OKX Ventures 2021 investment recap: covering 6 hot tracks, helping 90% of the top projects ecosystem construction

2021 is a year of rapid development of the crypto ecosystem and a historic breakthrough: Affected by the macroeconomic environment, Bitcoin hit a record high of $69,000. Driven by institutional funds and market sentiment, the total market value of the crypto market also exceeded the 3-trillion-dollar mark; the diversified on-chain activities led by GameFi are prospering, and the data on-chain such as TVL is steadily rising; Ethereum starts from the London upgrade and moves towards the grandeur of ETH2.0 (also known as the consensus layer). Going forward, the Layer 2 sector has emerged, and many emerging public chains have risen rapidly.

OKX Ventures has long been committed to promoting the prosperity of the Crypto ecosystem. With an aim to accelerate the development of high-quality projects, OKX Ventures has invested in hundreds of projects, covering core tracks such as NFT, GameFi, DeFi, Layer2, and Web3.0, and participated in over 90% of the projects’ ecosystem building. Meanwhile, OKX Ventures has joined forces with popular public chains such as Solana, NEAR, Polygon, and Avax to establish ecosystem funds to support projects built on these chains.

We will review the development process of 2021’s market together below, and share our prediction on future trends, and give examples of some projects that OKX Ventures has laid out under different trends.

DeFi remains hot

In 2021, the DeFi ecosystem continued the rapid trend of the previous year’s “DeFi Summer”. According to The Block‘s data, the total value locked in the protocol (TVL) soared from $16.1 billion to $101.4 billion, and user data also hit a new high. At the same time, a large number of high-quality native on-chain projects have also emerged in the market, and the total lock-up (TVL) of DeFi protocols has reached 247.12 billion US dollars.

High-quality DeFi projects continue to emerge, more diverse Dapp applications, more mature economic models, and more friendly interactive experiences are sufficient to meet users’ increasingly diverse needs for on-chain activities. In this field, OKX Ventures has invested in highly potential DeFi projects such as Acala, Deversifi, Swivel, Persistence, and SSV.

The prosperity of Layer2 & public chains

As the leader of the Dapp ecosystem, Ethereum has maintained its leading position in terms of capital accumulation and financial innovation in the past year, and the market value and the number of Dapps have both broken new highs. With the continuous transformation of ETH2.0, the prospects are promising.

This year, the ecosystem on the chain has exploded rapidly, and the number of users has grown exponentially. However, at the same time, the congestion of the main chain of the Ethereum network, high gas fees, etc. have not been resolved, and performance problems have always been an objective problem that hinders user participation and restricts ecological development. The restless market capital is looking for more profit space, developers are pursuing a more open and inclusive development environment, and users are also looking forward to a better trading experience. Therefore, the Layer 2 expansion plan and the new public chain have become new hotspots in 2021.

Layer 2 is a general term for a series of off-chain scalability solutions. This kind of expansion does not affect the public chain itself, and can achieve scalability improvements through other means, that is, off-chain improvements. Such solutions include state channels, sidechains and Plasma, Rollup, etc. In addition, the expansion of Layer 2 is not an intermediate compromise, but a long-term solution. After the successful launch of Ethereum 2.0, the expansion mechanism of Layer 2 can still coexist with the shard expansion of Ethereum 2.0.

Therefore, OKX Ventures has focused on expansion projects, investing in projects dedicated to expansion solutions such as Arbitrum, zkSync 2.0, Connext, Aurora, and Metis.

Take Arbitrum, the largest Layer 2 project on the ETH network as an example: its total locked value is as high as 280 million US dollars, accounting for 51.74% of the L2 market share, and it is far ahead in terms of TVL. Arbitrum helps build sustainable infrastructure by reducing costs and increasing efficiency to efficiently and securely power higher throughput DApps.

The zkSync built by Matter Labs also performed well:

So far, zksync’s TVL has reached $58.51 million. This data is expected to grow further as zkSync continues to improve in functionality and more and more users begin to migrate to zkRollups for a better trading experience.

Data source: https://l2beat.com/projects/zksync/

In addition to the sudden emergence of Layer 2, the overflow of the ecological resources of Ethereum has also given a number of emerging public chains the opportunity to rapidly rise by building a Dapp ecosystem. This year, the emerging public chain has attracted a large number of developers and users by improving performance, reducing transaction costs and thresholds, and the era of multi-chain coexistence and common prosperity has officially begun.

