5 Lessons for the New Year
What we learned in 2022 and our predictions for 2023
It’s been a Year
Let’s be honest: for crypto, 2022 was a bloodbath. Massacre after massacre this year continued to show that the vast majority of people prefer to chase easy money than use a cutting edge technology to its full potential. Just a few weeks ago, the FTX catastrophe annihilated all hopes that the “Crypto Winter” might soon be over, and most speculators now shiver in fear that the crisis could yet take an even uglier turn.
But cryptocurrency is just one side of the coin (sorry), the one application of blockchain technology that managed to capture global imaginations for the past few years. We have always maintained that there are many more interesting and valuable applications for this distributed ledger technology (DLT) beyond crypto. Now more than ever it’s important to separate blockchain from crypto, and highlight the technology’s fundamentally useful features beyond speculation. With that in mind, here are 5 lessons we can learn from the past year that demonstrate why this is important.
5 Lessons from 2022
Lesson 1: TNSTAAFL
Although cryptocurrencies were seen by many as a utopian solution to everything from global poverty to borderless banking, from where we are standing in December 2022 it looks like it only helped the rich get richer, while exploiting the hopefuls and squeezing every last penny out of the many true believers who thought that things would be made better by decentralized currency. Most of the crypto space, it seems, was more interested in getting rich quickly than in spending time and resources building something that would have lasted, truly benefited a larger group, and generated steady returns.
Ultimately, the problem lies in human nature. Show people two options: One is hard work with the prospect of eventually succeeding and having modest but steady profits; and the other is a gamble, with a small chance of quickly getting fabulously rich, but the risk of loosing everything. Most it seems will choose the latter. Unfortunately, as history keeps proving, there is no workaround for work. Speculative bubbles continue to appear, and sometimes someone is lucky, but these never last and when they pop they take everyone with them. The fall of many crypto majors is a typical example of what happens when someone assumes the market can only move in a single direction. It’s safe to say that the old proverb remains true: There’s no such thing as a free lunch.
Lesson 2: “Real Value” will be even more important in 2023
However, this is not where the story ends. For crypto, 2022 was a bad year and it’s not looking like 2023 is going to be all that much better. For enterprise blockchain, however, it’s a different story entirely. Despite crypto’s freeze, the underlying technology has continually proven to be valuable in a wide variety of applications. Over the past few years, we have seen the emergence of innovative applications and business models that solve real problems. For example, secure digital identity solutions, or advances in logistics and proof-of-origin. Tokens, too, have become more “down to earth,” with real asset backing and/or understandable (and non-scammy) business models. This is how 2023 will most likely continue, striving for real-world applications of a helpful new technology.
Blockchain technology has always been uncomfortably wedged between its obviously perfect purpose of creating “digital money,” and this plethora of real-world use cases. But these can be difficult to apply for a variety of reasons. In some ways, it’s a bit like having an electric car while living in an area with very few charging stations. The electric car itself is great, but it has limited use if you have no means to charge it. Same with blockchain. It is a great tool to, for example, prove the authenticity of data; but first, things have to get more digital. Believe it or not, a lot of businesses and legal procedures still run on paper. It’s only in the last couple of years, partly due to the pandemic, that we have really seen a push towards digital transformation in many areas. And it’s not surprising, given that the number of people on this planet is rising, and with it the complexity of our social, financial, and cultural interactions.
Lesson 3: Navigating the Hype Cycle
One thing to consider as we prepare for a new year is where we are in the inevitable cycle of hype, disillusionment, and eventual productivity that helps to define the progress of technological development. Looking at the crypto market, it’s easy to conclude that we are deep in the trough of disillusionment. Blockchain, however... Blockchain, however, is a bit different to other new technologies where such a simple curve applies. Within the categories of Web3 and DLT there are many such curves which overlap. The NFT curve, for example, started around 2019 and peaked in 2021. These are in contrast to many cryptocurrencies, which can possess some form of intrinsic value, NFTs were sold as “art.” They are more a tulip bubble than anything else.
