Even before the year is finished, it’s already clear that 2021 is a blockbuster year for startup funding. According to Crunchbase, by the third quarter of this year, investors had poured over $160 billion into funding startups, with each quarter outstripping its predecessor. 

On paper, at least, it all seems like great news for the crypto sector. After all, fintech is the darling of VCs, accounting for around $95 billion of the total raised until Q3 this year, and crypto is the rising star among fintech segments. VC funding for blockchain companies hit an all-time high of $6.5 billion in the third quarter of this year, reaching an annual total of over $15 billion. 

However, for the crypto sector specifically, this flood of VC funding is a double-edged sword when you consider that decentralization is one of the founding principles of the cryptocurrency community. A few years back, the space underwent a period of rapid, unrestrained growth known as the ICO boom. Thousands of startups emerged with their own tokens, allowing them to crowdfund from large groups of interested investors. 

Despite its popularity, it’s fair to say that the model was ripe for exploitation, and as a result, regulators, including the US SEC, clamped down on token offerings. Consequently, the model has evolved over the last few years. Firstly came the initial exchange offering, and after that, the initial decentralized exchange offering, or IDO. But over time, the broad potential audience of investors has shrunk to a relatively niche group of DeFi users. 

VCs Move Into the Gap

As the crypto markets have grown, VC investors have moved to take advantage of the opportunity denied to the open market. In the US, at least, VC investing is deemed “too risky” for the average Joe participant. To become an angel investor in your own right, you need to be an accredited investor, which means holding a minimum net worth of $1 million or earning at least $200,000 in annual income. 

Unfortunately, both of those preconditions disqualify the vast majority of the population. This is unfortunate because becoming a VC, particularly for one of the large funds, can be a very lucrative endeavor. 

According to one investigator, successful VCs can expect to earn up to $20 million a year, with the best performers earning even more than that. VC firms also charge their investors – typically hedge funds, family offices, or high net worth individuals – a management fee of around 2 or 2.5%, amounting to another cash injection worth up to $25 million. 

But the fact is, with so much money involved, VC investing is clearly a game for the richest 1%. So for crypto projects, this flood of VC funds represents a dilemma. How can a project remain true to its principles of decentralization while ensuring it has the funding it needs to continue? And how can they achieve decentralization while being dependent on centralized VCs for funding? 

Introducing Decentralized Ecosystem Funds 

Colony, a decentralized, community-centric VC fund, believes it has found the answer to this problem. Colony is an ecosystem accelerator DAO for the Avalanche platform, which aims to bring the structural integrity of the traditional financial system to DeFi on Avalanche. Users can participate via the CLY token, which exists for four purposes that Colony collectively dubs “ecosystem farming.” 

CLY provides early-stage funding to Avalanche-built projects and liquidity to established DeFi protocols operating on Avalanche. It also purchases and stakes AVAX in the Avalanche network and operates an index fund comprised of selected Avalanche projects designed to offer diversified exposure similarly to an ETF. 

As such, the CLY token provides multiple streams of revenue as returns. Along with full governance rights over how the funding is allocated among Avalanche projects, CLY holders earn rewards from staking and for liquidity provision. Any project tokens airdropped to early-stage investors are also distributed to CLY holders. 

The DAO community funding model has benefits for all stakeholders to a project – including VCs, particularly where a project takes a hybrid VC-community funding approach. Colony offers a straightforward route to decentralized funding and token distribution for crypto projects, shielding a project token from whale dominance and encouraging community participation from an early stage. 

For individual CLY holders, there’s the advantage of participating in the early stages of a crypto project. Still, there are more significant benefits to being part of a community. Rather than depending on individual instinct and research, a community can distribute the effort and expertise needed to analyze any given investment, meaning it’s more likely to make better, more informed decisions than a sole operator. The opportunity for yields from staking and liquidity also hedges against any risks of investing in early-stage projects. 

