The final day of our ‘12 days of Cryptomas‘ feature series is upon us. There have been times this year when 12 days felt like 12 months, so it’s only appropriate that we take a look at the year ahead. Next year could potentially be make or break for crypto, but within that, there is a lot to be excited about.
This year has been full of uncertainty and disappointment for crypto enthusiasts–prices crashed, companies went bankrupt, and the momentum generated in 2021 was significantly blunted.
But it’s not all doom and gloom–far from it! Here are ten things to be excited about in the crypto space in the next 12 months.
1. Fast and Mild Recession
Most analysts agree that there will be a global recession within the next 12 months; the only question is what form of economic downturn will hit.
While doom and gloom might seem to dominate the markets, the world may experience only a mild recession. At least, that’s what JP Morgan predicts for the United States.
A mild recession would mean a risk-on environment, which would be more conducive to encouraging investors and institutions alike to invest in riskier assets like crypto. If this were to pair with a truce in Ukraine, the industry could see a new bull run forming in the second half of 2023.
2. Interest Rate Cuts
If the global economy suffers only a mild recession, it becomes more likely that the U.S. Federal Reserve will look to cut interest rates.
It’s no secret that the Fed wants to kill demand to win its war against inflation. And it seems that it’s already winning. The November CPI print saw inflation easing at an accelerating rate, 7.1% vs. the 7.3% expected—the fifth-straight monthly decline.
A lower rate environment would mean that crypto would receive more attention from investors and more access to funding for crypto startups.
It is possible that, even if inflation is tamed, interest rates are cut, and the looming recession is less severe than projected, crypto will not see sustained price growth within the next 12 months. The events of 2022 proved that what crypto needs the most right now is clear regulation if it wants to attract the big players.
Some leaders in the space, like Coinbase CEO Brian Armstrong, believe only centralized crypto entities like exchanges and stablecoin issuers need to get properly regulated. He said that decentralized finance and other blockchain-enabled spheres should be left to innovate.
Some work is already underway in this regard. The European Union’s MiCA legislation, a landmark crypto regulation framework in the region, is expected to go into effect sometime in 2023. The stipulations can set the standard for other nations worldwide to propose their own legislation, including answering the question of what constitutes a security and what does not.
4. Decentralized Social Media
If 2022 taught us anything, traditional centralized social media platforms are not entirely trustworthy. The Twitter File debacle that followed Elon Musk’s takeover of the company showed that even seemingly unimportant and ordinary accounts are monitored and policed by the FBI and other government agencies. Furthermore, unwarranted tweet deletions and account suspensions have become far too common.
On the other side, decentralized social media protocols and applications have been developed throughout 2022 and are set to shake things up next year.
Protocols like Lens allow its users to own, transfer, and use their data across multiple applications. Lenster, Phaver, and Lensta are just some examples.
In the next 12 months, we’ll likely see a higher adoption rate among decentralized social media applications, regardless of whether centralized apps up their game.
5. Ethereum Sharding
The next Ethereum upgrade, Shanghai, just got a little bit spicier. While one particular highlight is that stakers can unstake and withdraw their ETH, an even more interesting Ethereum Improvement Proposal (EIP) is included in the upgrade.
EIP-4844, also known as proto-danksharding, is an improvement proposal aiming to include sharding elements in the Ethereum design. Sharding is a scaling method that breaks up a blockchain into several pieces, or shards, to increase its capacity and significantly reduce gas fees.
Many see proto-danksharding and zero-knowledge Ethereum Virtual Machine (zkEVM) as the killer duo that will scale Ethereum to billions of people. While the timeline for implementing Shanghai and EIP-4844 is still unclear, it makes the next 12 months as exciting as when the Ethereum community waited for the Merge.
6. Zero-Knowledge Ethereum Virtual Machine (zkEVM)
Zero-Knowledge Ethereum Virtual Machine (zkEVM) is the holy grail of Ethereum scaling technology. Its goal is to use zero-knowledge proofs–a proving method that enables one party to prove something to the other without disclosing any information about the matter – to verify all EVM processes, increasing privacy and reducing costs.
