to events all hold valuable data.
Since 2021, a significant amount of this data has been stored using fungible tokens, nonfungible tokens (NFTs), and timestamps on the blockchain, which serves as a data repository. While not all data needs to be stored on the blockchain, its ability to transform how we store, share, and utilize data for secure and automated transactions is revolutionary.
This trend of tokenizing everything is now extending to Bitcoin, giving rise to the first thesis. The Ordinals protocol, released by Casey Rodamor in January 2023, allows for the permanent insertion of any file type into the Bitcoin blockchain. In less than a year, the community has experimented with storing music, artwork, journalistic articles, and video games on the blockchain. While the Ordinals protocol is not the first to enable this, it has gained significant traction and shows no signs of fading away.
Bitcoin is now seen as a canvas for creating other projects and applications, sparking a cultural movement among builders. However, it is important to note that not everything needs to be stored entirely on the blockchain, as it can be expensive and inefficient for certain applications. Protocols like Taproot Assets, which enable the creation of other assets on the Bitcoin network while keeping most of the information off-chain, will be crucial.
In terms of storage costs on layer-1 blockchains, layer-2 blockchains are expected to shine. During the 2021 bull market, high transaction fees on Ethereum were common, making blockchain transactions expensive and slow. Layer-2 blockchains, designed to scale layer-1 blockchains, will play a crucial role in making blockchain technology more accessible to the mainstream. While layer-2 blockchains have been around for years, they were not mature enough in the previous cycle. Now, with lessons learned and a more mature building mentality, layer-2 solutions are poised to make blockchain transactions faster, cheaper, and more inconspicuous.
Abstraction solutions will play a key role in attracting users and traditional companies to Web3. While decentralization is important for certain aspects like Bitcoin custody, it is not always necessary for tokenized tickets or loyalty credentials. Simplifying the user experience by abstracting complex processes, such as creating semi-custodial wallets or eliminating concerns about gas fees, will make Web3 more accessible to a wider audience. These abstraction solutions will also enable traditional companies to join Web3 without requiring a team of developers skilled in blockchain languages.
Overall, the tokenization of everything and the advancements in layer-2 solutions and abstraction solutions will propel Web3 into its penultimate phase. Improved infrastructure, fewer technical barriers, and increased mainstream attention will lead to a proliferation of applications, projects, and use cases. Major blockchains like Ethereum and Bitcoin will be seen as platforms for multi-asset consensus rather than solely currencies. The quest for scalability will make blockchain layers more invisible and less complex, further integrating them into everyday life.
Lugui Tillier is the chief commercial officer of Lumx Studios, a Web3 studio that has worked with major companies like Coca-Cola, AB InBev, Nestlé, and Meta. The author holds investments related to the Ordinals Protocol. This article provides general information and does not constitute legal or investment advice. The views expressed are solely those of the author and do not necessarily represent the views of Cointelegraph.