2023 Metatrends
Trends were soo 2022 đ
Preface
New year, who dis?
Welcome back! We hope the holiday season treated you well and that youâre ready to dodge, dip, duck, dive, and dodge everything this new year has in store for us.
To help you dodge the proverbial wrench, this piece will synthesize the torrent of 2023 trends and projections hitting crypto twitter and newsletters, weâll present the metatrends.
We wonât be picking tickers and we wonât be projecting the marketâs macroeconomic trajectory.
We will be telling you where the vibes are â¨.
The Paperboy: 2023 Metatrends
Intro
If weâre covering 2023 trends it's because we think âcryptoâ will be around until at least 2024.
As this bear market rages on, some of you may no longer have the same level of conviction as you once did.
So prior to talking about the trends weâll try and help convince you that it's worth sticking around.
On their path to adoption new technologies go through mania, then crash, and eventually settle in the market.
This phenomenon is known as the Gartner Hype Cycle and is visually represented by a curve with this sort of trajectory:
Remember the dot-com bubble of 2000, where inflated valuations for internet companies (dot-com) were met by a stock market crash to the tune of a 78% drawdown (NASDAQ-100), leading to many companies going out of business?
(Interesting aside: in 1999, shares of Qualcomm rose in value by 2,619%...lol)
Well in 2020 global internet penetration reached 60%, (one of?) the richest dude in the world made his money through a dot-com (internet company), and the developed world as we know it would end without the internet.
In short, the market punished overeager investors for their mania in a fledgling industry/technology, but in the end they were right.
The idea, and hope, is that âcryptoâ is following this same curve.
Not convinced, hereâs how Ryan Selkis, founder of Messari (the gold standard for web3 research and data) frames it:
Alright, hope thatâs enough to at least convince you to read the restâŚon to the trends!
Layers
There are three ways weâre thinking about layers:
Where will capital be deposited?
Where will activity take place (where will value accrue)?
What tech advancements will see the most progress?
This isnât a comprehensive analysis, but it's good enough to give us a framing for the coming year.
Capital (1)
Thinking:
High value, high trust chains (BTC & ETH primarily)
Reasoning:
2022 is the year of neutron star level implosions: Terra, 3AC, FTX, etc. (etc.! there are moreâŚthe scale of failures last year was crazy! đ¤Ż). Due to these âissuesâ and the macroeconomic landscape, market participants will be gun-shy and deploy primarily where they feel the most safe
Activity (2)
Thinking:
On dApp chains instead of L1s
Reasoning:
Last year saw the L1 wars among Ethereum, Solana, Avalanche, Fantom, Terra, etc. and like in many wars there werenât clear winners. That said, itâs uncertain users (activity) will reenter this battle. Furthermore, if we assume our first point regarding capital deployment is true, then it follows that users will be more comfortable interacting with dApps on Ethereum and Avalanche (for example) then venturing to other L1s.
Whatâs seemingly more likely is that we see activity in dApps (the apps users actually interface with on chain). As the market begins to mature more, âcryptoâ will have to add more value to users, and dApps is where this will happen. They can onboard users (if you want to listen to music in web2 you âhaveâ to download Spotify; if you want to do âXâ in web3 you need to interact with âYâ). Finally, unlike base layer chains, dApps have the ability to build moats:
Tech (3)
Thinking:
ZK roll-ups will be the continued focus
Reasoning:
Zero Knowledge (ZK) roll-ups are part of the ideal solution for dealing with web3âs growing user base. That said, teams will invest a lot of time and mind power to rolling-out deeper ZK solutions. Looking for more detail? Check out the ZK deep dive we published last year!
NFTs
Did you think of Bored Ape Yacht Club after reading âNFTsâ? Doodles? World of Women? Yes you did, donât lie, donât lieâŚ
Profile picture (pfp) NFTs were arguably the biggest offenders of last yearâs mania, remember Pixelmon?
To be honest, it might not fully be over, this was a few days ago đ¤Ś:
Thinking:
The NFT meta will shift from pfp to value (digital identity, subscriptions, membership, etc.)
Reasoning:
âEveryoneâ got burnt by pfp NFTs; however the pfp mania was successful for trojan horsing NFTs conceptually to the masses. âEveryoneâ knows what NFTs are now, âeveryoneâ has been able to grasp them in their most basic formulation (pfp). Now that the market and user base are maturing, projects will be incentivized to add more functionality and value to the underlying NFT technology.
In PwCâs 2023 Digital Asset Predictions they say âNFTs [will] become (somewhat like internet protocols) both everywhere and invisibleâ. This might sound crazy on first glance, but the signs of this starting seem to be apparent â remember when we covered Starbucks Odyssey? Bonus: To further NFT utility, it would also be reasonable to expect more widespread implementation of soulbound tokens (we spoke about them too đ)
DeFi
There are 2 principle observations that ground this section:
Part of the âgrowing painsâ of âcryptoâ has been the failure of centralized entities operating on-chain, CeFi if you will
Inflation be crazy yo
Thinking:
DeFi use cases and adoption will grow in quantity and quality
Reasoning:
There are 5x more stable coins now than in 2021, indicating that participants are willing to remain digitally native in order to deploy capital when conditions improve, opportunity is ripe, etc. and/or holding stables is a hedge against the rampant inflation of local currencies. We see this to be true particularly in LATAM, some 2022 stats from Brazil:
Stablecoin trading grew by 85% in 2022
More than $14b was moved via USDT in August 2022
And USDT orders grew 3x from 877.5m in October to 2.381b in December
If people are in stables then DeFi entities have an addressable market they need to meet. Furthermore, as the industry matures so should the offerings of DeFi players. But, weâve already begun to see this. MarkerDAO, the DAO behind the stablecoin $DAI, allocated 500m for US treasuries and corporate bonds (AKA real world asset backing) and entities like Maple Finance and Goldfinch Finance are spearheading under collateralized positions in DeFi.
These steps are on track to help facilitate real world asset (RWA) tokenization, which would open the flood gate for wider DeFi adoption. People use the value of their house to do access cool financial levers, RWA tokenization (âputting your house on chainâ) would let people do the same, but in DeFiâŚ.might be worth doing a The Paperboy about this đ¤.
Entertainment
The gaming industry is huge, like really big:
Thinking:
There will be a continue push towards quality web3 game development
Reasoning:
Web3 needs onramps for the uninitiated; NFTs proved to be really successful, but there is still enormous untapped potential in gaming, or entertainment in general. Web3 developers are aware that real success will be achieved when people are interacting with dApps just because theyâre having fun not because they are speculating. While last year saw rises and falls with things like Axie Infinity or STEPN, we can already see a march forward.
Gala Games recently announced a movie with the Rock and Mark Whalberg (even if they botched the announcement). Entertainment extends beyond gaming though, in spaces like music weâve seen the same, last year Audius (Spotify of web3) acquired virtual concert platform Soundstage to help make the web3 music experience more engaging.
Final Thoughts
Surely there will be other trends to catch fire, and some of the above wonât be a bullseye, but the key takeaway is that builders are building and that the future remains optimistic. There will be tech and adoption advances that should carry the industry forward and you should probably continue to pay attention.
Until next time!
Your weekly paperboy,
Alek
Additional Reading
