Due to the constant availability of markets and the daily influx of elite talent, web3 and Defi are significantly growing. We have seen the emergence of L2s in addition to L1s, such as Terra, an institutional response to investment fraud, and heated debates about the advantages and disadvantages of decentralized governance. Keeping up with all that is occurring may be a very exhausting endeavour. Let me introduce you to some of the essential Defi Trends that will arise in 2022.

L2S LIFT-OFF

In recent months, Ethereum users have fled L1 gas pricing and the emergence of more practical protocols, leading to the acceptance of layer two solutions within the Ethereum community.

There are three major L2s you must be conversant with:

1.) OPTIMISM

This knowledge is crucial for Defi. Last year, it was the first Ethereum rollup to announce themain net release. Thus it naturally received a great deal of media attention.

They are devoted to offering speedy and inexpensive transactions. This L2 claims to have saved customers over one billion dollars in transaction fees since the launch of its main net.

“by the community for the community” is their crucial slogan, which they utilize often. In line with the spirit of web3, the protocol is developed in open-source code. Due to this, it attracts some of the most prominent apps in Defi.

2.) ARBITRUM

Off-chain Labs has tweaked a part of Optimism’s open-source code and made it their own.

It depends on the security that Ethereum can provide. They can achieve a greater transaction capacity because they have decreased the quantity of L1 execution required. Despite this, they utilize a multi-stage, third-party fraud prevention system. Excellent for use in applications using Defi.

3.) POLYGON

It functions similarly to a sidechain to Ethereum. It is composed of several blockchains that may readily connect. They like Ethereum’s network effects, as well as its strength and security.

While other blockchains, such as Avalanche and Polkadot, have introduced multi-chain solutions, only Polygon can use the Ethereum network’s underlying design.

THE REVIVIFICATION OF THE TERRA NETWORK

The decentralized cryptocurrency Terra has garnered Terraform Lab’s significant attention during the last several months. The network acts as a decentralized, user-shared electronic cash system. This is achieved by deploying a system of stable currencies, including UST, powered by the native token, Luna.

The broad adoption of the UST stablecoin, which is now recognized as one of the greatest stablecoins, is the key driver of the price action of Luna, which will climb from $0.66 to $89.90 in 2021.

Ethereum’s departure from the proof-of-work protocol has proved challenging. The Terra network proved to be a powerful adversary. This blockchain’s consensus process is based on proof of stake. As a direct result of this, its native token receives remarkable benefits.

I know that the most brilliant Defi game creators are hopeful about Terra (this is not investment advice ;)).

INSTITUTIONAL RESPONSE TO FRAUDULENT ACTIVITY

We are all aware that fraud is too common in organizations experiencing fast development, which has led to pressure from inside and beyond the community to hold bad actors accountable and prevent other fraudulent behaviour. Despite warnings from several organizations about the hazards presented by web3, blockchain technology makes it more difficult to commit fraud. Each transaction is public and accessible at any time.

Twitter amateur sleuths are shedding light on the shadowy history of prominent project leaders. They are progressively exposing many scam artists, including 0xsifu from Alice in Wonderland. However, peer pressure may not be sufficient to prevent unethical individuals from abusing the circumstance.

The Vice President of the United States, Joe Biden, has proposed an executive order concerning the proper expansion of digital assets. The on-chain technology community reacted positively to the measure, indicating Washington state’s growing interest in the area and legitimizing the technology instead of implementing strict limitations.

Decentralization refers to the dispersal of power or governance duties among various parties. It is often a remedy for the issue of corrupt centralized control. Unrivalled in terms of its resistance to extraneous influences.

Without a central database, decentralized networks are harder to compromise. They also do not need authorization. There is no place for new members or exclusions inside a close-knit group of significant stakeholders.

Also, read – Top 10 Crypto Trading Signal Providers For Crypto Investors

What are the downsides of decentralized blockchain technology? Dependence on consensus paired with a lack of support

Centralized technology is preferable in terms of governance and decision-making when compared to totally decentralized technology. Coinbase charges fees in return for a user-friendly interface, helpful customer service (lol), and some confidence that your cash will be secure (though tenuous).

One advantage of centralized commodities and marketplaces is the capacity to make judgments more quickly.

Most web3 tools and protocols operate along the spectrum of (de)centralization, which limits their susceptibility. This is an excellent development for the creative process. Nevertheless, humans are more susceptible to mistakes and modification than computer code. As more and more members of the general public use cryptocurrencies, the topic of whether centralized or decentralized systems are superior will only get more heated.