Timely Insights

5 Key Takeaways from Permissionless 2022 by Bitwise Research

San Francisco • May 26, 2022

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. 

Important Disclosures

This material represents the views of the authors and does not represent the views of Bitwise Asset Management.

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About Bitwise

Bitwise Asset Management is the largest crypto index fund manager in America. Thousands of financial advisors, family offices, and institutional investors partner with Bitwise to understand and access the opportunities in crypto. For six years, Bitwise has established a track record of excellence managing a broad suite of index and active solutions across ETFs, separately managed accounts, private funds, and hedge fund strategies. Bitwise is known for providing unparalleled client support through expert research and commentary, its nationwide client team of crypto specialists, and its deep access to the crypto ecosystem. The Bitwise team of more than 60 professionals combines expertise in technology and asset management with backgrounds including BlackRock, Millennium, ETF.com, Meta, Google, and the U.S. Attorney’s Office. Bitwise is backed by leading institutional investors and has been profiled in Institutional Investor, Barron’s, Bloomberg, and The Wall Street Journal. It has offices in San Francisco and New York. For more information, visit www.bitwiseinvestments.com.

  • Anais Rachel

    Crypto Research Analyst
  • Ryan Rasmussen

    Senior Crypto Research Analyst
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