2021 was the year of innovation in the cryptoverse. Where many new ideas and trends managed to gain a big share of the market, some turned out to be fads. Find out which trends died in 2022!
2021 was a time of great innovation and expansion in the crypto sphere. Many promising platforms and projects were launched — many of which provided novel utility and opportunities to users.
But while some trends appear to have genuine long-term staying power, including decentralized finance (DeFi), the metaverse and non-fungible assets, others failed to achieve the same degree of success so far.
A large number of cryptocurrency investors and users get caught up in what inevitably turn out to be passing fads, and many end up becoming bagholders. With that in mind, we take a look at the data and fundamental behind three trends that could up being nothing more than a simple fad in retrospect.
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Play-to-Earn Games
Arguably the biggest trend of 2021, play-to-earn (P2E) took the blockchain sector by storm by promising to shake up the way that games are monetized while allowing players to earn rewards for their in-game efforts.
Led by heavy hitters like Axie Infinity, My Neighbor Alice, Mines of Dalarnia and Splinterlands, these games allowed users to monetize their achievements — receiving cryptocurrency rewards for completing tasks and progressing through the game.
While dozens of P2E games managed to capture a great deal of attention, few have managed to stand the test of time, since most were plagued by a fundamental flaw — there is no balance between game revenue and player rewards. Indeed, the vast majority of P2E games simply rewarded players with a fraction of their token emission based on the size of their token stake and the amount of gameplay.
This system led to the meteoric growth of some P2E coins. At peak popularity, players could expect to earn potentially hundreds of dollars each day. However, as competition increased and both user acquisition and retention became vastly more difficult, most P2E games began to buckle. Some could not sustain attractive rewards in the face of rampant token inflation, and many saw a dramatic exodus as their users flocked toward other offerings.
As a result, many play-to-earn games are now among 2022’s biggest losers by price. The top 100 P2E coins/tokens by market capitalization lost an average of 84% since the start of 2022, compared to 60.2% for the top 100 cryptocurrencies by overall market cap. Moreover, of the top 100 largest play-to-earn games listed on CoinMarketCap, just one is in the green since the start of the year.
Crypto Launchpads
As platforms that allow users to access potentially attractive early-stage projects without needing to be part of a VC or investment fund, launchpads became incredibly popular among new and old hands in the crypto space alike.
In their early days, launchpads frequently provided access to the public rounds of highly sought-after projects, allowing participants to generate an impressive multiplier on their investment in many cases. In the early days of the launchpad niche, it wasn’t uncommon to achieve upwards of 1,000% returns on many projects within hours or days of launch.
With the bull market in full swing, a huge number of projects opted to conduct their public sale through one of the myriad launchpad platforms — since they were able to secure both funding and a great deal of exposure simultaneously.
But as the months progressed, an avalanche of low-quality projects flooded the scene in search of easy funding. This dramatically increased competition among launchpads, leading to a tectonic shift in the way that public sales were handled. Some projects began to enforce stringent vesting schedules on public participants and suffered from a highly inflative supply — leading to long-term price suppression in the absence of significant demand.
In 2021, barely a week went by without a new launchpad finding its way onto the scene. Many of these struggled to compete for an increasingly low-quality pool of potential public stage projects, and only a few managed to maintain attractive returns well into 2022.
There are now close to 100 different launchpads in operation, each vying for the dwindling number of projects that are either strong enough to succeed in a bear market or at least attractive enough to secure public funding. Many launchpads now have a negative average ROI for their projects, including Polkastarter, Seedify,and OccamRazer — each of which has produced an average of negative ~30% for investors, according to data from CryptoRank.
Nowadays, the launchpad scene is essentially a three-horse race, with DAO Maker, BSCPad and Launchpoolamong the few platforms to consistently offer net positive returns in recent months. But even these platforms have failed to match their earlier performance, according to data from CryptoRank.
Dedicated Yield Farms
Once thought to be an integral pillar of the DeFi landscape, yield farms have since fallen into relative obscurity in recent months as investors began to favor low-risk returns during the bear market.
As platforms that allow users to earn rewards on their cryptocurrency deposits in the form of a specific yield token, yield farms were highly popular in 2021, and many proved to be incredibly profitable. Though many yield farms are a simple accessory to more complete platforms, like PancakeSwap and SpiritSwap, a wide variety of standalone yield farms spread like wildfire in 2021 — most of which simply allowed users to earn rewards by staking LP tokens from popular AMMs.
At peak saturation, hundreds of yield farms were in operation across the most popular layer-1 blockchains and most offered little to no utility for the reward token — besides a native staking pool boasting often ridiculously high APYs.
While some of these were able to generate considerable hype in their early days, driving up the value of the reward token and potential yield available, practically all standalone yield farms failed to maintain momentum into 2022.
According to data from FarmScan, there are still more than 50 yield farms in operation, many of which have unusual or quirky names that speak volumes to the quality of the platform — such as cabbage cash, olive cash and pearl finance, to name just a few. As you might expect, most yield farms have seen their reward coins collapse in value due to a lack of utility, excess supply and limited buy pressure. It isn’t uncommon to see yield farm tokens that are down more than 99.5% from their all-time highest value.
Image courtesy: FarmScan
Can They Make a Comeback?
The cryptocurrency landscape is an unpredictable place. Projects that have no business succeeding sometimes climb to disproportionate heights, while those with promising products often have to take the hard road to success.
Because of this, it can be challenging to determine whether an individual project or trend has long-term potential.
In the case of play-to-earn, the model has proven to be largely unsustainable in its current form due to the way that rewards are not directly tied to platform revenue. Instead, the amount players earn is typically dependent on how much money (and sometimes time) they invest in the game, while the price of the token usually fails to find a support level due to a lack of utility and excess supply.
That said, a large variety of second-generation play-to-earn games are currently in development, many of which will include a more sustainable token economy and rewards that are directly tied to the value each player adds to the system — whether through user growth, asset creation, tournament-based achievements, or otherwise.
Because of this, while odds are high that most current-gen P2E games will continue to collapse, a handful may be able to pivot to join the second-gen titles in the spotlight.
As far launchpads, the model has been proven somewhat successful, but only in the case when the number of sought-after projects exceeds the capacity of existing launchpad platforms. Once this balance begins to shift, competition among launchpads will climb and platforms will start to fail, causing the returns for the end-user to collapse.
While most launchpads could inevitably end up shutting down over the coming year, the ones that weather the storm have a good chance of making a comeback during the next bull season: though we can expect a radically overhauled investment model due to the sheer number of people that were burned by holding net negative ROI launchpad tokens.
Last, but not least, yield farms provide an extremely attractive value proposition, but their often lax security and lack of reward token value support has undoubtedly damaged their perception among investors. Nonetheless, several platforms have proven that yield farms, when done right, can provide an additional source of utility for token holders. But unless rewards are kept at a reasonable APY and the reward token remains in demand, users can always expect their yields to dwindle over time — adversely affecting the risk/reward ratio.
Odds are high that yield farms will return to popularity in the coming years, but with an increased focus on security, utility and sustainability.
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