Nobody can deny the year 2022 was a tumultuous one. We saw rapidly changing macro conditions and a definitive tightening by the central banks. And it seems we might soon be witnessing yet another bear market for crypto and all other risk assets!
While this year seems to bring with it a looming recession and several structural challenges to the global macroeconomic landscape, many remain confident. Builders and true believers continue to build and thrive in the Web3 space while the 'tourists' have pretty much left the market, albeit with a few bruises.
So, for those that remain, things are beginning to look a lot more promising. In this article, we will go through some of the emerging trends in crypto and Web3 that could bring the next wave of adoption and attention to this sector.
Top Emerging Trends and Why They Matter
In 2023, we anticipate Web3 trailblazers to continue realizing new ways to bring their vision of a decentralized internet to life. Here are our top predictions and why we feel confident they will change the rules of what we’ll be able to do online.
1. Decentralized Perpetual Exchanges
One of the most significant dependencies (and monopolies) over centralized crypto exchanges was the ability to seamlessly engage in leveraged trading of digital assets.
In 2022, we saw public trust in CEXs eroding, in particular, after the controversy surrounding popular centralized exchange FTX and the mass exodus of users due to the ‘contagion effect’ affecting most centralized exchanges.
However, we are now witnessing the rise of DPERPs that offer a host of leveraged trading features powered by smart contracts, all while the user can control the keys to their assets. The top DPERPs currently are GMX on Arbitrum, Gains-trade on Polygon, and Drift-trade on Solana. It’s likely we’ll see even more companies join the mainstream in 2023.
2. Onramp and Offramp Platforms
Retail users were equally affected by the collapse of centralized exchanges. This was translated, in 2022, into the adoption of platforms that were easier to use and allowed for fiat-to-crypto onramps and offramps. The tendency will undoubtedly continue to increase widely.
We at TransFi continue to build and integrate all major payment providers and gateways around the world. Although our initial focus is on Asia, where users are more familiar with modern payment types via mobile wallets, apps, Netbanking, and QR code scan-enabled methods (apart from conventional credit/debit cards and SEPA), we have already announced our expansion into even more markets in Africa and South America.
3. More Regulations and Regulatory Clarity
During the past year, we saw a cascade of failures and bankruptcies that included everything from crypto lending companies like Celsius, Vauld and BlockFi, hyper-leveraged hedge funds such as Three Arrows capital (3AC), the algorithmic stablecoin Terra Luna, crypto custodians like Genesis, market maker Alameda Research and the now infamous major centralized exchange - FTX.
For 2023, we can expect the scrutiny to increase so that another major mishap or a financial contagion is avoided, which could adversely affect investors globally.
4. Top Global Brands In The Metaverse
Large businesses and brands will continue making their presence felt in the metaverse, virtual worlds, and Web3-based gaming and entertainment.
Global sporting brands like Nike and Adidas and luxury retailers like Louis Vuitton, Dolce & Gabbana, and Gucci have already ventured into Web3. Even stalwarts like Amazon, Coca-Cola, Starbucks, and WalMart are testing the waters, and more companies are likely to follow suit.
5. New Use Cases for NFTs
In 2023, NFTs will unlock newer, practical, and interesting use cases. For example, we can see them playing an important role in effectively implementing virtual access passes, membership cards, loyalty tracking, proof of attendance (POAP), and identity verification using non-transferable (also called soul-bond) tokens.
6. Stress Testing For Layer 2 Protocols
Layer 2 protocols will most likely be pushed to show their true speed and throughput capacity. We will probably also see more major protocols moving primarily onto L2s for better scaling and cheaper fees in 2023, opening up new possibilities and better ease of use.
Some of the top L2 players in popularity are Lightning Network (on Bitcoin) alongside Arbitrum, Optimism, ZkSync, and Metis (on Ethereum).
7. Artist and Musician NFTs
In 2023, artists and musicians will continue to explore NFTs, testing newer and better revenue models and customized royalty metrics. We can also expect more engagement with fans and an active effort to build a loyal fanbase or community that can not only support art and music but also provide valuable feedback for future collections.
8. Privacy-Preserving Coins
We’ve already seen how users continue to adopt privacy-preserving coins. In fact, the curve for utility-driven demand continues to accelerate steadily as many governments are inching closer to launching their central bank digital currency (CBDC) - which would eventually remove cash like privacy from all retail transactions.
This trend is clearly reflected in the fact that privacy cryptos have not taken as big a hit as other comparable digital assets from the all-time highs of the bull market.
9. New Computation Techniques
On a similar line, zero-knowledge proofs and other privacy computation techniques could make their way to the mainstream in the shape of smart contracts and major Dapps. It’s worth keeping in mind, however, that the public nature of a decentralized ledger presents other challenges, such as frontrunning transactions and using clever tactics to gain an unfair advantage to achieve faster confirmations.
10. Stronger DeFi
In 2023, DeFi will move from an early stage riddled with poorly coded and easily hackable scams and rug pulls into offering more robust security protocols and improved UX for the next wave of users.
Appchains and modular chains using the latest tech could play a major role here. We believe DeFi will leave pure degens chasing unsustainable yields and going bust “video-game style” behind. Instead, we will see real people with lesser or no access to traditional financial services exploring decentralized finance options to park their savings or borrow capital for their needs.
11. Onchain Fiat Currencies
We expect more fiat currencies to go on-chain using a 'trusted' stablecoin format with a fully asset-backed setup.
The most popular dollar-backed stablecoin in the form of USDC (issued by Circle), and BUSD (issued by PAXOS), as well as other major currencies like EURO and British Pound Sterling, are soon going to be on-chain. This is likely to encourage faster settlement times between cross-border payments while lowering costs at the same time.
12. New Institutional Players
We will most likely see many new institutional players, both major and minor ones, continue to explore blockchain use cases. In 2023, they will probably also keep building investments and offering services to retail users. Keep an eye on TradFi investment portfolios involving equities and mutual funds. Also, should there be favorable regulations from countries like the US could skyrocket the pace at which this is happening.
If you feel that it’s going to be boring in this bear market season, you might be in for a surprise. Builders and those who understand the power of decentralized networks know that 2023 is going to be an exciting year!