While zkEVMs are notoriously hard to build, mainly because the architecture of the EVM is rather unfriendly to zero-knowledge proofs, multiple teams have made enormous progress over the last few years.
For example, Matter Labs has deployed its zkEVM solution zkSync for developers on the Ethereum mainnet this year and is aiming for a full release next year. Polygon has also launched its zkEVM on testnet. StarkWare, Taiko, Consensys, and others are also building zkEVMs.
As crazy as it sounds, 2023 can be a year of zkEVMs.
7. Web3 Gaming
Web3 gaming has been on everyone’s “it’s going to the moon” list for the last year, but it has yet to happen. 2023 has the potential to be the year that chances, as the blockchain gaming studios that received funding in 2020 and 2021 are finally putting the finishing touches on their games.
One such game is Illuvium. Illuvium is a fantasy play-to-earn NFT game that features a decentralized in-game economy built on ImmutableX with StarkNet’s Layer-2 scaling technology. It’s set to be the first AAA Web3 title.
Illuvium has been in the works for the last few years and is currently in private beta testing. More than 130 people have been working on making Illuvium the game that opens the floodgates to Web3 gaming.
Gaming studios like Animoca and Horizon will release their games in 2023. It’s going to be a gamer’s paradise.
8. Final Washout
Following the dramatic fallout of FTX, Guggenheim Partners CIO Scott Minerd said there would be more “shoes to drop.”
And he’s probably right. Digital Currency Group, Genesis Trading, Grayscale, Binance, Nexo, Crypto.com, and other crypto entities have experienced different financial instability or at least rumors of it. The question here, perhaps, is not “if” but “when.”
Why’s that a good thing? Crypto is not unlike traditional financial markets, where each credit cycle ends with final washouts of companies that were insolvent or built on a flimsy or otherwise illegitimate premise. To Minerd’s point, looking at crypto price and volume charts, it would be hard to believe that the washout has already happened.
The potential price dump resulting from such an event would present a unique opportunity to purchase deeply discounted assets in preparation for the next cycle. As Crypto Twitter likes to say: “a few more bankruptcies and then up only.”
9. Account Abstraction
Account abstraction is something Ethereum Co-Founder Vitalik Buterin has called “a dream” for developers. But what is it?
Account abstraction seeks to eliminate the existence of externally owned accounts (EOA) and contract accounts (CA) by unifying them. This would open the door to features such as multi-signature security, social recovery, and allow and block lists for addresses, to name a few. This would also eliminate the need for a recovery phrase.
While it’s unclear whether account abstraction will be added to the Ethereum Shanghai upgrade, a few protocols already work on account abstraction solutions. Projects like Loopring, zkSync, StarkWare, and Argent will undoubtedly take account abstraction to the next level in 2023.
10. The Flippening
It’s the moment that Ethereum proponents have been dreaming about since the inception of Ethereum itself.
Can it happen in 2023? Bitcoin has been steadily losing its market dominance over the past few years. If nations worldwide recognized Ethereum as a commodity rather than a security, it might be the event that sparks an unprecedented Ethereum rally. Combining this with Layer-2 scaling technology, there is a reality in which Ethereum could dethrone Bitcoin in 2023.
On the other hand, if U.S. regulators officially deem Ethereum a security it is unclear whether the same could be said. Chairperson of the Securities and Exchange Commission Gary Gensler has repeatedly reiterated his position that ETH is a security, especially following the network’s transition to Proof-of-Stake. In this case, ETH may follow in the footsteps of Ripple (XRP).
Whichever way the pendulum swings, an answer will likely be determined within the next 12 months.
Crypto in 2023 has a lot of things to offer. From technological developments to increased adoption to a potential bull market, investors and everyday users will have plenty of opportunities to participate in the crypto industry.