You may find the following articles on Ethereum interesting if you want to know more:

The Flippening- Will Ethereum ever Become Bigger than Bitcoin?

What is Ethereum?

What are Smart Contracts?

DeFi

Okay, okay, I know… This one is a cop-out. But come on, from all the incredible DeFi applications out there, I couldn’t pick just one project, so I am including DeFi as a general category. It is up to you to figure out which ones will stand the test of time, I’ll let you know which ones have our attention.

For anyone who doesn’t know, DeFi stands for Decentralized Finance and it is one of the most revolutionary aspects of crypto. It was the first major use case for Ethereum, and one of the many reasons that Ethereum and crypto itself became so dominant.

A Good Overview of the DeFi Evolution. Image via bip-group.com

Imagine a technology so powerful that it can replace banks, institutions, financial regulators, and investment firms around the world. A financial application technology stack that once launched, does not need to be controlled by anyone, meaning no greedy and corrupt middlemen can manipulate it. A fair system where no high fees are taken from the consumer to pad the bank accounts of the elite. A system where no corporations can make billions by exploiting customers, as is the case with the legacy financial system in place today. 

I think this 2017 survey from the Cato institute highlights that I am not alone in my distrust of the financial sector, and this was long before the current financial crisis, meaning these figures are likely substantially lower today.

Image via Cato.org

An even more telling survey from The Street shows that only 14% of respondents aged 18-29 say they have any faith in the financial sector.

Can you blame society for the mistrust? Take a look at these next images and try keeping the blood pressure at acceptably low levels:

Money Laundering, Market Manipulation, and Terrorist Financing are Just Some of the Penalties. Image via infocreditgroup.com

And we are supposed to trust these companies with our financial livelihoods? As the quote in green below states, it’s only because these banks have become so large and powerful that they can get away with decades of shady and criminal dealings. It’s truly sickening the lack of justice, morality, and integrity that finances our world.

Image via BetterMarkets.org

And this is barely scratching the surface, we haven’t even gotten into full-blown scams like Madoff, gross instances of negligence like the Lehman Brothers, Enron, and FTX, or the irresponsible fiscal policies that resulted in the economic crash of 2008, and now the post-lockdown economic woes. All this gave rise to a desperately needed alternative.

Welcome to a truly trustless, permissionless, peer-to-peer completely democratic financial system that supports true financial freedom and fairness, one that can restore the faith that has been lost in the financial industry.

Welcome to DeFi.

Every one of the issues highlighted above can be solved with DeFi. Perhaps not now, but someday, and that is the key reason this sector has been experiencing astronomical growth. 

Rant aside, the key takeaway here is that DeFi has experienced exponential growth since its inception. The “DeFi summer” of 2017 sparked a movement that cannot be undone, and by 2021, the adoption of decentralized protocols that started off as a stream flowed into a river, and as awareness and adoption continue to grow, it is only a matter of time until the river becomes a flood as capital flows out of traditional finance and into its decentralized superior.

Here you can see the rapid flow of capital into Decentralized Financial protocols:

Value Locked in DeFi Protocols has Been On an Astronomical Rise. Image via DeFi Llama

And taking a look at Google search trends for “DeFi”,  we can see a clear upward trajectory over the past five years as crypto adoption grows and more people seek to understand it.

Search interest in “Decentralized Finance” has risen by 2,500% in 5 years and 14% since the collapse of FTX. Image via explodingtopics.com

Here is an image showing just how much capital is tied up in some of the largest protocols, keeping in mind that this is even after a year-long bear market: 

Image via Token Terminal

Value locked in DeFi went from $2 billion to $15 billion in 2020 and totalled $100 billion in 2021. Decentralized Finance is only possible thanks to what are known as Smart Contracts that run on blockchain networks such as Ethereum. You can learn more in our article: What are Smart Contracts?

And now, as promised, some of the picks that I am keeping an eye on in this space. Keeping in mind that I am still being conservative at this time until markets turn around, some DeFi projects that have withstood the test of time are the likes of Uniswap, Aave, Compound Finance, MakerDAO, and Curve, all primarily on the Ethereum network. 