Even VCs Can Benefit

VCs, who are often focused on an exit within a few years, can also benefit from the arrangement. With an invested community and token distribution, the VC investor has the confidence of knowing that the project is set up to succeed from the start. Therefore, projects applying for decentralized funding could even have the edge when pitching VCs, as a successful application is a stamp of social approval. 

Clearly, VCs can see the benefit in a project like Colony, as it has raised over $1 million in seed funding from investors, including the Avalanche Foundation, and a further $15 million from a private token sale. 

The decentralized funding model using DAOs and tokens is in its very early stages, but after ICOs, IEOs, and IDOs, it seems primed to be the one that will stick. 

It may be a new funding model, but DAO-based investments seem primed to be one that will stick, offering the best of all worlds to all project stakeholders. 

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Cryptocurrencies and blockchain technology are two of the most revolutionary concepts in the world at the moment. Both have been able to disrupt entire industries, changing the way processes are being run and value is being sent.

For concepts that are so interesting, crypto and blockchain haven’t quite been able to crack the gaming space. There is a general awareness that crypto and blockchain can help games become more interactive and fun, but no one seems to be actively exploring the opportunities for now.

Moving into 2022, there’s a general feeling that games in the crypto world will be even bigger. Everyone has seen the success of games like Decentraland and Axie Infinity, and they would like to build on that success to hit even bigger heights going forward.

Trends rule everything

For as long as it has been in the limelight, the gaming industry has been known to chase trends. Decades ago, everyone was into consoles and large setups. But, recently, it has been more of a shift towards different trends. Twitch and more have disrupted the space with video game streaming. Fortnite, League of Legends, and more have made games more interactive with the battle royale system. And on and on it goes. 

Many of these trends have a logical pattern – a game is a wild hit and makes so much money, so everyone else wants to be like it. But, blockchain and crypto are making an entrance into the scene and it is interesting to see how things will shape up to be.

In recent years, investors have already thrown hundreds of millions at game companies that are looking to incorporate blockchain technology and cryptocurrencies into their ecosystems. Now that concepts like non-fungible tokens (NFTs) are in the mix, investors are salivating even more. 

How crypto gaming usually works

The entire gambit of crypto gaming platforms is simply the gamification of your experience. Essentially, these games have their ecosystems and set of rules. Players come in and play the game, and they get rewarded for finishing tasks and leveling up.

But, instead of just giving rewards that are only valuable in the game, players now have the opportunity to earn. Think of it this way; if you play a game and get a reward (perhaps a new skin or a new weapon), it is only valuable to you and the people who know its value.

With crypto gaming, these rewards can take on a value of their own. So, they could be NFTs – tokens that are unique and which represent something actually valuable in the game. If you like, you can hold on to this NFT and keep it. Or, you could decide to sell it on an NFFT marketplace. NFT mania is currently gripping the world, and you could just get lucky enough to sell your game NFT for a sweet price.

Crypto gaming uses the play-to-earn model to attract players. Why simply play when you can play and actually earn money? For some platforms, there are even in-app marketplaces where you will be able to trade your NFT. This way, people who understand the value of these NFTs will also be able to contact you and pay you for your NFTs.

Growth opportunities abound

While crypto gaming didn’t especially take off in 2021, there have been different pointers to the fact that it is very much alive. The success of games like Decentraland and Axie Infinity – both of which are raking in millions of dollars already – means that many people are attracted to the play-to-earn model. So, there is a lot to be excited about when 2022 rolls by.

One aspect that has investors talking is the metaverse and how crypto gaming platforms can take advantage of it. The metaverse promises to be an expansive and immersive environment where participants can be free to express themselves and be creative, and gaming companies could take advantage of it.

Creating a metaverse-based gaming environment where players get rewards is an attractive concept, and some games already inhabit that space. Axes Metaverse – a game developed by Azur Games – has recently captured the attention of players thanks to its seamless gameplay and combination of NFTs and the metaverse. Players can get NFTs as rewards, and they get to explore the game’s iteration of the metaverse. That is definitely interesting.