According to the proportion of TVL, the top six public chains in the past year are Ethereum, Fantom, Terra, Binance, Avalanche, and Solana.

Although Ethereum’s DeFi protocol is still the most active, innovative DeFi applications on other public chains also have great development potential and room for imagination. OKX Ventures also strongly supports and invests funds in conjunction with the public chain ecological fund.

Metaverse key factors: The Complementarity of NFT and GameFi

2021 is known as the first year of the Metaverse. On the one hand, it is inseparable from the substantial progress of VR, 5G and other technologies, the increasing demand for people’s digital activities in the epidemic environment, and the “All In” layout of technology giants such as Facebook. On the other hand, it is due to the rapid development of NFT and GameFi, the two basic modules of the Metaverse. NFT solves the problem of confirming the rights of the metaverse world, and GameFi provides more reference for the economic model of the metaverse.

GameFi refers to presenting decentralized financial products in the form of games, gamifying the rules of DeFi, and transforming game prop derivatives into NFT. One of the most notable features is that the user’s assets become the equipment or tools in the DeFi game, and the user can obtain income or rewards in the process of participating in the game.

With the popularity of Axie Infinity, a new economic model of Play-To-Earn was born. At present, most GameFi games mainly include role-playing, virtual space, developing combat, and multi-player construction. Compared with the previous liquidity mining model, the GameFi project is more interactive, experiential and immersive with users, and also more interesting. For example, many games will use NFT pets for breeding. , Use NFT equipment to improve skills, pledge NFT to gain income, or introduce PK battle mode, participate in battles, complete tasks, and allow users to make money while playing games. The rise of GameFi has not only allowed people to see the progress of on-chain finance and the possibility of innovation in social production relations, but also the embryonic form of the metaverse economy.

OKX Ventures is more optimistic about the long-term development of the GameFi track, and will focus on this field in early 2021. Dora, the founder of OKX Ventures, believes that Gamefi can be simply understood as NFT+DeFi, but it focuses more on DeFi. On the one hand, Gamefi integrates DeFi into the game, that is, the gamification of DeFi, which makes the game more interesting, thereby promoting the development of the Game ecosystem; on the other hand, Gamefi provides players with more ways to enter, get more income. GameFi is the concept of “gamified finance” under the fusion of DeFi and NFT, which presents financial products in the form of games and gamifies the rules of DeFi. Gamefi is an inevitable result of the development of DeFi and NFT. Its value lies in enabling participants to enjoy the fun of games while also getting real benefits from them. Compared with the “Deposit to Play” of traditional games, Gamefi is “Play to Earn”. The former is to spend money to recharge and then play the game, while the latter is to make money while playing the game. The difference this brings can be described as revolutionary.

Therefore, OKX Ventures has focused on the upstream and downstream industries of Gamefi, investing in high-quality GameFi projects including Big Time Studios, Relay, Dehorize, Godsunchained, Chain Guardian.

In 2021, the total number of gamers in the world will approach the 3 billion mark, a 5.3% year-on-year increase compared to 2020, indicating that the strong growth momentum of the game industry is not only leading to continuous growth in the number of players, but also an even greater rise. space. Although there is still a huge gap between the combination of games and blockchain and the number of users in the traditional game field, the speed of data growth is also called rapid. DappRadar data shows that 1,334 game Dapps have been deployed online. Since July 2021, the data of chain games has grown rapidly. The number of players has increased from 80,000 in early April to 1.248 million in December, and the daily transaction volume has increased from about $500,000 in early April to an average of about $200 million. level, with the highest daily trading volume exceeding $850 million.

With the double rapid growth of blockchain game projects and the number of players, two subdivision tracks have emerged:

First of all, the characteristics of blockchain games are destined to be very frequent on-chain interactions. High gas fees and on-chain congestion are unbearable pain points for both players and developers, and people have begun to pursue infrastructure platforms with better performance. Public chains with a more friendly interactive experience and development environment have begun to gain favor, and some new game platforms have emerged as the times require. For example, WAX has become one of the most popular blockchains for chain games.