Outside of the Ethereum ecosystem, Trader Joe on the Avalanche network is looking attractive at these levels as are MinSwap, SundaeSwap, and MELD on the Cardano network.

Preserving the “buying low” narrative, we see a steep drop in Total Value Locked on the top Ethereum DeFi protocols, which has a direct correlation with price. If DeFi sees the same rate of growth and adoption in the next bull market, price and value locked will exceed the 2021 highs.

Image via TokenTerminal

DeFi tokens remain an attractive investment during bear markets, as It’s not just the potential for capital appreciation of tokens that attracts users. I would be remiss if I didn’t mention the other benefits and use cases, basically, the whole point of DeFi in the first place. DeFi has the ability to facilitate lending and borrowing without the need for banks and provides ample opportunities to earn passive income thanks to processes like lending, yield farming, Liquidity Provisioning, Staking, etc. all of which can provide crypto users with income in both bull and bear markets.

I can’t go into the plethora of benefits that DeFi provides in this article, but fortunately, Guy has put together a video where he provides an overview of what this industry has to offer:

Polygon (MATIC)

Just as Batman needs Robin, Ethereum wouldn’t be what it is today without the Polygon network. Polygon is Ethereum’s primary scaling solution, also known as a “Layer two” or “sidechain.”

It was launched to help connect and grow Ethereum-compatible projects and blockchains and aimed to overcome Ethereum’s primary weakness, its lack of scalability.

During times of peak demand, the Ethereum network can see slower than usual transactions and network fees costing hundreds of dollars per single transaction, rendering the network nearly unusable by the average person. This is where Polygon came to the rescue, providing a technology stack that allows users to enjoy low-fee, nearly instantaneous transactions, processing up to 7,000 TPS, while still benefitting from the security of the Ethereum network.

Polygon at a Glance. Image via DeFi Llama

And it isn’t just us here at the Coin Bureau that are impressed by how Polygon has benefitted the Ethereum ecosystem, but Matic has garnered the attention of some major players and formed some heavy-hitting partnerships. 

It can be argued that Polygon is leading the way towards mainstream crypto adoption, announcing the following partnerships in recent months:

• Starbucks– Powering their loyalty rewards program
• Mastercard– Artist Accelerator Program
• Mercedes– Providing data support
• Facebook (Meta)– NFT support
• Instagram– NFT support
• Adobe– Artists can showcase digital art on Behance
• Twitter– Powering creator payments
• Stripe– Facilitating payments
• Draftkings– NFT support
• Reddit– NFT marketplace
• Adidas– NFT support
• Disney– NFT marketplace, AI, AR, virtual and metaverse development
• National Football League– NFT support

And this isn’t even a complete list, I just got tired of typing. With all of these massive partnerships, Polygon isn’t likely to be going away anytime soon. Another thing that gives them staying power is that they are not pigeonholed to a single niche. You will see from the list above that their partnerships range from powering NFTs to payments and Metaverse development. If one of those sectors is disrupted, Matic’s multi-utility use makes it that much more robust in the eyes of investors.

Furthermore, Polygon has a large, well-funded, and active development team, and high levels of active users, often around the same levels as Ethereum itself.

There are Times When Matic has More User Activity than Ethereum and Considerably More Than Competing Scaling Solutions Optimism and Arbitrum. Image via Token Terminal

Those who are concerned about the environment will also be happy to learn that Matic network is carbon neutral.

Now I will highlight some issues that some investors have with the project. There are concerns over Polygon’s centralized nature, being considerably more centralized than many other networks. Cyber Capital founder Justin Bons claims that it would only take 5 people to compromise Polygon’s security, and 4 of the people are Polygon founders themselves.

Image via Twitter/justin_bons

This concern stems from the understanding that the Polygon admin key is controlled by 5 of 8 multi-sig contracts, with the Polygon founders holding 4 of the keys. The concerns don’t end there. The top 100 Matic addresses hold over 90% of the MATIC supply, which could lead to massive sell pressure and is a clear centralization of supply.

