This was the year of the breaking blockchain.
News ceaselessly broke as blockchain tech failed to replace good old-fashioned human weakness. Consumers went broke, VC funds looked broke, and cryptocurrency companies went broke.
In many ways, humanity broke over new technology for the thousandth time. But like the dot-com bubble, the railroad explosion, and a hundred tech revolutions before this one, the underlying advancement should survive.
They just might use another name instead of cryptocurrency to define how humanity will use blockchain.
While Sam Bankman-Fried allegedly swapped customer funds like casino chips and donated to political parties, and Binance’s Changpeng Zhao typed up yet another “we are not broke, we swear” document, the Federal Reserve Bank of New York quietly announced it was building a central bank digital currency.
Blockchain, in all its incomprehensible glory, is likely here to stay. After two years of mayhem, the most recent bull run, where does that leave the industry? Many valuations are at an all-time low, and like fintech companies, crypto projects are feeling the heat of intense burn rates.
What do remaining firms have to say this holiday season about the new year?
Though this year, it became clear that DeFi, Web3, and centralized cryptocurrency companies are not the same; for a predictions round-up, they are included here under the same banner.
Bittrex cryptocurrency exchange
Oliver Linch is the CEO of Bittrex Global, a centralized crypto exchange in the U.S. It is the 34th-ranked exchange ranked for volume. He said his business has consistently argued that more regulation is better, and a crypto-friendly prime minister in the UK and Whitehouse crypto framework may have positive momentum in 2023.
“Regulation is a ‘need to have,’ not a ‘nice to have.’ It has been an uphill battle to educate industry professionals and policymakers on this idea and ensure the correct guardrails are in place for crypto trading across the globe. But the need has always been there.
“They reinforced my views that getting the fundamental, though arguably “boring,” parts of crypto right is essential if the industry is to be taken seriously.”
“The formal adoption of Markets in cryptocurrency Assets Regulation (MiCA) is penned for February 2023. Assuming no major bumps in the road, it will come into effect in late 2024. MiCa is one of the most extensive regulatory moves to be introduced to the crypto space, and we’re looking forward to seeing how it plays out.”
“If the lesson people have learned from the FTX collapse is that they should put their money in less regulated institutions, such as decentralized exchanges (DEXs), then they have missed the point.”
“The lesson for regulators is to beef up standards and increase controls on legitimate exchanges. Institutional investors are also paying close attention, as recent events make the need for due diligence very clear. Investors can no longer afford to take a punt on a project based on hype or a charismatic leader at the head of a company.”
Wirex crypto payments
Yves Reno is the head of trading for a cryptocurrency card payments firm based out of London. He said they could expect sinking asset prices and recession blooming on Main Street, but hopefully, blooming regulation to sort it all out. He also said DeFi would show its strength by comparison, and the next bitcoin halving in ’23-’24 might pull the industry out of the muck.
“The current crisis shook hedge funds, brokers, and asset managers. Their confidence has been severely undermined for years, or at least until a framework occurs.
“DeFi platforms are emerging and slowly taking over. DEXs like DYDX or GMX offering margin products are serious substitutes to FTX. They show daily volumes competing with some of the best-centralized exchanges.”
“The collapse of FTX confirmed that many centralized crypto entities have implemented poor standards. The lack of any serious regulatory framework and the absence of any sense of responsibility decimated years of effort toward democratization. The road to adoption is long and full of obstacles. But there is no revolution without blood.”
“With the prospect of 2024 halving, 2023 could be one of the best years for cryptocurrencies. However, there are important conditions to realize a great performance. DApps, including DeFi apps, must improve their standards.”
“In the meantime, investing in cryptocurrencies remains highly risky. Self-custody is the new trend. The safest and most rewarding way to invest is to keep our cryptocurrencies on-chain, on their original blockchain or DApp, and contribute to the community’s governance.”
Tokenized fintech tools with Securrency
Dan Doney, the CEO of Securrency, said companies that can build would start to pour out tech options for those interested in the space.
“At scale, we expect in 2023 for you to see a proliferation of parties who follow that template and give the parties interested in blockchain and investment on the blockchain a whole range of new options of reliable assets that can be efficiently transferred. And that isn’t purely speculative. In this world, I think the other prediction is you’re going to see an explosion of institutional applications of DeFi lending, trading, collateral management, etc.”
The DFINITY Foundation
Jan Camenisch is the CTO at the DFINITY Foundation, a major contributor to the ICP protocol. He said ethereum’s switch from Proof of Work to Proof of stake was a breakthrough despite the blowups of exchanges. He also said consumers’ distrust of web2 social media might push them to new platforms with better ownership.
“In response to recent Web2 social media controversy, decentralized social media platforms owned, controlled, and built by users could become the next big trend.”
“Web3 social media services are a good way to show off the advantages of blockchain and even incorporate previous trends like NFTs, DEXs, and fungible token payments or tipping among users. With all of these features, Web3 social media platforms will offer more versatility to users and protect users from the exploitation of centralized entities.”
