Despite a bear market, the future of cryptos is still bright: Crypto in 2023

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2022 has been quite a year for crypto. It has seen incredible innovation and greater adoption. This progress has been accompanied by major growing pains, including major hacks and scams in an overall bear market. Unexpected developments that took place towards the end of the year, such as the trend of abolishing creator royalties and the collapse of FTX, will reshape the space in the coming year, forcing users and projects to adapt to a changing landscape. Considering all the space has been through in 2022, here are the biggest predictions for crypto in 2023.

NFT adoption expected to continue with focus on technology standards and utility

NFTs could be more widely adopted as technology standards and as utility-based primitives, leaving behind the highly speculative age of PFP, 10K or 1 in 1 collections.

In October 2022, many major marketplaces such as LooksRare and MagicEden began making creator royalties optional or removing them entirely, meaning creators would lose a major source of revenue. Since royalties are a big part of what attracts and retains creators to Web3, this may threaten the use case for NFTs as art. New technology standards are likely to emerge to address the royalty issue, but in the meantime, NFT technology will filter into other industries.

Even before the royalty debate, as the market became saturated with countless collections with no clear utility, it was becoming clear that use cases for NFT primitives would grow. While in 2022 we saw NFTs become more widely used in entertainment, games, and sports, 2023 is likely to introduce NFTs to DeFi. DeFi projects are already seeing the need for tokenized data for security, convenience and transaction speed and NFTs are the optimal solution. DeFi-oriented NFTs will demonstrate that the foundational technology securely transports all types of data, further expanding its use cases to include medical records, legal records, and copyright documents.

Another place where NFTs found a home last year was with big brands. In 2023, more traditional brands and creators could enter Web3, seeking tangible utility for their NFTs. By supporting NFTs with physical products, brands can diversify and augment their products to provide unique benefits to customers, which can help them reach new audiences, increase their overall presence, and generate revenue.

NFTs will continue to power the metaverse, a strategic entry point for luxury brands

The metaverse has proven to be a strategic avenue for brands to further showcase their latest collections, increase community engagement, and launch virtual events such as the Nikes .Swoosh collaboration or Burberrys Minecraft.

Metaverse-based activations allow users to virtually experience the track or have their characters wear new parts in a game. Community experiences fuel fan collaboration on next-gen virtual creations, increasing loyalty and retention. Luxury brands can make themselves more accessible and extend their reach to audiences around the world by hosting shows in the metaverse, rather than at a single physical event.

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Government directives and regulations are more likely to occur as technology advances

The SEC has already launched investigations into Ripple and Yuga Labs over potential securities violations. Big companies in the sector will continue to come under scrutiny from the SEC this year as the technology becomes more widely used by businesses and individuals. The Terra/Luna debacle and FTX’s insolvency are two major events that have increased regulatory pressure on lawmakers, ensuring regulation will remain a priority in 2023.

This year, regulators will likely weigh the merits of algorithmic stablecoins and assets backed by reserve-based stablecoins like USDT. Regulators will seek to determine whether these controversial assets are sufficiently positioned via technology or assets to justify being marketed as pegged to the dollar.

Greater commercial and institutional adoption of DeFi

DeFi could be more widely adopted by retail investors in 2023, once they regain confidence in the crypto space. Although the FTX debacle has left many investors and companies intimidated and skeptical of crypto as a whole, it only further proves the overall crypto narrative that the space needs more decentralization. . This could drive investors away from centralized exchanges and lenders towards DeFi alternatives.

Once these hurdles are overcome, retail investors can find more tangible use cases by lending and borrowing against on-chain collateral or engaging in derivative activities powered by trustless smart contracts. Institutions could also enter the DeFi space, offering lending and market-making initiatives while selecting the safest partners to do so.

The combination of increased retail and institutional participation in DeFi will result in tight network effects. Increased use of retail will increase the volume of assets, which will lead to more opportunities for institutions to provide liquidity, which will facilitate the integration of retail investors without execution risks, which will increase ultimately the use of retail and will create a positive cycle.

New trends come with challenges

Security and reliability are the keys to the success of NFTs and Web3. To combat malicious actors, hackers, and scammers, businesses must prioritize robust infrastructure and strong security. Success and growth are built on trust. If consumer confidence declines due to hacks and scams, projects and businesses may face difficult roads.

While security is paramount, consumer education is essential for any project or company pursuing business strategies in Web3 and NFTs. Since conversations around NFTs are currently mired in doubt and fear, projects need to invest more in educational tools for their communities by posting blogs or hosting webinars and Twitter spaces to alleviate this uncertainty.

Finally, despite Web3 regulation posing many challenges for the ecosystem, the regulatory direction of 2023 could actually positively resolve much of the gray area that exists today for digital assets like Bitcoin and Ethereum. This could make it easier for institutions to onboard their customers, businesses to support and accept payment for crypto, and brands to engage in Web3 initiatives. The regulatory tailwinds will serve as a significant catalyst for the continued growth of this fledgling industry.

Anthony Georgiades is the co-founder of Pastel Network.

This article was published by Cointelegraph Innovation Circle, an vetted organization of senior executives and blockchain technology industry experts who are building the future through the power of connections, collaboration and thought leadership. The opinions expressed do not necessarily reflect those of Cointelegraph.

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