Image via CryptoRank

The final concern comes from the simple fact that there is a company behind Polygon. India-based software company Polygon Technology is primarily responsible for building and maintaining the network. This means that MATIC holders are open to third-party risk should the company mismanage itself and collapse, or become the target of regulations and laws. 

Despite these concerns, Polygon still makes the list as the company has proven to be incredibly innovative, competent, trustworthy, and reliable, and with the massive partnerships and utility that is only growing, I can’t think of many projects with as bright of a future as Polygon.

Stablecoins 

I know, it’s a bit of a boring one, but hear me out. 2023 is likely to be a long, boring, accumulation year and investors are going to need some dry-powder to dollar-cost average or lump sum into their favourite token projects, meaning that stablecoins are likely to remain highly dominant throughout much of the year.

We already see this trend very clearly with stablecoin dominance and market cap hitting a 5-year high as investors rush out of risky assets and into the safety of United States Dollar-backed stablecoins like USDC, USDT, Binance USD, and others.

Stablecoin Market Cap Hits All-Time Highs. Image via The Tie

As for which stablecoins, you can’t ignore USD-backed stablecoins as the US Dollar has shown incredible strength and resiliency post-pandemic, and US stablecoins have a considerably larger market cap than any other fiat-backed tokens, with far broader platform support.

USDC is arguably the most trustworthy stablecoin as Circle, the company that issues it, is audited and tokens are backed 1:1 with US assets. Binance’s BUSD is also audited and considered trustworthy, along with any other stablecoins issued by Paxos.

The stablecoins that raise red flags for some crypto users are the likes of Tether (USDT), due to its turbulent history and lack of transparency, and any algorithmic stablecoins until our wounds are healed from the Terra collapse and they can prove themselves over time.

Here is a look at which stablecoins hold the highest levels of market dominance as of January 2023 to give you a lay of the landscape and show you where crypto holders are placing their trust:

How USDC, USDT, and BUSD Compare for Market Dominance. Image via DeFi Llama

The key risk worth mentioning for stablecoins is it is uncertain how future regulations will impact the stablecoin market. You can learn more about Stablecoins in our Ultimate Stablecoins Guide.

Chainlink (LINK)

Chainlink makes the list as they have a similar dominance benefit like Bitcoin and BNB, and an impressive network and usability effect like Polygon.

Chainlink is what is known as an Oracle, connecting real-world information and data to the blockchain. It is a network of nodes that essentially bridges on- and off-chain sources of information. In the modern world we live in, data is everything, and Chainlink is the freeway that supplies crucial information to blockchain projects that could not run without it.

A Diagraph Representation of the Role Chainlink Plays. Image via Gemini

When we look at utility and partnerships, nobody has come close to seeing the levels experienced by Chainlink. Chainlink has partnered with over 1600 companies both in crypto and traditional industries, onboarding an average of 1.4 partners per day in 2022.

For use cases, Chainlink provides services for blockchain projects in every niche of crypto, meaning that no matter what happens, some project providing some use case in some sector somewhere is going to need to rely on a data oracle such as Chainlink.

While I obviously cannot list all 1600+ partnerships here, some of the key companies that utilize Chainlink are: 

• Google
• Amazon
• Oracle
• Binance
• Swift
• T Systems

When we look at dominance, Chainlink has the market firmly in its grasp with no other oracle project coming close to the size and scope of what Chainlink provides. Chainlink also had first mover advantage by over 3 years before we really saw any other similar projects sprout up in any significant capacity. The lack of competition, first-mover advantage, survivability and utility make Chainlink a great defensive play.

Looking at network effect and utility, Chainlink provides services for DEXs and DApps on the following networks:

• Ethereum
• Polygon
• BNB
• Avalanche
• Solana
• Fantom
• Arbitrum and Optimism
• Harmony
• Cardano
• Polkadot
• Tezos
• Bitcoin

So basically, Chainlink works with every major blockchain network. Regardless of what networks survive in the long run, they will likely be taking Chainlink along for the ride.