Of course, this doesn’t mean that other games can’t do the same. All they need to do is find something that makes players want to come to their platforms, and they can sell that.

Crypto gaming is also attractive to companies looking to sell. One of the primary benefits of the metaverse is that it will offer an abundance of marketing and engagement opportunities. Companies understand the potential of this, and they know how much games attract members of their target market.

Nike and Adidas are prime examples of this. Both companies are building their iterations of the metaverse, and they will allow participants to sample some of their products using their online avatars. When a metaverse-based crypto game gets popular enough, there is no doubt that brands will line up to advertise on its platform. This means greater revenues and an even more seamless opportunity to grow.

2022 is poised to be an even bigger year for crypto than 2021 was. With several facets of the industry making waves, gaming could take a giant leap forward as well.

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Tron Foundation has partnered with digital real estate platform MetaEstate to develop an ecological complex. It will house the headquarters of the foundation, which is behind the development of the Tron (TRX) cryptocurrency, as well as a convention club and digital art museum.

According to the official announcement, after Elon Musk’s SpaceX and NFT marketplace SuperRare, Tron is the third company to launch a complex in the metaverse.

As the metaverse becomes the hot topic with everyone from tech giants like Facebook (rebranded as Meta) and Microsoft to popular brands like Adidas and Nike joining the digital world, Justin Sun’s Tron is also venturing into the metaverse, which is expected to be a trillion-dollar sector.

Over the past few weeks, we also saw metaverse projects in the crypto industry, Decnetraland and The Sandbox rallying to lead the market gains and investors spending millions of dollars for virtual land. 

Now, Tron Foundation has released the first-ever ecological complex in the metaverse of Cryptovoxels. The TRON complex has three adjacent buildings located on the east coast of Miami.

The Tron Headquarters in this digital world called TRON ECO HQ has three floors, including an atrium with a display of the Tron Network. It also has a public office area, with independent offices and meeting rooms along with large outdoor terraces.

Its BT Convention Club has two levels — the first floor has a reception area and a large conference hall, and on the second floor, there is a large open office and theatre-like space for meetings and conferences.

Another important part of TRON’s complex in the metaverse is APENFT Digital Art Museum, dedicated to digital art and non-fungible tokens (NFT). The museum will display the artwork of digital artists as well as the paintings of winners of the “Second Life” public contest.

The museum also has two floors. The first one has an open concert hall and an area for demonstrating the artwork. These displays are adjustable and can be customized. On the second floor, there is a painting atrium to onboard the new generations of digital artists and their artwork. This floor also features indoor and outdoor exhibition halls for early-stage artists.

The complex also has a SUN temple, named after Tron founder Sun, who bought 150 Bitcoin at the recent dip.

Tron Network’s native token TRX is a $9.18 billion market cap cryptocurrency trading at $0.09, currently down over 61% from its all-time high of 0.23.

Meanwhile, the Tron Network has been attracting users, its total number of accounts surpassing 65 million this month.

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Over recent years, cryptocurrencies have undergone a remarkable transition, moving from being the “wild west” of the financial world to a legitimate asset and means of payment for millions of people. Something seemed to shift towards the end of 2020 when PayPal made its landmark decision to begin supporting cryptocurrencies across its vast, 20 million-strong merchant network. 

Over this year, the idea of using cryptocurrencies as payments has strengthened. Tesla announced its intention to accept Bitcoin payments, which later stalled, although Elon Musk has since vocalized the company’s support of cryptocurrency payments. Amazon is reportedly gearing up to integrate crypto but also apparently investigating the launch of its own native token. Recently, the largest supermarket in Croatia announced it would begin taking payments in nine cryptocurrencies. 

