Since Ethereum launched officially in 2016, thousands of developers around the world have been working on new blockchains and new types of organizations. This module groups the projects into the major sectors that are foundational and conceptual differences. We have divided “sectors” into those driven primarily by the form of organization, and those that are part of emerging types of utility and functionality that may combine one or more of these forms.
A. Forms of organization
- Layer 1 Blockchains – There are hundreds of blockchains today, all attempting to solve a problem, which offer different native coins which also serve typically as a gateway token that pays transaction costs, but which investors often tie to the success of the organization. All of the altcoin blockchains are still primarily compared to Ethereum for problem-solved, the strength of team projects and as an investment. Buyer beware: Keep in mind that unlike stocks, coins do not directly imply ownership; founders can expand supply in the future which may devalue holdings or issue new and different tokens, and may control the supply and sell-offs for the purposes of personal wealth creation. Here are a few of the most well-known of blockchains that appear in the top 25 coins on most market tracking charts. Bitcoin is left out, but taken alone is responsible for about 40% of the valuation of all crypto exchanged worldwide.
- Ethereum. Founded by Vitalek Buterin in 2014 and launched in 2016. According to Electric Capital Ethereum had by far the largest ecosystem of 4,000 monthly open-source developers as of January 2022, out of about 31,000 in the entire open source ecosystem on all blockchains that year, and is still the most expensive coin after Bitcoin.
- Avalanche. Founded by AvaLabs in 2018, Avalanche markets itself as having the fastest layer one transactions. Using a multi-chain design it. processes 65,000 transactions a second, competing with Solana. The speed advantage has been less important since ETH2 launched. It has $11 billion locked in May 2022, and traded at about $3.85 December.
- Cardano. Founded by Ethereum co-founder Charles Hoskinson, and dubbed “the Ethereum kill” since it was the first to use Proof of Stake, but now looked like one of the grandaddies in the industry. It has just 250+ developers in 2022. With 3.5 million holders, it fell 80% in 2022 to .24 in December. However it boasts that 34.1 billion of a limited supply of 45 billion ADA tokens have already been sold. 1,000 projects are built on top of the chain, the largest of which mostly swapping and DeFi.
- Hyperledger. An umbrella project of blockchains and tools, founded by the Linux Foundation with contributions from IBM, IBM Blockchain, Intel, Samsung, Microsoft, Visa, American Express, and blockchain startups such as Blockforce in 2016. In all, the collaboration includes banking, supply chain management, the internet of things (IoT), and manufacturing and production-based fields. Unlike Ethereum, it is not truly open-source, as the network is restricted to predefined participants.
- NEAR. A blockchain whose stated purpose is to build for Web 3. It claims to save users” from cryptic addresses, constant confirmation requests, etc.” and to allow developers to code in Web2 languages such as JAVA and Rust. It . It claims unverified 400 developers in 2022 (other research put them at 250+)with 750 projects and 125 DAOS>
- Polkadot. With a community of 1,500 developers in 2022, it is one of the most actively developed in the ecosystem. Polkadot’s innovation is to allow diverse blockchains to transfer value and messages, in an attempt to solve interoperability issues between blockchains. With 1,000 transactions per second, it is not in the same speed league as Solana, however, which is at 65,000.
- Ripple. Ripple, formed in part to facilitate enterprise-level international transactions. It runs on RippleNet, a “decentralized network of financial institutions that use Ripple’s API and blockchain to clear and settle transactions, according to Nasdaq News and Insights, not the typical proponent of a cryptocurrency. Ripple calls itself a “utility” and like Cardano, has a finite number of coins. However, the SEC has filed a lawsuit against Ripple Labs, the developer of the network, claiming it’s XRP token ICO was an illegal securities trade. Although Ethereum and Bitcoin were referred to as Non-securities by the head of the SEC in a 2018 speech, the verdict is out, and analysts say that in spite of the utility claim, there is more correlation to hype than utility value. However, if Ripple wins, its technology enables cross-platform and cross-blockchain payments, and the PayID feature, for instance, allows users to send currency across platforms through an easy-to-read yet secure ID that, works with any service provider may be a game changer. Moneygram has also piloted XRP for transborder transactions.
- Solana. One of the fastest blockchains, with the least expensive transactions, Solana can process 65,000 transactions per second. This advantage helped it create the second-largest NFT marketplace, SolSea, behind Ethereum’s much larger OpenSea. It had 1,000 developers building on its platform monthly in January 2022.
2. NFTs
NFTs, or non-fungible tokens. Non-fungible means unique, one-of-a-kind assets such as a house, rather than a commodity, like oil. The origin of NFTs began in the art market, where an easily copied digital image could now be authenticated as the original with its sale time-stamped on the blockchain. Anyone can still copy the digital art – or music – but the authenticity and change of ownership now had a permanent record.
The use of NFTs has evolved over the years. Fine art was put on the financial map by Beeple, whose “1000 days” series of images was sold as a collection by Sotheby’s for $69 million in 2021, elevating the entire graphic arts industry, tainted by a commercial ‘work for hire’ history, with the promise of participation in a new, personally expressive marketplace for digitized art.
Digital collectibles soon followed, with collections of slightly altered “one of a kind” collectibles such as Bored Apes and Top Shots, a collaboration with the NBA that adapted the business model of baseball cards.
Then music, where DAPPs like Audius promised to disrupt Spotify by allowing any musician with a following to cut-out-the-middle man and sell its audio files directly to fans.
Soon, animated characters and fashion statements that could be used in games, or air-dropped when points were scored, added a cool and “in the know” factor for gamers to earn, or buy and participate. The metaverse added options for real estate in virtual cities.
