May 17, 2023
2022 brought a lot of skepticism in the Web3 market sparked by the crypto winter, the collapse of FTX’s centralized exchange, and the Terra (LUNA) crash. However, technological developments and market maturity across Web3, blockchain, and crypto will drive new use cases and applications in the coming year. 2023 could see increased adoption of Web3 technologies as interoperability improves, privacy becomes key, and decentralized finance grows. The blockchain space will see increased use cases in supply chain management, identity verification, and a continued rise of smart contracts and blockchain gaming. The cryptocurrency market will witness growth in crypto payments, stablecoin adoption, and new consensus protocols. Let’s dive into these trends to understand what to expect for 2023 and beyond.
What is trending in Web3 in 2023?
A major milestone for the Web3 space will be achieved once blockchains and metaverse platforms become interoperable, allowing seamless integration across networks and platforms. There are currently 8,865 unique cryptocurrencies operating on a similar number of blockchain networks, according to CoinMarketCap. This will make creating a multi-chain, interoperable approach to connect, share data, and utilize features and services across blockchain networks increasingly crucial in 2023. Similarly, there are various metaverse platforms and spaces for users to explore that require a similar level of interoperability to transfer assets, allow cross-chain social interactions, and conduct other activities without the restriction of siloed ecosystems.
One notable project trying to achieve interoperability is the Polkadot network. The network consists of parachains used to process transactions in parallel and a Relay Chain – the main chain securing Polkadot.
Decentralized finance (DeFi)
Decentralized finance is a growing Web3 trend that executes peer-to-peer transactions through smart contracts without intermediaries. These transactions include lending, borrowing, and staking. There’s an increasing interest in DeFi because of its benefits, like secure exchanges, cost-effective transactions, and immediate cross-border payments. To picture the market’s growth, all it takes is to look at the total value locked (TVL) representing the total value held by DeFi platforms which rose to $49.3 billion in May 2023 from $15 billion in 2020. Some major sectors driving DeFi’s growth include decentralized exchanges (DEXs), liquid staking, lending, and oracles.
Non-fungible tokens (NFTs)
Despite the market’s plunge in 2022, NFTs continue to gain momentum with new use cases this year. 2022’s lackluster growth can be attributed to a lack of understanding of use cases and a rise in scams in the NFT space, with over 80% of NFTs minted with OpenSea’s minting tool reported to be fake. However, the year ahead holds promise with the power of NFTs to prove authentication, opening up new business use cases like rewards and immersive experiences. Starbucks is already leveraging NFT utility through its Odyssey Rewards program that allows customers to earn “Journey Stamps” or NFTs that increase user points to unlock rewards.
Privacy and security
Companies and tech giants struggled with several cybersecurity attacks in 2022, which has led the industry to rethink security in the Web3 space. The sector will see increased investment in security for Web3 projects and a rise in companies focused on the cybersec space to shield the Web3 industry from potential threats. Web3 is not necessarily private, with blockchain networks open for anyone to track. However, the industry aims to change the privacy narrative by tackling crucial questions like what should be revealed to an auditor or what data a user can conceal. The sector aims to give back data control to users by allowing them to own their data and choose when they want to share such data with corporates or third parties.
What are the blockchain trends for 2023?
Blockchain in supply chain management
Blockchain technology is emerging as a beneficial tool in the supply chain industry to track and verify the movement of goods from their origin to their destination. The ability of blockchain networks to track the origin of products is highly beneficial to consumers that are environmentally and socially conscious of the product they purchase. These networks provide a secure, tamper-proof, and transparent record of movements reducing the risk of fraudulent activity and increasing efficiency. Over the years, blockchain technology will continue to become a popular use case for value chain management, source tracking, and data integrity tracing.
Smart contracts are a programming language used to develop self-executing contracts on blockchain networks that are automatically enforced after certain pre-determined conditions are met. The global AI and smart contract market is forecasted to grow at a CAGR of 53.39% during 2022-2029, as reported by The Business Wire. A growing interest in embedding smart contracts into processes is driven by its ability to automate complex transactions, improve efficiency, and slash costs. Smart contracts have several use cases, from supporting the development of financial applications to blockchain-based games, and 2023 will continue to see greater adoption across industries.
