• Scandals and price crashes shaped the crypto market in 2022
• Some crypto trends could still develop positively in 2023
• DeFi could even benefit from the collapse of FTX & Co
After popular cryptocurrencies such as Bitcoin were able to soar to new record highs in 2021, a crypto winter followed in 2022. The year was marked by negative headlines such as the debacle surrounding the crypto lenders Celsius and Voyager, the hedge fund Three Arrow Capital and the digital tokens Terra/LUNA and the bankruptcy of the crypto exchange FTX. The news sent shockwaves through the entire crypto market and caused numerous coins to crash. But despite the currently gloomy mood in the market, some crypto trends could develop positively in 2023.
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Decentralized finance
One area that could benefit from the collapse of once crypto star FTX is Decentralized Finance (DeFi), according to BTC-ECHO. Because the demise of the crypto exchange has shown the risks of putting your money in the hands of centralized crypto companies. Customers have lost confidence and withdrawn billions of dollars as a result of the troubles at FTX and other companies struggling in the wake of the crypto exchange collapse. Many companies in the crypto industry are now struggling to survive and have announced job cuts in recent weeks and months. And so, given the debacle surrounding FTX and other centralized crypto companies, the case for DeFi in 2023 is stronger than ever.
crypto gaming
2022 has not been looking too rosy for the crypto gaming sector. The numbers for games like Axie Infinity, which at its peak had up to 2.7 million daily users and a peak weekly trading volume of $214 million (November 2021), fell significantly during the course of the crypto winter. The popular blockchain video game was also the target of a hacker attack last year that stole over $6 million worth of cryptocurrencies.
However, as investment bank Drake Star reported in its Global Gaming Report last October, investors invested over $3.4 billion in NFT and blockchain gaming companies in the first nine months of 2022. It has been shown that investors continued to have a strong interest in blockchain gaming companies, even though the crypto market was under pressure. Half of the total amount raised and 40 percent of all funding rounds for private gaming companies were investments in blockchain gaming, according to Drake Star. These investments and new games coming out could prop up the crypto gaming space in 2023.
Ethereum’s Layer 2 networks
Another area in the crypto universe that could gain further prominence in 2023, according to BTC-ECHO, is Layer 2 – an umbrella term for certain scaling solutions for Ethereum. “A Layer 2 project is its own blockchain, which on the one hand extends Ethereum, but on the other hand the security guarantees of Ethereum also apply,” says ethereum.org.
Ethereum currently has a network capacity of more than 1 million transactions per day. However, when demand is very high, the network is quickly overloaded, which increases transaction fees – hence the need for scaling solutions. Layer 2 networks are particularly interesting because they offer scaling options for Ethereum.
According to ethereum.org, Layer 2 offers the advantages that transaction fees can be significantly reduced, transactions are still processed via the mainnet, whereby “users benefit from the security of the Ethereum network” and the projects “thanks to the higher transaction throughput, lower fees and new technologies […] to new and more user-friendly applications”. Therefore, it is possible that the number of transactions handled by Layer 2 networks will continue to increase this year.
Decentralized Social Media
Many are already familiar with the term “decentralization” from new technologies such as blockchain or non-fungible tokens (NFTs), but decentralized social media are now also being used more and more frequently. As Blockzeit.com reports, decentralized social media platforms can offer users more control over their data and privacy. Because according to the analytics agency, not a single entity owns all the data in decentralized social media in Web 3.0 – and can benefit from selling it to third parties. Instead, the data is distributed across different nodes or connection points within the network. According to Ethereum.org, many blockchain-based social platforms also hold native tokens that open up new ways to monetization enable content. In addition, the fact that there is no central administrator for the network creates a more democratic and collaborative environment. The system of governance allows users to democratically vote on important issues and have a say in how the social media platform evolves.
As a popular alternative to Twitter – after the takeover by Tesla boss Elon Musk and rapid changes in the short message service – the microblogging service Mastodon, for example, recently experienced an enormous increase in users. Other alternatives to Facebook, Twitter & Co., whose awareness and relevance could increase in the future, include Odyssey, Supernovas, Mirror, Diamond, Entre, Steemit, Hive, Minds and Diaspora.
Cosmos ecosystem
Another area of the crypto sector that could see growth in 2023 is the Cosmos ecosystem, according to BTC-ECHO. Cosmos bills itself as “an ever-expanding ecosystem of interconnected applications and services built for a decentralized future.” According to the company, Cosmos apps and services connect via the Inter-Blockchain Communication protocol (IBC), which enables the free exchange of assets and data across sovereign, decentralized blockchains.
In 2023, Cosmos could also benefit from innovations. Two years after the launch of the Cosmos Hub – a blockchain that provides key services for the interchain – according to Cosmos it will “play a leading role in the interchain by offering a wide range of key services”. As BTC-ECHO reports, for example, projects in the Cosmos ecosystem could be enabled with the interchain security model to outsource their security authority to CosmosHub at low cost. “Staked ATOM will be able to secure more than just the Cosmos Hub. In practice, validators will be able to send chains that request it (referred to as child chains) on an opt-in basis with their ATOM delegation validate as collateral. In exchange for securing child chains, ATOM stakers are rewarded with additional rewards,” according to the company on its website. In addition, Cosmos has already announced other innovations that are to be released soon, such as interchain accounts, which should offer a secure account for all digital assets, and Gravity DEX for exchanging tokens and collectibles between all connected blockchains.
It remains to be seen how these trends, but also the entire crypto market, will actually develop in 2023.
Editorial office finanzen.net
This text is for informational purposes only and does not constitute an investment recommendation. finanzen.net GmbH excludes any claims for recourse.
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