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Hot Topics in Crypto 2023

Major themes and developments in NFTs, Web3 Social, Gaming and more.

I am happy to share my 4th yearly forecast on crypto — wait we call it Web3 now — with you. 2022 was one of the most turbulent years in crypto history, showcasing how early the space still is. Markets crashed, ecosystems collapsed (Terra), millions exploited (Ronin bridge hack) and the shocking FTX bankruptcy made the headlines.

While it was a bad year for most traders, I like the bear market as most innovation happens when speculators and hype riders leave the space and the people interested in the sector’s sustainable growth get to work. Many of the innovations being built now will drive the next bull run, as was the case with the last bear market in 2018. While I have no crystal ball to look into the future to see if the bull will already be back in 2023, multiple trends will dominate 2023 and beyond that I want to share with you.

As this is also my first forecast in a bear market since I started with this series in 2019, I want to make something very clear: Crypto and blockchain technology are here to stay and market crashes like the one in 2022 that we see every two to three years since the inception of the space will not change the fundamentals. The technology is becoming increasingly mature and talent is joining Web3. The future is very bright even if it does not seem like this at the moment.

As always I hope you enjoy reading this post and it helps you set the right focus for 2023.

Web3 Social

Let’s start with my favorite crypto sector: Web3 Social aka Decentralized Social (DeSoc). In my last year’s crypto forecast I predicted that decentralized social media will become one of the next trends in 2022. In May 2022, Lens Protocol by the Aave team launched and was one of the few projects growing despite the bear market*. Even though Web3 Social is still early it is generating more and more traction and I am very confident in predicting that this will continue even more 2023. The Twitter turmoil from 2022 will further help accelerate adoption by the crypto community, and the next web2 social scandal is surely waiting around the corner. UI/UX for Web3 Social applications will further improve over 2023. The Lens team for example announced a scalability update for early 2023 that would allow Lens Protocol to handle up to 50k transactions per second (TPS). In comparison Twitter’s average TPS is around 5.7k TPS. This would make Lens as scalable as Web2 social platforms. Further I expect to see more and more apps that leverage Web3 characteristics in 2023 as currently many applications on Lens, Farcaster or DeSo are simple copies of Web2 platforms.

Web3 Credentials

Connected with the emergence of Web3 Social is the increased usage of on-chain credentials, in most cases NFTs, for 2023. NFTs can not only be used as fancy profile pictures on Twitter to show that you were either early or rich enough to acquire one but to represent and prove certain attestations like certificates, grades, work experience etc. Already in 2022, we saw increased usage of POAPs that prove your presence at a particular event, NFT collections like Poly representing support for a cause, or soulbound tokens (SBTs) that are non-transferable NFTs bound to your wallet. For 2023, I expect to see increased usage of such digital reputation tools and more utility for their owners. There are multiple Web3 LinkedIn projects out on the market (e.g. Social3) where we see the early usage of on-chain credentials in 2023. This trend will continue over the next years and it is only a question of time when DAOs and other projects will onboard their talent via these tools. NFTs as work credentials will be a central element of the future gig economy.

Mobile Applications

Many experts highlight the importance of user-friendly Web3 mobile applications as one of the critical elements to onboard the next billion people to crypto. For most current Web3 applications the mobile experience is not the best and cumbersome. Even basic actions like connecting your wallet can be challenging. Jumping back and forth between an app and Metamask is bad UX.

In 2022, one could see increased development of mobile decentralized applications (dApps) as Phaver, especially in Web3 Social, as most consumption on social media happens via mobile and not desktop. I expect to see significant improvements in mobile UI/UX in 2023 and for the following years in all major sectors of crypto: DeFi, NFTs, Metaverse, Gaming and Social. It will also be interesting to see how big Web2 players like Apple or Google will react to this trend and if they will change some of their app store policies to adapt to Web3 characteristics or not.

Account Abstraction

Another trend is the abstraction of the blockchain from the end user. This is nothing specific to Web3 but to new technologies in general. While in the early days of new technologies applications are very technical and require tech-savviness by users this will be optional in the future. The average end user does not care how a technology works as long as it brings some sort of advantage. The best example is the internet. What percentage of all internet users could explain how the internet works or directly interact with it? Could you?

This point is connected with the previous prediction to see more mobile-friendly Web3 applications in 2023 respectively better UI/UX. The more a technology matures the less technical it becomes for the end user. The same applies to blockchain applications. While till now one needed to be tech-savvy and interested to learn and use Web3 wallets like Metamask, there are multiple projects in different sectors working on putting the blockchain in the back. With this I mean that more applications will have a traditional Web2 registration and login method with email & password and the wallet will be created, funded etc. in the back and optional to directly interact with.