Then NFTs for use value emerged. Memberships, loyalty programs, clubs, tickets, and private invitations could be accessed with an NFT purchase. Some began to add NFT to authenticate or include physical objects. Sometimes a T-shirt will come with the NFT, sometimes a high-end car, and sometimes a party if the threshold price for the purchase is met (see the NFT class for all these examples).
Today Opensea still is the largest marketplace for NFTs, followed by SolSea, though by a considerable distance, and there are a number of pricing models that create scarcity relative to the community, and even one, an “open edition” in which buyers all receive the same digital asset, limited by time, say 3 days. NFTs sales can be by auction or fixed price. They can include personal use only, which is the typical default, or a variety of use licenses up to copyright,
3. DAOs
DAO is a form of organization that assumes either some form of rules around voting rights and/or distributed payments. The voting, however, could be created as an informational poll or limited to issues inconsequential to the company. But it also could incorporate rules for proposing important votes, the quorum required to execute, and the percentage required to pass, that govern an organization with minimal administrative infrastructure.
Two of the largest and most successful DAO are the swapping as well as lending and borrowing, platforms, Uniswap and Sushiswap. Because the DeFi rules, such as the amount of collateralization of loans and the automatic capture of collateral if payments are in default, are predetermined, there is not a secret team in the background investing customers’ money as was the case with the now-bankrupt protocols such as Celsius and Voyager. Uniswap has been thoroughly studied as an investment in Unis is required to propose a vote and to vote, to see if a hostile takeover by a competitor could change its rules, but so far the design of its DAO on both the lending/borrowing has held up.
Many founders ultimately find that the complexity of operating a treasury and the inability of democracy to provide nimble leadership is too cumbersome and have opted for other structures.
B. Industry sectors
Whichever form of organization is selected, there are a variety of new and/or disruptive industry sectors that are evolving. Here is a short list of the most active ones:
- Defi. In spite of the spectacular meltdowns of Defi companies in 2022 including Celsius, Vogager, Blockfi, and FTX, lending and borrowing using blockchain technology has been incredibly successful when utilizing other types of decentralized and more transparent transactions and is still one of the largest sectors in turns of volume, as mentioned above.
- TIPIN, or Token Incentivized Physical Networks. Instead of mining coins by validating puzzles or staking coins, TIPIN allows users to be rewarded with tokens for using a physical object to provide data that is typically gathered by only private companies. The earliest example of this model is Helium, which open-sourced its software protocol to hardware providers. Anyone could buy a tiny box that was a preprogrammed computer using this software, and hook it up to their wifi with a mobile phone. The distribution was optimized by gamification (you earned more by putting the device in a “sweet spot” needed to fill gaps in the network. The resulting loran Wifi network was intended to be sold to the providers of the internet of these. ings, for a retail customer of people walking their dogs, for example. The network failed to obtain enough customers, but by then a host of other entrepreneurs were on their way to market. Today you can buy a DIMO to earn tokens from tracking car movement data or a device that records video which may compete in the future with Google maps.
- Data Unions. Similar to TIPIN, data unions allow individuals to monetize the data that is currently resold by Google, Facebook, and other data collectors. One of the first of these, Streamr, allows creators to build any kind of data collection organization on their platform, and distribute the tokenized incentives to participants on a preset basis. This could include, for example, general internet browsing data currently resold by Google for retargeting purposes. Go to Streamr’s marketplace to see all of the projects – there are about 100 or them – the good, the bad and the ugly. Theoretically, those contributing data could also participate in the governance of these unions.
- Web3 in general. Web3 does not always mean monetizing data, it could be disruptive of Doordash, Uber, Airbnb, Upwork, or any centralized company that is taking a lion’s share of the revenue compared to what a more distributed and democratized model might be able to provide. Many Uber drivers also drive for Lyft, and may eventually drive for AllyNow, a new organization that allows both the driver and the business that needs to deliver goods to keep more of the revenue, using the blockchain-primarily to distribute payments.
- Facilitation of international transactions. There is a growing market for stablecoins tied to the dollar, for use in international payments. With countries experiencing high inflation rates and unreliable financial services, 0organizations that facilitate stable transactions without the involvement, fees, and wait times involved with currency exchanges and banks, have a clear advantage. A (very) few international banks have even started to provide these services, although most require a third party that collects a third-party fee. Blockchain start-up Ripple had a good idea by working directly with international financial companies, before its legal issues with the SEC over its native coin.
- Retail and peer-to-peer use of crypto for goods and services. This is an area that is much more regulated by many countries than crypto trading per se, fearing an erosion of the use of a declining national currency. Still, more Dapps and Apps are incorporating some aspects. CashApp now facilitates payment in Bitcoin. BlockSpaces integrates Bitcoin payments even to small businesses via the Lightning Network into QuickBooks. Bitcoin ATMs, which deliver a fee that can be split between the SMB and the provider, are crisscrossing the country.
- Investment pools. A rich vein of opportunity lies in the area of investment pools. Once the SEC hurdles have been passed, any high-end real estate property or group of properties; yacht or high-end valuable such as the recent bid on the last copy of the U.S. Constitution, can be tokenized in a way that makes the investments affordable and liquid. The alternative in real estate is often a private investment pool, which is not liquid, or a REIT which is basically a public company. The infrastructure and cost for tokenization are much less than an IPO, and the control via a DAO or other mechanism, much closer to the investors. Unlike a private offering, the rules can be predetermined, and sales of smaller pieces are offered on the open market. Similarly, investment in, say, medical research companies, can be facilitated. VitaDAO is one such project. Members can vote on projects invested-in, in and participate in future asset development based on preset rules. The SEC explicitly does not regulate investment clubs that make decisions together and have fewer than 100 members.