Crypto winter may be coming, but from the Permissionless conference last week in Palm Beach, Florida, the future of the industry couldn’t look brighter.
More than 7,000 attendees, 2,000+ developers, 1,000+ companies, and 120+ speakers (including our CIO, Matt Hougan) gathered for Permissionless, making it one of the biggest crypto events of the year.
Attendees included crypto evangelists, venture capital and hedge funds, institutional investors, job hunters, and some of the most recognized blockchain-based projects in the industry, all gathering together to establish a presence in the growing Web3 ecosystem.
Permissionless proved to be an ideal platform for those looking to build on Ethereum and Layer 2s like Arbitrum and Optimism, with the development of this ecosystem’s vibrant NFT, gaming, and DeFi applications being the overarching theme.
Here are the five key takeaways our research team observed.
1) People are excited … for the bear market?
Some people might assume that the state of global financial markets—including crypto—would have dampened the energy at Permissionless. However, that wasn't the case. With far less attention fixated on prices going up, there was tremendous focus on what's being built and learning from past mistakes, especially in light of the recent failure of the Terra ecosystem. Instead, attendees remained energized about an essential adage of crypto: Bear markets are when innovations happen and new products get built.
Even with a potential crypto winter looming, it’s likely to be less harsh than the previous ones, given the amount of long-term capital already dedicated to the space. Better yet, more capital is on the way. Andreessen Horowitz (a16z), one of the most widely recognized venture capital firms in the world, recently announced a $4.5 billion Web3 fund, while several other venture firms like Electric Capital, Framework Ventures, and Bain Capital also recently announced their own Web3-focused funds ranging from $400 million to more than $1 billion.
2) The “DeFi Mullet” is taking shape with CeFi companies in the front and DeFi protocols in the back
Historically, DeFi has been very difficult to access for most people. Perhaps that’s why one common theme across the wide range of DeFi panels was the need and desire to make entry to DeFi easier. And while many crypto enthusiasts might not be fans of Centralized Finance ("CeFi") companies, it's clear they are playing an increasingly important role in the user experience.
CeFi companies, like Coinbase and Robinhood (which announced the launch of its own noncustodial Web3 wallet at Permissionless), are making the entry point to DeFi increasingly accessible for retail by offering noncustodial Web3 wallets. These represent a critical infrastructure element for users seeking to interact with Web3 environments, which is why companies joining the space are focusing as much on front-end design and user experience as on back-end functionality. That’s not currently the case with the original noncustodial wallet providers, like Metamask and Phantom, which place less emphasis on user experience and are therefore more suited for crypto natives.
3) Crypto-native tools are set to fix various global coordination failures and enhance community values
The crypto community heavily relies on general-purpose Web2 communication platforms like Twitter and Discord to engage with each other, collaborate, and drive the industry forward. It’s a problem on multiple fronts, and it’s why there is an increased focus on building decentralized social protocols.
Given that the core values of crypto include privacy, self-sovereignty, and decentralization, it makes sense that crypto natives—both users and developers—will lead the charge. For example, the team behind leading DeFi lending protocol Aave recently launched a social media protocol called Lens. Their motto: “Own Your Digital Roots.” Community interest is strong, with over 50 applications already built on top of the platform. (They also had some of the best swag at the conference.)
Stani Kulechov, Aave’s CEO and founder, stated, “Ultimately, as seen from Elon Musk’s bid to purchase Twitter, people are ready for a better experience than what Web2 offers today. Ownership over not only the content you create online, but also your profile and social network is long overdue, and empowering users is what Lens aims to achieve.”
However, because switching costs are high in Web2 (that’s part of their business model, after all), the transition from centralized to decentralized social coordination tools will undoubtedly take some time.
4) Web3 gaming is set to bring in the next billion users
Although the price of crypto assets has plummeted over the past couple of months, the innovation occurring in blockchain-based gaming isn’t slowing down. It was clear at Permissionless that interest in blockchain-based gaming is abundant from all sides: crypto enthusiasts, developers, venture capital firms, traditional gaming studios, and—most importantly—gamers.