The two concerns about Chainlink come from the concentration of LINK holders and centralization. The top 125 wallet addresses hold approx. 80% of the total link supply, with the Link team holding about 25% of tokens, meaning they could manipulate price and cause considerable sell pressure.

As for centralization, while Chainlink as a network is decentralized, the fact that it is being controlled by a company opens investors up to third-party risk.

Though these concerns are fairly small in my opinion and are not enough to scare away Chainlink investors. Another feature that cannot be overstated is that Chainlink introduced staking in 2022, adding yet another utility to its belt. The snapshot below shows all the “up and to the right” type growth metrics that investors dream of:

Chainlink is Looking Like an Investor’s dream. Image via blog.chainlink

You can learn more about Oracles and Chainlink in our articles below:

Chainlink Review

What are Blockchain Oracles?

PAXOS Gold (PAXG)

Here we have another great defensive play. Just as gold has been used for centuries in its physical form as an inflation hedge, store of value, and currency, the asset has made its entrance into blockchain with gold-backed stablecoins.

Image via Paxos

During these turbulent and uncertain times of high market volatility, it is important to hedge investments and diversify one’s portfolio into risk-off assets. Gold has always played an important role here. Taking a look at the price chart, we see PAXG has held up considerably well during 2022 when compared to risk-on assets like cryptocurrency.

PAXG is Considerably Less Volatile Than Standard Cryptocurrencies. Image via Coinmarketcap

There are multiple gold-backed stablecoins available but Paxos is the one I am putting on your radar as they are a reputable and audited company, insuring that for each PAXG coin minted, one fine troy ounce of a 400 oz London Good Delivery gold bar is stored in Brink’s vaults and held in custody by the Paxos Trust Company.

PAXG is also the largest gold-backed stablecoin by market cap and is available on most major exchanges.

Buy PAXG on Binance!

Cosmos (ATOM)

Most of us in the crypto industry are of the opinion that the future of blockchain technology will be multi-chain and interoperable, meaning that applications built on networks like Cardano, Ethereum, Avalanche, etc. will all exist and be able to communicate and interact with one another.

Could you imagine a world where Mac computers could only send emails to other Macs, and users running Windows could only communicate with other Windows users? Or even worse, imagine if Dell computers could only message Dell, Lenovo to Lenovo, etc.

We can’t imagine that either and think the concept sounds a bit unfathomable. Sorry, Ethereum maxis.

It is with that reasoning that many of us believe blockchains will be interoperable, and that is exactly the use case that projects like Cosmos and Polkadot are trying to fulfil. Cosmos refers to itself as “the internet of blockchains.”

The Goal of Cosmos is Interoperability Image via twitter/cosmos

Some of the current networks building on/with and connected to the Cosmos framework are:

• Binance Chain (BNB)
• Terra
• Crypto.com Coin (CRO)
• Juno
• Polygon
• Ren protocol
• THORchain

Additionally, there are currently over 300 projects building with the Cosmos Software Developer Kit (SDK) as of 2023.

Cosmos is also able to bridge to Ethereum and Bitcoin and focuses on overcoming 3 major hurdles in blockchain:

• Sovereignty– When blockchains encourage all economic activity to take place on a single chain, they run the risk of centralization in governance, ongoing costs for smart contract developers who build on these chains, and the high fees that come with congested chains. Cosmos SDK is free for developers and promotes the building of sovereign blockchain apps.
• Scalability– This has been a major issue plaguing all blockchain networks. With Cosmos, developers can continuously improve and build upon throughput via horizontal scalability. Developers can duplicate blockchains to relieve congestion, split the apps on blockchains into multiple application-specific blockchains, and facilitate interchain token transfers.
• Sustainability– Because Cosmos uses a Proof-of-Stake consensus mechanism, it is quite eco-friendly and sustainable. 