An estimated 850 million people lack official identification, as the World Economic Forum reported in a 2023 publication. This has created a massive opportunity for blockchain to provide decentralized digital identification systems that allow individuals to access legal IDs and participate in the digital economy. Blockchain-powered identification ensures privacy, an element often lacking in centralized identification systems.
Blockchain-based voting systems
Governments are searching for trustworthy, transparent, and secure voting systems, and blockchain networks are becoming an increasingly viable option. Zero-knowledge proof, an increasingly important technology in blockchain, can ensure voter anonymity and guarantee the immutability of a recorded vote. These encrypted transactions prevent tampering and ensure credibility. Blockchain-enabled voting systems also use smart contracts, which can automate processes like vote tallying and result declaration, increasing trust in the system. However, blockchain comes with threats and hesitancy around electronic voting, and though blockchain-based voting is gaining traction in 2023, governments are proceeding cautiously.
Blockchain in gaming
Blockchain-based games are gaining traction as development activities around gaming dApps (decentralized apps), and metaverses continue to grow. Blockchain gaming activity grew by 2000% from 2021 to 2022, according to DappRadar and BGA Games’ report. The market’s continued growth in 2023 and beyond is predicted to be driven by gaming app technology and the experience quality delivered by games. Popular games like Illuvium and Guild of Guardians promise high-quality gaming experiences.
What are the new trends in crypto in 2023?
Adoption of cryptocurrency payments
Though cryptocurrencies have witnessed a relatively slow adoption until now, developments in the space can see them gaining wider acceptance as a payment medium in 2023. Checkout.com reported that 40% of 18-35-year-olds want to use cryptocurrencies for payments in the next year (2023). With growing demand, merchants are driven to provide cryptocurrency payment options. Payments giants like Visa and Mastercard are also offering crypto payment transactions. Apart from the developing world embracing crypto as an alternative payment method, the Middle East, UAE, and Bahrain are also catching up in crypto adoption.
Rise in stablecoin usage
Stablecoins are digital currencies whose value is pegged to a financial instrument, asset, or stable currency, like the US dollar. The concept of stablecoins was conceived by Meta’s (formerly Facebook) Diem coin and has since gained popularity among enterprises looking to develop a stable alternative to crypto. Though market conditions have been turbulent in the past year, stablecoins like Cirle’s USDC and Maker’s DAI continue to secure a top spot by market capitalization. Consensys reported that the on-chain volume of stablecoins has increased over the year, with USDC’s growth at 15% YoY.
Decentralized exchanges (DEX)
A decentralized exchange is a peer-to-peer marketplace that allows individuals to trade cryptocurrencies without relying on an intermediary or centralized authority. While Decentralized exchanges have been a crucial part of the DeFi ecosystem, they needed to catch up while competing with centralized exchanges like Binance and Coinbase. However, particular market conditions are now driving DEXes to achieve broader acceptance. The volume on DEXes in January 2023 rose 27% over the previous month, the first increase since May 2022, as reported by Consensys. The recent FTX scam has led to concerns around centralized exchanges and piqued interest in decentralized alternatives. DEXes are technologically advancing by adding new features, increasing efficiency, and becoming more user-friendly, leading to its resurgence in 2023.
New consensus algorithms
New consensus protocols are underway in 2023 as the need for scalability, efficiency, and sustainability is evident in the blockchain and cryptocurrency landscape. In 2022, Ethereum, a leading blockchain technology, switched from a “proof of work” consensus mechanism to “proof of stake,” which reduced its electrical consumption by 99.9%, as reported by The Guardian. Another sustainable variant to proof-of-stake is “Proof-of-Space-Time,” a consensus protocol where the greater the storage space you offer, the higher the chances of being selected to validate a block, a mechanism aimed at reducing energy consumption.
Several trends will shape the 2023 Web3, blockchain, and crypto landscape. In Web3, interoperability, privacy, DeFi, and utility NFTs will shape the ecosystem. Supply chain management, smart contracts, digital identification, blockchain-based voting systems, and blockchain gaming are emerging trends in the blockchain space. In the crypto sector, the adoption of cryptocurrency payments, stablecoin usage, decentralized exchanges (DEXes), and new consensus algorithms will be noteworthy developments in 2023.
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May 17, 2023
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