Which Crypto Assets Will Hold The Most Value In The Future?

People join the crypto space for a variety of reasons - the technology, the community, the culture. But let's be honest, a lot of people are here because they want to "make money" and get rich in the traditional sense. So many are still stuck in the fiat mindset, simply trying to increase the dollar value of their portfolio. But the world is changing, and what is highly valued today may not be valued so much tomorrow. As investors, we need to identify projects which are currently overvalued, and predict which crypto assets will hold the most value in the future.

Which Digital Assets are Overvalued?

The older generations were the ones who were lucky enough to buy cheap real estate in the 70s or 80s, and get an early start investing in the stock market, and contributing to their 401k / RRSP. Now, after several decades of non-stop money printing, their assets have ballooned to sky-high valuations.

Bitcoin was originally mined and purchased by geeks and libertarian-minded people. However, these days it has become an alternative asset class for these traditional investors, who don't understand the technology, but have the means to push it to a trillion dollar market capitalization.

As more on-ramps open up, traditional investors are also starting to dip their toes into Ethereum, and the original DeFi coins like Maker and Uniswap. Therefore we could argue that these tokens are being overvalue by the "blind capital" flowing into them. All these protocols are open source, and can be duplicated on faster, cheaper, and more user-friendly blockchains.

The majority of these traditional investors do not understand or "vibe with" the promise of games like Axie Infinity and Splinterlands, or DEXes like Pancakeswap and Hive-Engine - but these tokens represent the real digital economic activity happening right now. This is where the fiat-poor teenagers and 20-somethings are, and where the future of crypto is. It's only a matter of time before a subset of the traditional investors realize this and their capital flows from the "first mover advantage" coins into the DeFi and gaming tokens of their more efficient and innovative successors. The FOMO then follows.

There are the crypto OGs who got involved with Bitcoin and Ethereum at their inceptions, became incredibly wealthy via those coins, and have since developed a strong emotional attachment to them (becoming maxis), but kids who are joining crypto now do not share the same emotional bond to Bitcoin that their elder OGs do. They want to gain status among their peers in blockchain-based games by amassing in-game tokens and NFTs, not by stacking sats.

The Decentralization Argument

Many people argue that, while yes these successor blockchains are faster and more efficient, they aren't sufficiently decentralized like Bitcoin or Ethereum and therefore aren't secure enough to hold substantial value. But what exactly does it mean to be decentralized?

Consider that 50% of the hash rate behind Bitcoin and Ethereum are under the control of three or four mining pools. In theory these pools could collude to censor transactions, but given the transparent nature of public blockchains, doing so would be quickly detected, make headline news, and cause the value of the token to plummet. And with so much competition out there, investors could move their capital to more censorship-resistant chains.

Currently the Ronin sidechain for Axie Infinity has only five block producers, all of which were elected by Sky Mavis. The EOSIO-based Ultra (UOS) game distribution platform will also only have a few block producers, elected by the team. We shall see if this level of decentralization is sufficient to keep the chain censorship-resistant. If regulators don't apply pressure, and the community doesn't witness any censoring of transactions, we could see a lot more 5 validator blockchains in the future.

The point is that the block producers have no incentive to mess with the chain. Everyone invested in the token - the validators, liquidity providers, community members - all have an incentive to see the blockchain succeed, and that means no colluding to censor transactions or attempting to sabotage the network in any way.

At the end of the day, community is more important than decentralization. It's the token holders who keep the blockchain in-check and censorship-resistant. Blockchain tech aligns incentives like nothing before it - if you can distribute the token wide enough, you'll have a massive team rooting for its success.

Gaming as the Gateway Drug

Gaming was already an addiction for billions of people before crypto, but earning value and status by playing takes it to a whole new level.

The government lockdowns have only accelerated the adoption of blockchain gaming. Play-to-earn games like Axie Infinity and Splinterlands offer hope to many who have lost their jobs or find themselves locked indoors with nowhere to go. I imagine, in the future, the developers and early adopters of these games will go down in history as saviors of the people. Their early NFTs could become incredibly valuable solely for that reason.

I have friends who've lost their traditional jobs, or are under the threat of losing them, and they've been swept away by games like Gods Unchained and Town Star, which offer them an alternative income source - and sometimes life changing airdrops.

Investing For The Future

So where is the value going to be two, five, ten years from now? What should people be investing in today, that have yet to see massive increases in valuation? Of course no one knows for sure, but here are my best guesses:

Smart Contract Platforms

When it comes to investing in Ethereum alternatives, it's important to look for chains which offer innovation, committed teams, and genuine leaders. How long has the chain been in development? How many dapps are being built on it? How many partnerships have they formed? I would say Elrond (eGLD), Solana (SOL), Algorand (ALGO), and Terra (LUNA) are all good bets.

Similar to what Axie Infinity has done, we could see many games breaking away from their underlying platforms to launch their own blockchains so that they don't have to compete with other dapps for resources. In this case, owning the game token should be sufficient, as it will be migrated over to the new chain at launch time.

Gaming Tokens

Axie Infinity (AXS), Decentraland (MANA), and the Sandbox (SAND) have all had significant runs recently. While these metaverses still have room to grow, you may find greater gains in blockchain-based games set to be released in the coming months and years. The graph below lists a few of them:

Gaming NFTs

In the future, what will be more valuable - a bag of Bitcoins, or a land plot with hundreds of millions of players passing over it on a daily basis? How about an epic sword that was used by a famous gamer who had a hundred million followers? NFTs change the game entirely and will absorb a lot of capital.

At this stage of the game, if you can own some of the original collectible NFTs (think origin or mystic Axies), or some land that gets a lot of foot traffic, you will most likely be sitting pretty in the future.

It requires a lot of time to sift through all the new games, and determine which ones have NFTs worth investing in, but this effort will definitely pay off in the future. Consider following @zima_red and @DCLBlogger on Twitter for further insights.

Decentralized Exchanges

Forget about the NYSE, NASDAQ, and TSX - DEXes are the next generation's way of trading digital tokens. And the DEXes that will accrue the most value will be the fastest, cheapest, and easiest to use. Did you see Pankcakeswap overtake Uniswap in trading volume? It may be a good idea to start investing in up-and-coming DEXes on lesser-known blockchain platforms.

And do not sleep on cross-chain DEXes. What happens when government oversight of centralized exchanges like Binance and Kucoin become too burdensome for the people? They will seek alternative trading platforms with less friction. And right now Thorchain (RUNE) offers the only cross-chain (non-wrapped) native asset swaps.

The Community Aspect

What have we learned from coins like Dogecoin and Shina Ibu? It's often not innovation and decentralization that makes a cryptocurrency valuable, but the culture that forms around it. Crypto offers a sense of belonging that no other technology has before it. Let us not dismiss meme-coins, but rather accept the new techno-culture that is forming around them, and take that into consideration when making our investment decisions.

In Closing

Given the amount of blind capital rushing into Bitcoin, Ethereum, and the original DeFi coins, it wouldn't be wrong to assume they've been overvalued. Their collective innovative successors will most likely overtake their marketshare in the years to come.

The crypto space is nascent - we still don't know who the winners and losers will be, but we can make educated guesses. Some of your investments will fall by the wayside, and others will increase in value more than you could have ever imagined. The key is to keep yourself open to new information via social media (decentralized, whenever possible), Leofinance, Odysee, etc. and to take some well-calculated risks on a variety of assets.

The innovation will not stop - and that's a good thing. Security, ease of use and efficiency will all improve until we finally reach an optimal decentralized financial system. It's going to be a wild ride, and the most important thing is to enjoy the journey!