According to Token Terminal, Cosmos has the second most developer activity behind Ethereum, tied with Cardano. This shows that despite the bear market, Cosmos is a thriving ecosystem with plenty of innovation happening.

Image via Token Terminal

To sum up, the reason Cosmos makes my list as a good defensive play, is again, thanks to its massive ecosystem, network effect, and survivability as multiple networks depend on it. Cosmos is also one of the best tokens for earning passive income by staking, so investors look to benefit from capital appreciation and staking income.

Cosmos is an incredibly complex and massive project, we barely touched on its full utility here. You can learn more about it in our Cosmos Deep Dive article.

You can also hear why Cosmos is one of Guy’s top picks in his interview with Altcoin Daily.

The biggest risk for ATOM investors is that there is a known lack of demand drivers for the token itself, something the developer team is aware of and is working on. Because networks build on top of Cosmos, fees on these networks do not need to be paid in ATOM, and the actual Cosmos network itself sees little user activity. Cosmos also underwent an ICO in 2017, so it could find itself in regulator’s crosshairs.

Another risk worth mentioning is competition. While there are not a high number of competitors in this niche, there is one primary contesting competitor, which is Polkadot. Polkadot is a well-funded and highly acknowledged blockchain that is also working on interoperability. Time will tell if the two will exist side by side like Coke and Pepsi, or if one will do to the other what Netflix did to Blockbuster.

Grab ATOM on Binance!

Cardano (ADA)

Last but not least, we have Cardano as a good defensive play. Despite most altcoins crashing in price by 90+ percent, Cardano has held up surprisingly well and has even experienced a price increase of around 20% in the first week of 2023 as whales continue to accumulate ADA.

Cardano is Pumping as we Enter 2023. Image via Coinmarketcap

This is no surprise to anyone who has been following Cardano closely. Cardano easily has one of the largest and most active communities in crypto, and its founder Charles Hoskinson, who also co-founded Ethereum alongside Vitalik Buterin and Polkadot founder Gavin Wood, continues to be a veritable beacon of light and hope in the space.

Hoskinson has been known to meet publicly with US regulators and congress, discussing the future of blockchain and lending his knowledge and experience to key decision-makers.

Though it is not reflected in the price, 2022 was a massive year for Cardano. Search trends for Cardano have skyrocketed in 2021, and to my surprise, Cardano led the entire industry in terms of total developer activity in 2022.

Cardano Led in Developer Activity in 2022. Image via Santiment

Cardano already enjoys a thriving ecosystem of over 1,000 DApps and over 4 million active addresses according to Messari. Despite the dull year from a price standpoint, smart contracts on Cardano surged an impressive 359% to a figure of 3,334, showing just how active development activity is. 

Image via Cardano Blockchain Insights

As the adage goes, keen investors look for who is building in the bear market as the amount of growth and progress possible in a bear market can help highlight the projects that are constructing a solid platform in which to launch from come the next bull market.

This tremendous rate of growth has been achieved before Cardano has even seen its final form. There are still plenty of exciting milestones set to launch in the near future that will see the network become massively scalable with high throughput, lightning-fast transactions, low fees, and even privacy projects such as Midnight being announced.

Cardano speaks to many who like to invest for the good of humanity as it is not only a carbon-friendly blockchain, but many of the members behind it are on a noble mission to make the world a better place. One such example of this is the remarkable impact the Cardano Foundation, Emurgo, and founding company IOG have had in Africa, where the project is highly active.

Cardano is Having a Positive Impact in Africa. Image via reddit/r/cardano

Another factor I find fascinating about Cardano is its partnerships with academic faculties, Ivy League universities, and governmental and global organizations such as:

• the University of Zurich
• Stanford University
• Edinburgh University
• Carnegie Mellon
• Ethiopian government
• Ethiopian Ministry of education
• Agence française de développement (AFD)
• European Bank for Reconstruction and Development
• Foreign, Commonwealth & Development office
• Federal Ministry for Economic Affairs and Energy
• Federal Ministry for the Environment, Nature Conservation, Building and Nuclear Safety
• Japan Bank for International Cooperation
• International Finance Corporation
• Ministry of Foreign Affairs of the Netherlands
• Norwegian Ministry of Foreign Affairs
• United Nations Environment Programme

It’s also notable to mention that tech giant Samsung has chosen Cardano as its blockchain of choice as we roll into a new era of blockchain-infused technology, and they even ran a tree reforestation campaign together.