AAA Blockchain Games

… will continue to be developed. In my last year’s forecast, I predicted that sophisticated AAA blockchain-based games would hit the market in 2022. I was too early on this and believe this will also be the case for 2023. Developing an AAA game takes years (look at Rockstar Games with GTA VI) and while there are many projects building such games, they will probably hit the market in 2024/25. Maybe I will be wrong in this assumption but I believe that the next big blockchain-based games will not have a P2E setup but will primarily focus on NFTs as season passes, in-game items etc. like Haven’s Compass. The reason for that is that as Axie Infinity or STEPN have shown us P2E game setups as they are currently are not sustainable in the mid nor long-term and decrease the gaming experience when many players do not really want to play the game but rather earn a salary. This will also help onboard traditional gamers who are skeptical towards blockchain games because of the speculative characteristics of P2E.

Ethereum Upgrades

One of the main crypto events of 2022 was the switch of Ethereum’s consensus mechanism from Proof-of-Work to Proof-of-Stake, named “the merge”. Ethereum is constantly upgrading and multiple Ethereum Improvement Proposals (EIPs) are scheduled for 2023 and beyond. The most prominent one being the Shanghai upgrade that is scheduled for March 2023 which will enable withdrawals for ETH validators from the Beacon Chain among other changes. Also, sharding which should greatly improve Ethereum’s scalability will be rolled out over 2023–2024 according to the current road map.

Looking at the successful merge in 2022 by the Ethereum developer teams I am (like some scaling solutions) very optimistic about the planned upgrades and expect them to go smoothly without any bigger issues. Most probably some upgrades will be delayed as in the past but the changes will bring Ethereum and its ecosystem to the next level and prepare it for the next bull run.

Music NFTs

In my 2022 prediction I wrote about the usage of NFTs beyond profile pictures and collectibles, as NFTs can represent any type of digital medium. One particular application of NFTs beyond representing JPGs, PNGs or GIFs are music NFTs. Even before the last bull run and NFT hype of 2020/2021, multiple projects started to leverage blockchain technology to democratize the music industry. NFTs may be the missing element to make this a reality.

In 2022 multiple music NFT platforms launched, notable projects are Sound.xyz or Royal. Similar as with some Web3 Social applications, Sound.xyz grew over 2022 despite the bear market showcasing increased interest**. For 2023 I expect this trend to continue and see more launches of music NFT platforms, artists creating music NFTs, and increasing user numbers. Maybe the next NFT hype will not be about JPGs but MP3s.

Web3 Messaging

Most communication in Web3 is done through web2 providers, namely Telegram and Discord, or workarounds like connecting your wallet with an email address. This is bad UX and will change in 2023 and beyond with the increased adoption of crypto-native solutions. Yes, your wallet will turn into a mailbox. Multiple projects on the market take different approaches, protocol-first as XMPT or application-first as Tribes or Dmail. Besides the obvious encrypted peer-to-peer communication, it is also very easy to prove the genuineness of your counterparty, which in today’s web2 social can be challenging.

While the above is about users communicating peer-to-peer, the next level will be direct communication with the protocol itself. In the end, every blockchain transaction is some sort of message (send this amount to this address, approve this action, etc.), and the next logical step is directly talking with the protocol. I leave it up to your imagination what leveraging AI will do in the future. Imaging communicating with Ethereum as with ChatGPT. Yes, next level.

More Companies affected by FTX

While the FTX turmoil has calmed down a bit, and SBF will soon meet the judges, the full extent of FTX’s bankruptcy has not yet been revealed. For 2023 I expect more companies and projects to announce that they have been affected by FTX exposure. While this may cause some more FUD in the space this will be of short nature.

The whole FTX scandal will strengthen the space in the mid and long-term. Clear winners of the FTX scandal are regulatory-compliant players like Sygnum Bank and DeFi projects as users have seen the disadvantages of unregulated and centralized players in 2022. The scandal will also result in more regulation of the space which if done right will significantly help to make Web3 more mainstream and protect investor funds. The main takeaway of the FTX story is that regulation is needed, decentralization can be a solution and that the space is still very early. So, if you think you are late to the party, you are not!

I hope you have enjoyed reading this year`s forecast. See you next year!

*https://dune.com/niftytable/Lens

**https://dune.com/nicoelzer/sound-xyz

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Darius Moukhtarzade

Blockchain & crypto enthusiast with working experience from startups to corporates in blockchain technology. Thankful for being early in Web3.