8 Blockchain Trends to Watch in 2023

Blockchain is an architecture where data is maintained in blocks that are cryptographically linked to each other. Blockchain, also known as a decentralized or distributed ledger, supports the concept of decentralization where everyone has an equal opportunity to own, engage and develop without the intervention of other entities. In this article, let’s explore the blockchain trends expected to dominate the blockchain industry in 2023.

In many ways, blockchain marks the next technology revolution – after the rise of the internet, and then social media, which changed the world as we know it. The blockchain database allows transactions as well as contracts to be stored in linked blocks. Each block is encrypted, time-stamped and immutable – making it completely secure despite the absence of a watchdog.

This is an important blockchain trend of our time that 1 in 4 unicorns in Q2 of 2022 was a blockchain company. So, what does the future hold for blockchain? Here are our predictions:

1. Decentralized Autonomous Organizations (DAOs) to achieve credibility

In 2023, the shift from conventional organizational structures (such as LLCs) to DAOs will continue to accelerate even as Web3 trends expand. DAOs enable members from a variety of nations to collaborate without the complex documentation associated with establishing a multinational entity or recruiting foreign employees. DAOs are becoming the de facto business model for many of today’s leading decentralized app or dApp developers.

As interest in DAOs continues to grow, a growing number of businesses are launching services aimed at helping DAO founders. Singapore-based Poko, for example, helps creators launch, raise funding and distribute their DAOs in a relatively short time compared to the challenges of establishing a new business in an emerging economy.

2. Fewer entry barriers, thanks to blockchain-as-a-service

The affordability and adaptability of cloud-based services is encouraging blockchain networks to adopt the as-a-service business model. This enables blockchain developers to quickly build and host blockchain applications and smart contracts, thereby reducing time to market.

For businesses, blockchain as a service further eliminates the expense of in-house network development. This allows them to concentrate on improving functionality and optimizing their products or services while keeping their network agile and productive via service providers.

NIFTRON, a UK-based firm developing a blockchain as a service platform, is one example. Together with the company’s software development kit (SDK), it allows companies to leverage blockchain technology and build applications using plug-and-play modules. In addition, the platform manages user accounts and transactions and enables users to tokenize different data types.

3. Adoption in the public sector is increasing

This is one of the biggest blockchain trends. Traditional paper-based systems are likely to be replaced by distributed ledger technology (DLT) – a primary use case for government. The transition to digital data infrastructure has been underway for some time, but DLT provides additional benefits that provide greater credibility, transparency and protection via cryptography and validation capabilities.

With the creative use of blockchains, public organizations can rapidly improve communication and management of constituents. For example, blockchain can improve submission and processing of public document forms and chain-of-custody monitoring.

4. The industry will emphasize environmentally friendly use

Blockchain negatively affects the environment due to the high energy consumption. The majority of modern cryptographic protocols currently have a high energy requirement. According to an index provided by the University of Cambridge, Bitcoin mining (a blockchain-based cryptocurrency) is responsible for around 0.5% of global power use – greater than Sweden’s annual average.

By 2023, carbon offsetting as well as energy-aware blockchain network architectures will make the adoption of green blockchains more achievable.

Proof of Stake and other environmentally friendly algorithms will help in the development of greener blockchains. For example, Ethereum, one of the most popular blockchain networks, is likely to implement a Proof of Stake resolution this year.

5. The Rise and Rise of Central Bank Digital Currencies (CBDCs)

CBDCs have the capacity to develop the most compelling breakthroughs in blockchain, which will impact all industry stakeholders. Digital currencies for central banking institutions represent digital tokens similar to cryptocurrencies generated by a centralized banking system and linked to a nation’s fiat currency.

While cryptocurrencies are decentralized where their price is tied to a fiat currency such as the US dollar, CDBC could become the fiat currency, i.e. the central bank’s digital equivalent of banknotes.

In addition, more than 95% of the world’s GDP examines CDBC, and 50 nations, notably Jamaica, Nigeria, South Korea, India, Russia, Japan, etc., are currently in advanced stages of prototype, development or implementation. Given the market buzz that CDBCs have generated, it would not be wrong to predict that they will be popular in 2023.

6. Cautious but steady investment in the metaverse

Advertisers, pundits and tech companies are now discussing the Metaverse as a revolutionary force capable of changing our lives.

While ‘meta’ refers to the beyond, ‘verse’ refers to the cosmos. The Metaverse is an interactive digital universe with enormous economic and social possibilities.

With the use of blockchain and immersive technologies, including Augmented Reality (AR) as well as Virtual Reality (VR), it is now possible to establish the Metaverse – a decentralized 3D world consisting of multiple virtual spaces. No vendor controls the metaverse’s virtual environment, as it is device agnostic and collaborative. In addition, blockchain-based cryptocurrency and non-fungible tokens (NFTs) will power transactions in the Metaverse.

Despite potential losses, the Metaverse concept is still “full steam ahead”. In 2023, we can therefore expect a more active, if guarded, presence of large technology firms in the Metaverse.

7. Ricardian contracts appear as a middle ground between traditional and smart contracts

Ian Grigg originally proposed the concept of a Ricardian contract in 1995. These digital contracts establish the terms and guidelines for interactions involving two or more parties. These contracts can now be hashed, signed and stored on the blockchain using blockchain platforms.

Ricardian contracts are human-understandable legal papers that, when agreed to and signed by the parties, are transformed into machine-readable contracts that define their goals and actions. A cryptographic hash is used for signing and validation.

In the future, these Ricardian contracts will likely replace smart contracts. Why? Since the Ricardian contract binds the parties to a contract and performs actions in accordance with the agreement, blockchain transactions are made more reliable and accessible.

8. Federated blockchain for institutional use

Federated blockchain (AKA consortium blockchain) is just an upgrade to the standard private blockchain. While a single company operates a normal private network and new players need authorization to view and upload files, a federated blockchain delivers the same functionality but is managed by a coalition of organizations.

Federated blockchains are more centralized than public blockchains, but more decentralized than private networks. As a result, it is a suitable option for organizational groups where decision-making authority is distributed among many individuals.

This “hybrid” paradigm offers enormous scalability and allows easy and efficient collaboration. In addition, it is more secure since all nodes can continuously monitor each other. Hyperledger, Corda, and Quorum are three large federated blockchains – and more may appear in 2023.

Overall, expect a bullish market environment for blockchain trends in 2023. Investors may tighten their purse strings for certain use cases, but others – such as blockchain-based finance and enterprise applications – will continue to thrive. Amid this complex backdrop, it is also important to be aware of the not-so-positive trends in blockchain-based currency, which will also influence the industry in the coming months, and navigate them successfully.