Cardano is one of the most successful blockchains in terms of development upgrades, with the potential of overcoming the blockchain trilemma directly from within the core protocol architecture, something that has not yet been achieved by any crypto project on a mass scale. It’s too early to tell if Cardano has, in fact, cracked this cryptographic conundrum, but blockchains such as Cardano and Algorand appear to be making the greatest strides in that respect.

The Cardano Foundation and IOG have also proven time and time again to be a highly competent development team as their rollouts and upgrades happen in a timely fashion, unlike the Ethereum upgrade which has been pushed back and delayed for over 4 years and Solana, which routinely goes down as it was launched before it was suitable for use. We have seen very few issues like this with Cardano.

A Look at the Massive Cardano Ecosystem. Image via Cardanocube.io

Now to get into some concerns about Cardano. This may be a benefit or risk depending on your frame of mind, but Cardano suffers from poor community sentiment outside of Cardano fans. This is something Hoskinson frequently discusses and defends. Cardano has very little VC funding and backing, and we see Cardano often get the cold shoulder as prominent papers and reports seem to ignore Cardano’s existence, as we saw with Coinbase not even mentioning Cardano in their 2023 crypto outlook report.

Surely, you cannot release an article on the state of crypto in 2023 without even mentioning a cryptocurrency in the top five for market cap. Hoskinson argues that much of this negative press is the result of Cardano being academically based and not having the “ponzinomics” pump and dump hype as other blockchains, and without much VC funding, Cardano doesn’t have the same level of Lambo moon boys and high-profile marketing campaigns as other projects.

Regardless of the reason for the negative sentiment, despite Cardano’s massive community, ADA doesn’t normally “pump” in price like many projects, it plays more of the tortoise role in the famed race between the tortoise and the hare. Investors looking to make a quick buck may want to find other projects, though Cardano may be better suited for investors with a longer-term mindset.

The other concern that some may have about Cardano is its bold ambition to become the blockchain for government infrastructure. Hoskinson has already made it clear that Cardano will abide by global regulations and compliance, which puts some libertarians and anarchists off. I argue that I would rather see governments adopt a network like Cardano instead of creating their own dystopian blockchain nightmare, but this comes down to personal beliefs.

You can learn more about this advanced, third-generation blockchain in our in-depth Cardano review, and find out about the Top DApps building on Cardano.

Buy ADA on Binance!

Bonus Sectors to Keep an Eye On

As you have made it this far, I wanted to provide you with a little more alpha for those true degens out there that want to take early risks.

Without mentioning any specific projects, as we are in the incredibly early days of these trends and chances are that over 95% of projects building here today will likely not be around tomorrow, after months of research, collaboration, and consultation with other blockchain thought leaders, analysts, and proponent members in the space, the following industries are believed to have the most potential for moon rockets in the next bull run.

Metaverse + GameFi projects

Decentralized file storage projects

Web3 infrastructure projects

Decentralized web hosting projects

Decentralized Social Media platforms

Decentralized digital IDs

Scaling Solutions

There you have it folks, some solid defensive plays and what I consider to be the lowest-risk crypto projects. As always, nothing in this article should be considered financial advice, nor even recommendations. This article is simply intended to help you observe the crypto industry through the mind of a team who has been around the blockchain a time or two, and the sort of mental framework some investors apply when constructing a portfolio to match current market conditions and trends.

I hope that you found this article useful, and that we gave you a good starting point to do some of your own research to help you out on your crypto journey.

Until next time cryptonauts, safe hodling.