It’s a move that will be welcomed by the many people in the crypto community who have long craved the ability to transact trustfully and with the assurance of privacy that cryptocurrency offers. But although KYC has long been a contentious subject for privacy advocates, it’s, unfortunately, the case that the more prevalent crypto payments become, the heavier the KYC burden on merchants and payment gateways will grow. This is simply because there are more scenarios where sellers will need to confirm a buyer’s identity. 

The Opportunity to Transform KYC

Any sale above a certain value requires identity verification. Tesla could recommence accepting Bitcoin payments tomorrow, but the firm will still require any customer to provide an ID before they can buy a car. Even lower value purchases can incur the need to provide identifying details. It may be for insurance or warranty purposes or because the vendor has a legal obligation to verify details such as age to sell restricted products. 

However, this obligation to collect identity documents creates a heavy burden of responsibility on the vendor’s part. They need the operational systems to verify identity documents, and regulations such as the European GDPR mean they come under onerous requirements for data storage and processing. 

Several projects were quick to identify the potential of blockchain in managing this imbalance in digital identity. The term “self-sovereign,” frequently attached to the concept of blockchain-based digital identities, refers to the fact that the ownership and rights to the identity credentials lie with the owner. This marks a fundamental shift from the current model, which relies on the identity owner distributing copies of their documentation to third parties. 

However, the development of this concept is now taking an intriguing turn. Blockchain identity projects including Selfkey and PhotoChromic have recently begun to showcase the potential of NFTs in making self-sovereign identities more unique and visually accessible. 

Selfkey’s “Living Avatars”

Selfkey, which has been developing its KYC-focused identity platform since 2017, recently launched a new governance model along with the concept of “Living Avatar NFTs.” The Selfkey platform allows a user to stake native KEY tokens against any of their own individual credentials as a means of demonstrating their authenticity. Users found to be falsifying their identity lose their stake, whereas good actors are rewarded in LOCK tokens. Thus, Selfkey creates a trusted identity system where users self-govern. 

The NFT element comes into play by using the properties of NFTs to create a unique token representing the individual, with the opportunity to “stack” specific credentials to build an identity comprised of an avatar image and a scannable code. 

The code could tell the scanner anything the user wants them to know. For instance, a social profile Living Avatar might reveal that the person is a cryptocurrency enthusiast, but they could use another one to get verified for using a service like a crypto exchange, confirming their residency, passport ownership, and address. 

PhotoChromic’s “Generative Art”

PhotoChromic is another project working at the edge of NFTs and identity. Whereas Selfkey came to the idea of using NFTs through its established identity offering, PhotoChromic has baked NFTs into its offering from the outset. The protocol will issue each individual with an NFT, which cumulatively represents their biometric identity, government-issued ID documents, and unique personal attributes. A PhotoChromic identity can also be tethered to the individual’s assets, both physical and individual, meaning it can play an important role in processes such as assessing creditworthiness. 

However, PhotoChromic’s unique selling point is its “generative art” feature, which allows users to create an avatar image seeded by their own face. It doesn’t need to be identifiable if the individual wishes to remain pseudonymous, as the algorithm can be adjusted accordingly. However, just as a cryptographic hash represents a specific input that will always produce that same hash, the output of a generative art image will always represent the unique facial attributes of the input image – even if they become unrecognizable. 

Blockchain-based identities that use NFTs in this way solve the challenges of KYC from the perspective of both user and merchant. The user maintains full security and privacy over their credentials, as they aren’t providing copies of anything – merely verifying that they’re legitimate for the purposes of any given transaction. From the merchant side, they can fulfill their compliance obligations but without having to take custody of sensitive personal documents and shoulder all the regulatory burdens that accompany them. 

The increasing prevalence of crypto doesn’t solve the challenge of KYC by itself, as the earliest crypto enthusiasts believed it would. But with ongoing innovation at the cutting edge of blockchain-based identities, we can reach a more optimal balance between privacy and disclosure. 

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