“Most chains face increasing challenges as their user adoption outgrows their ability to scale. Scalability will be a major obstacle to mass user adoption. Due to recent controversies arising from the blockchain space, discussions around the regulation of cryptocurrencies are poised to become more pressing.”
“It’s hard to predict how markets will behave in the coming months. Some say the crypto market is getting close to a bottom; others believe the worst is yet to come.”
Cryptocurrency custody with SEBA bank
Mathias Schuetz is the Head of Client and Technology Solutions at SEBA Bank, a swiss regulated digital asset custody bank. Owing to this past year, their site has to specify customer assets are not comingled with the Banks balance sheet. Schuetz said the ethereum merge was a success, and Polygon had a fantastic year for partnerships. Still, the collapse of unregulated crypto service providers like Celsius and FTX shows the dangers of low regulation.
“Polygon had a stellar year bringing in major Web2 partners like Reddit, Starbucks, Adidas, and Meta. I expect to see these trends in crypto growth and engagement continue in 2023, with greater industry engagement from retail, corporate and institutional entities.”
“If they are not sufficiently regulated or transparent, it would not be wise to trust them with custody of your cryptocurrency. At SEBA Bank, our philosophy is ‘your bank, your coins.’ As a regulated bank, client assets are segregated from the bank balance sheet, ensuring that your assets are always available for withdrawal on demand.”
“Identity solutions on Web3 will be a major trend in the next cycle. Decentralized social network protocols like Farcaster and Lens are already building towards this, heralding the advent of new markets such as credit history-based services in crypto in the future. I predict scalability will continue to be a key area of focus throughout 2023.”
“In previous cycles, bitcoin (BTC) lost approximately 85%. In this cycle, it is down by about 75%. We are approaching the year mark for this bear market, so if we’re following the pattern of history, a bottom should not be too far away.”
Web3 media with Calaxy
Solo Ceesay is the CEO & Co-Founder of Calaxy, a Web3 social media brand who previously worked as an investment banker at Citi. He said when it comes to building tech, it’s remarkable anyone is still alive through the years of turmoil.
“After all that has happened, the fact that we’re still standing speaks volumes about how far the industry has come. Algorand is one of FIFA’s biggest sponsors, Google and Apple are consciously working towards providing payment solutions involving crypto, and the market is within reach of some regulation.”
“The most surprising trend of 2022 was the growing interest in central bank digital currencies (CBDCs) from global banks. For example, Sweden, China, Jamaica, Ukraine, and more are currently testing their beta networks.”
“My biggest learning from 2022 is that nothing is what it seems – if something sounds too good to be true, often, it is. Two of the main challenges witnessed by the industry unlikely to diminish in 2023 are ambiguous regulation and negative perceptions due to recent nefarious activity.”
“The lack of clear regulation has created a breeding ground for corruption and nefarious practices. Moving forward, builders may be a little apprehensive, and some institutional capital will briefly leave the space, but I am still incredibly bullish on decentralized technology.”
The Web3 internet-of-things with peaq
Spokesperson: Max Thake is the Co-founder of peaq, which aims to make easy the process of developing decentralized apps to run devices like vehicles and robots. He said 2022 taught him to beware of the bull#$^%.
“In 2023, beware of bulls – but keep building. The macroeconomic conditions pressuring markets across the board will continue for longer than optimists admit. However, this is not the death knell of Web3.”
“As always, usability is king, but more than usual in this bear market. If your project can deliver value to its users, you will survive the chaos of the market and contribute to the next era of blockchain, which will have fewer veiled scams and stronger foundations than crypto in the bull market.”
“Established corporations still have a place in Web3 when they combine their power with the disruptive technology of blockchain startups. As these collaborations increase, the result will be a flood of real-world use cases and values that prompt sustainable, healthy, responsible growth for the industry.”
Metaverse platform Over
Diego di Tommaso is the COO and Co-founder of a metaverse platform called OVER. He said the year has been fundamental to scaling, with layer two solutions called Rollups that could help bring billions of users to the blockchain. He said ease of transfer between layer 2’s and 3’s would make all the difference.
“In 2023, I can see the potential rise for L2s and ZK rollups. Scale economies and network effects will result from riskless access to L1 liquidity. Seamlessly moving liquidity between L1 and L2 without incurring centralized bridge risks will make a real difference in the success of Rollups and projects built on those.”
“2023 will see challenges in regulation risks. I am not confident regulators will clearly distinguish between DeFi and centralized exchanges when drawing the next bill on crypto regulation. The FTX collapse, with the usage of customer funds for speculative investments, would not have been possible in a transparent DeFi environment. This is why what we really need in 2023 is more DeFi.”
“We need to move from the “Don’t be Evil” of CeFi to the “Can’t be Evil” of DeFi. Looking closely at what happened with FTX, there is a lesson to learn on what should be regulated more sternly – CeFi – and what should be untouched – DeFi.”
“I would be quite surprised to witness a new bull run in 2023. I think that first, we need a better macroeconomic environment, and second, we need all the dust from the EOY 2022 debacle to settle to allow for a new, strong bull trend to flourish. Ironically enough, that likely brings us to 2024, the year of the next bitcoin halving.”