Secondly, the total financing scale of the GameFi sector in 2021 is close to $4 billion. In addition to traditional institutions and companies launching special funds to support the development of the GameFi ecosystem, many game guilds that are essentially DAOs have also begun to become new financing channels, and have devoted themselves to the construction of the GameFi ecosystem. Today, game guilds such as Yield Guild Games have become an integral part of the GameFi ecosystem.

In terms of game guilds and platforms, OKX Ventures has invested in high-quality projects such as YGG SEA, Blockchain space, Infinity Force, Lootex, Gamee, and kollect;

GameFi has given NFT more practical value through gamification settings. The NFT items in it are no longer just commodities to be sold on the NFT trading platform, but can also be directly traded on the market in the game, and the entire transaction The process is simpler than traditional games. These factors directly led to the outbreak of the entire game NFT track in 2021.

As one of the two basic modules of the Metaverse, NFT, in addition to acting as a tool or equipment in blockchain games, has also achieved impressive results in works of art, collectibles, avatars, film and television music, etc. In 2021, there will be phenomenal products such as CryptoPunks, BAYC, and Loot with huge influence and significant wealth-making effect in the NFT market. The auction prices of NFT artworks have repeatedly hit new highs, and they have been out of the circle at a terrifying speed. Leading companies in various fields such as Disney, Porsche, Coca-Cola, and Burberry have deployed; Curry, O’Neal, Shawn Yue, JJ Lin, Jay Chou, Wilber Pan and other celebrities have also set foot in the NFT field one after another and made public voices for them. According to data from Footprint Analytics, the cumulative transaction volume of NFTs by 2021 is $21.5 billion, and before 2021, the cumulative transaction volume is only $120 million, and the cumulative transaction volume has skyrocketed 200 times in one year. In the context of the increasingly popular metaverse, NFT is also known as the key to the metaverse world.

NFT infrastructure and platforms are also the focus areas of OKX Ventures. Well-known projects such as waxp, efinity, metadojo, Bit.Country, and AlchemyNFT have all received funding and traffic support.

Web3.0, the critical period of Internet transformation

It can be simply considered: Web1.0 is a read-only network, Web2.0 is a read-write network, and Web3.0 promises to provide an unmediated read-write network, that is, a decentralized Internet. Web3.0 is more ambitious than Web2.0, because Web2 is companies trying to get value from people, and Web3 is community creating value for people.

Over the past decade or so, the Internet-based Web 2.0 has tended to be centralized. For example, Google provides the fastest and most convenient search service, gaining 74% of search traffic control. Facebook built the largest social network, gaining control over the online identities of 2.2 billion people. As more and more Internet companies in a monopoly position have problems such as information privacy leakage, Web 2.0 has fallen into huge doubts. Internet companies that once brought convenience have accumulated excessive power. Under the storage system, it seems that users are just tools for contributing traffic and data.

In a Web3 world, people can control their data through a personalized account, switching from social media to email to shopping, creating a public record of all these activities on the blockchain. Therefore, Web3.0 is more open, trust-free, and permission-free. Blockchain-based social networks, transactions and businesses will grow in the years to come, democratizing the internet, creating a more level playing field, and changing the lives of many.

In terms of Web3.0, OKX Ventures has invested in projects such as Pocket Network, Octopus, and Joystream. It also showed confidence in the development of the next-generation Internet.

Prediction on future market trend

In 2021, many milestone events have occurred in the crypto industry: Bitcoin and Ethereum both broke new highs in price and market value; Coinbase landed on Nasdaq; NFT became a hot word of the year and created an extremely popular out-of-the-circle effect; Tesla has successively Announced support for Bitcoin and Dogecoin payments; the United States passed the first Bitcoin futures ETF; El Salvador announced that Bitcoin will be used as legal tender; the single-day revenue of blockchain game Axie surpassed the glory of the king…

In 2022, the development trends of the crypto industry will be particularly important for investors and institutions.

Trend 1. The accelerated expansion of the metaverse

The term Metaverse has become almost impossible to ignore. The Metaverse is a large network of 3D virtual worlds focused on social links, including physical and virtual worlds and integration with the virtual economy. It can not only use the material information in the universe, but also get rid of various complex laws of nature, and maximize the subjective initiative of human beings. Ideally, the metaverse allows users to carry out any experience or activity, so there are many application scenarios, such as virtual office platforms, virtual shopping malls and video games in the business field, field trips without place and time limit in the education field, real estate field Virtual house tours and more. What is lacking in the real world can be filled by computer means in the virtual world. With the development of computer technology, the application scenarios of the metaverse are still expanding.

