Polychain: The crypto ecosystem landscape will undergo significant changes in 2021, and Ethereum's monopoly will be weakened

This article is from the PolkaWorld WeChat official account.

The year 2021 has just begun, and the excitement in the crypto market has already brought surprises to everyone.

How will the market develop in 2021?

Will the Polkadot parachain auctions spark a new wave of enthusiasm?

Which sectors in the Polkadot ecosystem have the potential to stand out?

This time, PolkaWorld interviewed the globally renowned crypto investment firm Polychain to understand their views on the 2021 crypto market and the Polkadot ecosystem.

Polychain is an early investor in many outstanding projects in the crypto market, including Polkadot, Coinbase, Compound, Maker, and Acala.

Interviewees:

Jacob Phillips (Polychain Researcher)

Ben Perszyk (Head of Polychain Ecosystem Fund)

PW: How do you view the crypto market in 2021, given that Bitcoin's price has already reached $35,000? We feel very positive about the crypto market in 2021. Although Bitcoin has broken its historical high, we see this merely as a delayed repricing to reflect the significant progress made in usage, institutional adoption, and developer activity over the past few years. Currently, the momentum in the crypto space is very strong, and we expect this momentum to continue into 2021.

Compared to the rebound in 2017-18, this price recovery seems to be more fundamentally driven. In 2017, speculation about upcoming infrastructure projects fueled the hype. Now, with the improvement of infrastructure, substantial use of decentralized finance, and Bitcoin's acceptance by institutions (something we could only dream of years ago), the crypto market has been reignited. PW: What crypto sectors does Polychain focus on long-term? Polychain broadly focuses on the crypto space, but here are some trends we are particularly interested in:

DeFi: The core protocols currently being built in this space are chasing opportunities worth trillions of dollars. We are particularly interested in new types of assets, markets, and financial collaboration methods (such as DAOs), which are unique to cryptocurrencies.

Application Platforms: As the ecosystem shifts towards scalable infrastructure and interoperability, Layer 1 and Layer 2 protocols will enable entirely new applications that are impossible to achieve within the current Ethereum paradigm, greatly benefiting the entire ecosystem and creating potentially vast new value accumulation opportunities.

Zero Knowledge: This is all-encompassing but extremely important. ZK-tech is still in its infancy but has the potential to become one of the defining technologies of the next decade.

Web 3.0: This is a slowly accepted field, mainly due to the lack of scalable infrastructure, but over a sufficiently long period, we expect most major web platforms to be replaced by community-driven crypto networks. NFTs/digital media could be a significant fuel for this area. PW: What principles or investment strategies do you adhere to when investing in a project? Regarding our investment targets, I would like to mention that ideally, we hope to collaborate with projects as early as possible (from the idea stage to the seed round). However, Polychain is also quite flexible in the stages of projects we collaborate with, and we can invest in Series A or even later-stage projects.

Once we invest, our strategy is essentially the same. We aim to be the closest partners of the projects. We are a fund that is very focused on the crypto world and can add significant value through various aspects such as helping with mechanism design, crypto economics, community building, and market entry. We have found unique ways to participate after the protocol goes live, such as operating validator infrastructure, becoming liquidity providers, and actively participating in governance. As new opportunities for active participation arise, we will adjust our strategy. Most importantly, we are long-term investors. We are not troubled by short-term price fluctuations, and we look forward to sustained active participation throughout the project's multi-year journey. PW: What do you think is Polkadot's biggest advantage? What is the biggest innovation that Polkadot brings to the blockchain industry? Biggest Advantage: Community ------ Apart from Ethereum, Polkadot arguably has the most engaged community and the strongest appeal to developers. Even before the launch of parachains, we have already seen a large number of teams building core DeFi infrastructure based on Polkadot, including DEXs, lending, synthetic assets, staking derivatives, and privacy solutions. Additionally, we are impressed by the community-driven efforts that have created developer tools, educational materials, and hackathons. The grassroots community growth of Polkadot seems to be positioning the platform as a focal point for economic activity in the crypto ecosystem.

Biggest Innovation: Substrate and application-specific chains. In the coming years, we believe more and more developers will choose to build applications on blockchains optimized for specific scenarios. Substrate significantly lowers the technical costs for teams wishing to take this route, and Polkadot makes these chains interoperable and composable within the ecosystem. This will enable a new generation of applications that could not exist on a single smart contract platform. PW: How do you view Polkadot's PLO? Will it have a great impact on the crypto market? The parachain auctions are one of the most interesting aspects of the Polkadot system, and for projects looking to participate in these auctions, the PLO will be an important fundraising tool. It will be very interesting to see how these processes develop. For us, the PLO represents a great opportunity for DOT holders to actively participate in some of the earliest and most exciting projects based on Polkadot. We expect these to be very popular. The only question in our minds is: how many DOTs will these PLOs attract?

PW: Do you think the first Polkadot unicorn project after parachains are implemented will be a DeFi platform? Why? That seems possible. DeFi has already become a core scenario and appears to have found a product-market fit suitable for the crypto ecosystem. DeFi projects are the most valuable applications built on Ethereum, and we hope to see a similar trend on Polkadot. Even before these networks launch, it is clear that DeFi projects on Polkadot have already attracted significant attention from investors and developers. However, over time, we see a wide range of applications and platforms based on Polkadot that will have numerous opportunities to become very valuable. PW: How does Polychain view the Chinese market? Do you have plans for the Chinese market? Polychain views the Chinese market as a core driving force for the Polkadot ecosystem and the broader crypto space. We have been impressed by the organized community appeal of the Chinese Polkadot community, which is a significant distinction for Polkadot compared to other projects. By talking with some teams and community leaders in China, we are excited about the quality of activity in China and look forward to seeing top projects emerge from the Chinese DOT community.

Our plans are: 1) Continue to support the best teams in the Chinese ecosystem. 2) Ensure that all projects we invest in have the opportunity to develop a community in China. 3) Actively support the Chinese Polkadot community and continue to promote its growth and development.

PW: What major events do you predict will happen in 2021? We have many predictions about what might happen in 2021, so it's hard to narrow it down. I just want to emphasize one major trend we are looking for------ with the launch of cross-chain interoperability and ETH Layer 2, the landscape of the crypto ecosystem will begin to undergo significant changes in 2021. Users will start interacting with many different chains (not just Ethereum), applications will be distributed across multiple platforms, and liquidity may also become decentralized. This will weaken the monopoly of the Ethereum mainnet and open the door for the development of potentially multiple different focal points in the crypto ecosystem. Competition is about to intensify, and it will be exciting to see how this unfolds.