MakerDAO on decentralized governance
Corina Dolghier is a project manager with MakerDAO, a decentralized issuance platform that turns digital assets into a stablecoin called DAI. Corina said it was hectic and said the refrain “not your keys, not your crypto” is still present.
“Many projects have established and developed DAOs and are looking to figure out best governance practices – which I think will still be a trend in 2023, as no one has figured out a perfect governance model yet.”
“The market was hit by economic factors and user trust breach by the projects these users believed in. It seems that the major challenge in the following year (or even years) will be recovering that trust – not only in the face of users but also the regulators.”
Rebuilding trust will be the most challenging part of any project, especially for anyone looking to build something new in the space.
We finally shifted back to the importance of decentralization, and the projects built with the core values of crypto (such as decentralized ownership, power to the users, transparency, security, etc.) will be the ones to survive market shifts.”
CrunchDAO and investing advice
Arnaud Castillo is the CEO & Co-Founder at CrunchDAO. It describes itself as a team of researchers aiming to build an automated investing model that makes money even when markets go down. He said the team is optimistic even after substantial losses, compounded by fin-fluencers selling their viewers down the river.
“The current downward trend will give more firing power to the industry skeptics and will likely encourage users to offboard from centralized projects, looking to greater decentralized alternatives. We believe the DAO framework will move to the foreground in 2023 as a strong value proposition in the industry. In line with this, decentralized science (DeSci) will gain prominence as a new tool that harnesses the power of communities to create and build more collaboratively.”
“In the aftermath of FTX, platforms will have to prove their reserves so that this type of scandal doesn’t repeat itself. Discourse surrounding “Proof of Reserve” has surfaced to explore how maximum transparency can be ensured. Perhaps “Proof of Liability” should also be traversed.”
He pegs the bottom of crypto prices in Q1 2023, around $10k per bitcoin, following right behind the S&P 500.
German DeFi with Swarm
The DeFi trends to watch in 2023 – Katie Evans is the head of PR for Swarm. This BaFin license DeFi platform enables clients to trade crypto alongside traditional assets under the safety of German financial regulation. She said the three main themes of the year in review were self-custody, attestation, and securitization.
“This year has been a watershed moment for DeFi, and the wider crypto sector. We’ve had not one but two market flashpoints that have taken out some big names in the space. But this will clear the way for stronger, better organized, and more sustainable innovators in the coming years.”
“One of our key trends to watch springs directly from the FTX saga but was already emerging in relevance – self-custody.”
Businesses have grown based on custodian models, and entire populations are used to having their money kept safe by someone else. 2023 then needs to be the year the sector promotes and delivers realistic self-custody options to holders.”
Eventus on preparing for new crypto rules
Mike Castiglione is the Director of Regulatory Affairs and Digital Assets for Eventus, a trading security and fraud-fighting company. He said the market turmoil proved users need more protection and transparency.
“In 2022, we saw significant moves in crypto policy globally. This includes major legislative drafts in the EU and United States.
“For 2023, we’re closely watching the pace and ambition of crypto policymaking. The debate has grown from AML and sanction enforcement to a sharp focus on consumer protection and countering market abuse. During the past 12 months, we’ve seen a growing consensus that crypto regulation should be “comprehensive” and look similar to traditional financial regulations.”
“The good news is that in 2023 there are developed playbooks and tools available for the crypto industry to prepare for policy changes and more intense enforcement scrutiny.”
“Governments worldwide are using the phrase ‘same business, same risks, same regulation’ to explain that firms should look at how other asset classes are governed and apply that framework to crypto. Even investors promise more due diligence, and in 2023 we expect more VCs to ask about a company’s regulatory practices and technologies before allocating money.”
“The crypto industry will likely get ‘back to basics’ – trust and verify with proof, have transparency by default, and prevent double-spend and double-lend.”
Eco-Friendly crypto with Reneum
Brianna Lee Welsh is the Co-Founder & CEO of the Reneum Institute, an environmental movement trying to turn ecological protection into a marketplace for investors. She said regenerative finance (refi) will grow in relevancy in 2023.
“Private enterprises currently account for approximately two-thirds of our energy emissions. However, in recent years, the incentives of private profits and the planet have become increasingly misaligned.”
“This divergence has resulted in significant adverse effects on the environment, which have worsened the effects of climate change. All the while, our chance to combat the negative outcomes is dwindling.”
“Accordingly, it is only with the buy-in of those companies producing the majority of emissions that we can feasibly hope to make impactful progress in resolving the climate crisis — and this is where ReFi enters the discussion.”
Cryptocurrency Accelerators with Cronos
Ken Timsit is the Head of Cronos Chain and Cronos Labs Accelerator. He said to compare 2023 to the bear market growth stage of 2019.
“Thousands of fintech professionals are now working in crypto. I expect they will apply their considerable skills and brain power to create a decentralized implementation of more efficient DeFi market infrastructures.”
“By the end of 2023, it will likely be much easier for self-custodial DeFi users to access the types of products that custodial players have been able to offer thus far: efficient order books, derivatives contracts, structured products, automated investment vaults, and renewed experimentations around collateral-efficient lending markets.”