If the metaverse was just an imagination that was too far away from reality, then with the successive explosions of basic components, NFTs and GameFi, the accelerated landing of the metaverse is infinitely close to being possible. Facebook’s rebranding to “Meta” seems to be just the beginning of the metaverse becoming a market theme.

Trend 2. Web3.0 undertakes development

Web 3.0 is the identity layer of the Internet. Users can have their own identity online and have absolute control over the degree of information disclosure, without the need to hand over the ownership of personal information because of the monopoly of social media networks. At the same time, Web3.0 based on blockchain technology can also allow users to enjoy the dividends brought by the ecological expansion of the platform without worrying about privacy and security issues. That is, the value generated by the user during the interaction will be attributed to the user rather than the developer. The essence of Web3.0 is the process of returning operational power to users. At that time, various decentralized Internet applications will be managed by users instead of developers.

Currently, there is a lot of controversy about Web 3.0, and even Musk, who is extremely tolerant of the encryption industry, has doubts about its application scenarios and value. But it is undeniable that the traditional Internet has entered an obvious bottleneck. Web 3.0 is the keyword for the transformation of the pattern, and it is also a good medicine to solve the pain points of the current Web 2.0. Although the application of the Web3.0 concept is relatively limited, it mainly focuses on storage, decentralized social networking, payment, domain names and other fields. But I believe that as more and more teams and companies join in the development of Web 3.0, and more composable applications are integrated into Web 3.0, this concept that is still relatively vague currently will surely gain more mainstream attention.

Trend 3. New type of cooperative organization – DAO

The centralized autonomous organization DAO is a digital world organization form based on blockchain technology. It has the characteristics of information transparency, community autonomy, freedom and openness. It can be said that the flat organizational structure of DAO can integrate decentralized individual forces through smart contracts, so that group intelligence can be maximized, thereby avoiding bias and mistakes in central decision-making. At the same time, the structure and characteristics of DAO also give it more advantages in flexibility.

2021 is a year of rapid development for DAO, the ecosystem has begun to take shape (the cumulative number of organizational members and token holders has exceeded 1.3 million), and it has shown unlimited potential as a new type of cooperation. According to statistics, as of January 2022, there are a total of 4,157 DAO organizations in the industry, covering three major directions of investment, application, and governance, covering development tools, services, social networking, creation, collection and other fields.

At present, DAO still has problems such as governance attacks due to loopholes in smart contracts. However, it is believed that with the further development of the DAO modular operating system and the improvement of various services, the DAO ecosystem will go further in terms of interoperability and composability, and thus continue to broaden its boundaries. Major organizations and institutions will also successively participate in this experiment in the paradigm shift of cooperative organizations.

Trend 4. The outbreak of the DEX derivatives track

Derivatives are one of the key elements of any mature financial system. Judging from the development of the traditional financial market, derivatives have been one of the main forces driving the entire financial industry since the 1970s. The volume of derivatives in the traditional financial field is 40 to 60 times that of the spot, while in the crypto market Among them, the trading market value of derivatives accounts for less than half of the entire digital asset market. In contrast, the development of derivatives still has huge room for imagination. In addition to the volume comparison, mature players and institutions in the market have also begun to try to use derivatives to avoid risks and gain more value capture. According to estimates, the current daily trading volume of DeFi derivatives is only equivalent to 1/6 of the DeFi spot trading volume and 1/100 of the CEX derivatives trading volume.

Although people are more inclined to operate in CEX due to considerations such as interactive experience and depth when trading derivatives. However, DeFi derivatives do not require permission and other decentralized features, and with the addition of a professional liquidity team, we have reason to expect a breakthrough in the market share of derivatives DEX.

Summary

The Federal Reserve’s warning of rate hikes, as well as macroeconomic uncertainty, made the start of the crypto market look rather bleak. But we should be aware that in 2021, which continues to hit new highs in market value, it is also full of corrections, risks and shocks from the general environment. In the past year, the successive outbreaks of GameFi, NFT, DAO, Layer2 and other sectors have laid a good foundation for 2022.

We realize that the development speed of the industry has surpassed the imagination of most people. Faced with this change, all industry practitioners should be more fully prepared.