Polychain:the landscape of the crypto ecosystem will begin undergoing significant shifts in 2021 and Ethereum’s monopoly will be chip away

2021 has just begun, and the crypto space has brought a constant surprise.

How will the market progress in 2021?

Will the Polkadot Parachain auction bring a new round of craze?

Which track of the Polkadot ecosystem will have a chance to stand out?

PolkaWorld host an interview with Polychain, one of the world’s leading crypto investment institutions, to discuss what’s their opinions on the crypto market and the Polkadot ecosystem in 2021.

Polychain was an early investor of Polkadot, Coinbase, Compound, Maker, Acala, and many other outstanding projects in the crypto market.


Jacob Phillips:Researcher

Ben Perszyk:Ecosystem Fund Lead

We are feeling very good about crypto in 2021. While Bitcoin has been breaking all-time highs, we merely see this as a long-overdue repricing to reflect the immense progress in usage, institutional adoption, and developer activity that has occurred over the past few years. There is a ton of momentum in the crypto space at the moment, and we expect this to carry on throughout 2021.

Comparing recent rallies to 2017–18, this time around feels much more fundamentally driven. In 2017, hype was fueled by speculation around pre-launch infrastructure projects. Now, with the infrastructure in place, crypto markets have been reignited by material usage of decentralized finance and institutional acceptance of Bitcoin (things we could have only dreamed about years ago).

Polychain is broadly focused when it comes to crypto, but here are a few key trends we’re watching:

  1. DeFi: Core protocols in this area being built right now are going after a multi-trillion dollar opportunity. We’re particularly interested in novel assets, markets, & methods of financial coordination (like DAOs) that are uniquely enabled by crypto.
  2. Application platforms: As the ecosystem shifts toward scalable infrastructure and interoperability, layer1s and layer2s that enable entirely new applications not possible in the current Ethereum paradigm stand to benefit the entire ecosystem immensely and create potentially massive new value-accrual opportunities.
  3. Zero-knowledge: This is overarching but incredibly important. ZK-tech is still early but could become one of the defining technologies of the next decade.
  4. Web 3.0: This is a space that has been slow to gain adoption, mainly due to a lack of scalable infrastructure, but over a long enough time period, we expect most major web platforms will be displaced by community-owned crypto networks. NFTs/Digital media may be the fuel that ignites greater traction in this category.

One quick note on what we invest in: Ideally, we look to partner with projects as early as possible (idea stage to seed round). However, Polychain has significant flexibility in the stage of projects we work with and can invest in Series A stage or even post-launch projects.

Once we invest, our strategy is largely the same. We look to be the project’s closest partner. We’re an extremely crypto-native fund and can add significant value by helping with everything from mechanism design, to crypto-economics, to community building & go-to-market. We find unique ways to participate in protocols post-launch by running validator infrastructure, becoming liquidity providers, being active in governance, etc; we adjust our strategy here as new opportunities to actively participate arise. And most importantly, we are long-term investors. We aren’t fazed by short-term price movements; we look to continue being actively involved throughout a project’s multi-year journey.

Biggest strength: Community — Outside of Ethereum, Polkadot has arguably the deepest community and strongest traction among developers. Parachains haven’t even launched yet, and we are already seeing a large number of teams building on Polkadot within each category of core DeFi infrastructure (DEX, lending, synthetic assets, staking derivatives, privacy, etc.). In addition, we are impressed to see community-driven efforts to create developer tooling, educational materials, and put on hackathons. Polkadot’s grassroots community growth appears to be on its way to positioning the platform as a Schelling point for economic activity in the crypto ecosystem.

Biggest Innovation: Substrate & application-specific chains — Over the coming years, we believe a growing number of developers will choose to build applications on blockchains optimized for specific use cases. Substrate significantly lowers the technical hurdle for teams looking to go down this route, and Polkadot empowers these chains to become interoperable and composable within an ecosystem. This will enable a new generation of applications that couldn’t have existed on a siloed smart contract platform.

Parachain auctions are one of the most interesting aspects of the Polkadot system, and PLOs will be a vital fundraising tool for projects looking to participate in these auctions. It will be really interesting to see how these play out. To us, PLOs represent a great opportunity for DOT holders to become active participants in some of the earliest & most exciting projects being built on Polkadot. We expect these to be extremely popular. The only question on our mind: how many DOTs will these PLOs attract?

This seems likely. DeFi has emerged as a core use case and appears to have found product-market fit within the crypto ecosystem. DeFi projects are the most valuable applications built on Ethereum, and we would expect to see a similar trend arise on Polkadot. Even before these networks have launched, it’s clear that DeFi projects on Polkadot are attracting the bulk of investor and developer attention. However, over time, we see there being plenty of opportunity for Polkadot-based applications & platforms in a wide variety of categories to become ultra-valuable.

Polychain sees the Chinese market as a core driver of the Polkadot ecosystem, and of the crypto space more broadly. We’ve been blown away by the organic community traction we’ve seen in the Chinese Polkadot community, something that is a huge differentiator for Polkadot relative to other projects. From conversations with a number of teams & community leaders based in China, we are thrilled about the quality of activity coming out of this region and expect to continue to see top projects emerge from the Chinese DOT community.

Our plan is:

  1. To continue to back the best teams coming out of the Chinese ecosystem.
  2. To make sure all of our portfolio companies have an avenue to grow a community in China.
  3. To be active supporters of the Chinese Polkadot community to continue to foster its growth & development.

We have so many predictions on what may happen in 2021, so it’s hard to narrow them down. Just to highlight one major trend we’re looking out for — With the combination of cross-chain interoperability and ETH layer 2s set to launch, the landscape of the crypto ecosystem will begin undergoing significant shifts in 2021. Users will begin interacting with many different chains (not just Ethereum), applications will spread out across a number of platforms, and liquidity will likely see fragmentation. This will chip away at the monopoly of the Ethereum mainchain and will open the door to the development of perhaps multiple different Schelling points for activity in the crypto ecosystem. Competition is about to pick up, and it will be exciting to see how this plays out.

PolkaWorld is Polkadot’s Chinese community. We have gathered more than 30,000 Polkadot fans. It is the world’s largest Polka Chinese community and the only community that has received the Web3 Foundation Grant.PolkaWorld is committed to popularizing Polkadot technical knowledge, training Substrate developers, and supporting Polkadot ecological entrepreneurs, thereby promoting the development of China’s Web3.0 ecology.

Follow PolkaWorld on Twitter:@polkaworld_org

PolkaWorld Interview Program(https://polkaworld.medium.com/polkaworld-interview-program-94d3be53ea94), aiming to help Polkadot community projects to be better heard in China.

Substrate Entrepreneur Camp(https://polkaworld.group/en/substratecamp/), which is to help the birth and growth of Polkadot’s eco-innovative products.

Polkadot Community in China.

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