In early 2022, the trading of NFTs saw a dramatic drop. Prices were supported by people buying their own NFT’s to make them appear more valuable than they were. Since it is quite easy to produce an NFT “the classic way” it was clear that sooner or later there would be NFT’s in abundance. We will still see new NFT’s arriving on the market. Especially from famous brands, which picked up the idea at the peak of the cycle and — after having kicked of the project and funded it — will at least bring it home and make sure they don’t have to write off the investment completely.
There is little utility value in most NFTs these days, and given the economic downturn that is currently affecting the world, together with the uncertainty of 2023, most of the exciting and expensive NFT projects (mostly aimed at the metaverse) that would have given them more value have either been stopped or paused. The result is the same. Anyone expecting a real and functioning metaverse in the style of “ready player one” to emerge in 2023 should really temper their expectations. For the CoreLedger team, we are looking at a looming plateau of productivity. But more on that in Lesson 5.
Lesson 4: Nothing Lasts forever
Given the lessons we’ve discussed so far, it’s safe to say that for the market as a whole the outlook for 2023 is mixed. On the cryptocurrency front, things look rather bleak. Governments have been looking for ways to get the new technology under control, with many states already preparing tougher regulation in the aftermath of the FTX meltdown. Governments have an incentive, as well as the means, to block and counter any further adoption of unregulated cryptocurrencies. At this point, anyone should take that into account when making an investment decision in crypto.
Private coins might see a revival under these circumstances, but whatever moves in 2023 on the cryptocurrency front will be largely driven by institutions and CBDCs. The days of early mover advantage are long gone. Big money and big business is taking over the industry, and it will become yet another financial tool with leveraged products, the antithesis to the original idea of Bitcoin.
On the one hand, it’s safe to say this because people have “gotten wise” and the easy/gullible money is now more or less exhausted. The days of Token Sales backed by vapor and hot air are gone. At the same time there is a global economic crisis looming. Investors will carefully chose the projects and do due diligence before they commit their money. And in such a young industry, the few ‘older’ companies have a distinct advantage. The golden days of crypto are over after 2022. Even if prices move beyond their 2021 peak, the sentiment will never again be the same as it was.
Lesson 5: Stay Positive
A good analogy to think of when considering how new technology gets adopted, is a mining operation. As long as there is enough rich ore close to the surface nobody bothers digging long shafts into bedrock to reach the veins deep beneath the surface. But once the surface deposits are depleted, the miners move deeper. That’s exactly how one could visualize the state of the crypto and blockchain space. Crypto was the rich ore on the surface, but by now the easy money has been made, and between all the scams, market crashes, rising mining costs (both literal and environmental), and increasing regulation, it’s clear that the gold rush is well and truly over.
Token sales and NFT’s resembled yet another deposit close to the surface, and they were exploited even faster. But as we enter 2023, all that’s left for the market now are the large but hard to reach deposits; the ones where you actually have to invest work, time, and resources. That’s the industrial applications of blockchain technology. These may be difficult to exploit, but they will ultimately provide the whole mining operation (blockchain technology) with a steady supply of sustainable business. Not a 1000% profit of course, just regular business, with average but consistent profits. With most of the easy deposits now depleted, 2023 will be a year in which the technology shifts to industry.
That’s why the CoreLedger team is staying positive and looking forward to the coming year. We’ve already seen the emergence of applications such as track & trace on blockchain, certificates of authenticity for collectibles, art, jewels and documents, notarization, security enhancement, etc. That’s how the journey continues for us and our entire industry, by focusing on delivering real value to businesses. We hope you’ll join us in 2023.
At CoreLedger, we believe that blockchain is a practical technical solution to improve and solve a wide variety of issues across industries and sectors, which is why we try to cut through the hype and focus on real-world applications, not just what’s technically possible.
CoreLedger’s mission is to help businesses of all sizes quickly and affordably access the benefits of blockchain technology. From issuing a simple token to enterprise-grade token economy solutions, we have all the tools and components you need to quickly and affordably integrate blockchain into your business whether you’re a new startup or a big multinational enterprise.
Interested in our results-focused, real-world approach? Visit our website for more information, or get in touch with us directly to discuss your project.