Five months into 2022, several venture capital firms have already launched funds dedicated exclusively to metaverse gaming, including a16z's recently launched $600 million gaming fund. In addition, traditional gaming companies are also getting involved. For example, GameStop released the beta version of its crypto and NFT wallet this past week in preparation for the launch of its NFT marketplace this year.
Then there are the 3.2+ billion gamers worldwide who just want to game. They don't care about the state of global financial markets or rising inflation. As several panelists pointed out, adding the ability to earn crypto from gaming is not likely to change that essential dynamic—but it's a powerful incentive nonetheless, particularly when combined with high-budget, high-profile games.
Most notably, the number of gaming studios that have shifted their posture from fighting Web3 to embracing Web3 is exceptionally bullish. Sarah Buxton, the COO of an up-and-coming Web3 gaming platform (Gala Games), pointed out that among the top 10 gaming companies, eight have full-time groups working on gaming in Web3.
5. There’s an overwhelming interest in crypto from institutions and enterprises, and it isn’t slowing down
A noticeable number of institutional investors and enterprise solutions providers attended Permissionless. That’s a sign of the unabated interest of traditional corporations and institutional capital in gaining exposure to crypto markets.
And while past market cycles have generally turned bearish around the same time enterprise blockchain solutions became a popular topic of conversation, this feels different. It’s not giant corporations trying to build private blockchains. It’s crypto-native companies, like MetaMask, Ledger, and Chainlink, expanding their footprint and building bridges between Web2 and Web3.
Either way, one thing was abundantly clear at Permissionless: Crypto is on a collision course with mainstream adoption, and it’s only a matter of time.
The sheer amount of talent pouring into the industry is also a force to be reckoned with. Countless attendees were taking time away from their Web2 jobs to attend a Web3 conference. That’s likely a reflection of Web2’s golden handcuffs slowly losing their hold over talented developers who are eager to explore the innovations of blockchain technology, and it’s another reason Permissionless left us feeling particularly bullish.
Up next on the conference circuit is Coindesk’s Consensus in Austin, where our team will be bringing you the key takeaways from one of the most anticipated crypto conferences of the year.
This material represents the views of the authors and does not represent the views of Bitwise Asset Management.
Cryptocurrency is a digital representation of value that functions as a medium of exchange, a unit of account, or a store of value, but it does not have legal tender status. Cryptocurrencies are sometimes exchanged for U.S. dollars or other currencies around the world, but they are not currently backed nor supported by any government or central bank. Their value is completely derived by market forces of supply and demand, and they are more volatile than traditional currencies, stocks, or bonds.
Trading in cryptocurrencies comes with significant risks, including volatile market price swings or flash crashes, market manipulation, and cybersecurity risks and risk of losing principal or all of your investment. In addition, cryptocurrency markets and exchanges are not regulated with the same controls or customer protections available in equity, option, futures, or foreign exchange investing.
Cryptocurrency trading requires knowledge of cryptocurrency markets. In attempting to profit through cryptocurrency trading, you must compete with traders worldwide. You should have appropriate knowledge and experience before engaging in substantial cryptocurrency trading. Cryptocurrency trading can lead to large and immediate financial losses. Under certain market conditions, you may find it difficult or impossible to liquidate a position quickly at a reasonable price.
Based in San Francisco, Bitwise is one of the largest and fastest-growing crypto asset managers, offering both index and active strategies across a wide array of investment vehicles. The firm is known for creating the world’s largest crypto index fund (OTCQX: BITW), a suite of crypto-focused equity and futures ETFs, and investment products that span Bitcoin, Ethereum, DeFi, and NFTs. Bitwise focuses on partnering with financial advisors and investment professionals to provide quality education and research. The team at Bitwise combines expertise in technology with decades of experience in traditional asset management and indexing, coming from firms including BlackRock, Blackstone, Meta, and Google, as well as the U.S. Attorney’s Office. Bitwise is backed by leading institutional investors and asset management executives, and has been profiled in Institutional Investor, CNBC, Barron’s, Bloomberg, and The Wall Street Journal.