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Several Sectors to Watch During Crypto Winter

29 July 2022 15:00, UTC

It is strange to think that anyone could look forward to downturns in the crypto market. However, that is precisely the position held by many developers as well as project creators who like the low-pressure environment that exists during a bear market.

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Now is a perfect time to survey the landscape to check which sectors of the market are most active when it comes to designing the platforms that will reach good results in the next bull cycle.

Let's start with Layer-1 protocols. It is noteworthy that Layer-1 (L1) protocols like Bitcoin (BTC) form the foundation that much of the cryptocurrency ecosystem is based upon and enable most of the other sectors of the market to exist.

At the moment, there aren't many options available for launching other protocols on the Bitcoin network. Also, Ethereum has well-known limitations in terms of scalability, which can lead to high transaction costs and slow processing times.

Due to the above-mentioned factors, there remains a significant opportunity for other L1 protocols to establish themselves. Just remember that the total revenue generated by a protocol is one metric that can be utilized in order to determine which networks see the most usage.

Based on the data provided by Token Terminal, the top five L1 protocols in terms of total revenue over the past six months, excluding Bitcoin and Ethereum, are BNB Smart Chain (BNB), Avalanche (AVAX), Fantom (FTM), Helium (HNT), and Solana (SOL).

Crypto winter and new opportunities

Unfortunately, the Ethereum network has limitations in terms of scalability that won't be solved during the upcoming Merge, leaving an opening for layer-2 protocols to fill the gap by helping to reduce the activity that happens directly on the Ethereum blockchain.

Notably, Arbitrum is ranked number one in terms of total value locked (TVL).

One network that wasn't on the list provided by L2Beat, but remains the most highly adopted L2 in terms of active wallets, as well as protocols launched, is Polygon (MATIC). It currently has a TVL of $1.59 billion, according to data from DefiLlama.

In the case of the Bitcoin network, the main L2 solution that is presently experiencing increased inflows is the Lightning network, but there is no token involved with the protocol. Instead, customers can choose to run a node if they want to support the network and earn passive income.

Gaming and investors

Investors should pay more attention to the gaming sector as well.

The gaming sector of the cryptocurrency ecosystem has proven to be one of the more resilient when it comes to keeping users engaged during the current crypto winter.

Data from DappRadar shows that some of the top games in terms of active users include Alien Worlds, Farmers World, and Splinterlands. All of them operate on the WAX network, while Axie Infinity is the top game in terms of the value of assets held in its smart contract.

Don't forget about other games that are under development. They attracted a lot of attention. For instance, Illuvium and Aavegotchi, as well as tokens that represent gaming ecosystems such as Enjin Coin (ENJ), Gala (GALA), and Ultra (UOS).