Blockchain expert revealed three main trends in the blockchain industry in 2023

In an interview, Alex Reinhardt, a blockchain expert and venture capitalist, one of the 100 most influential people in Dubai, shared his insights on the goals of blockchain projects, risks associated with cryptocurrencies and new trends emerging in the industry. The expert believes that blockchain technology has enormous potential to fight poverty and inequality worldwide. In addition, the expert identified new trends emerging in the industry, including the shift towards decentralized services and the growing popularity of mining opportunities and wrapped tokens.

1/ You have been involved in launching and developing projects for several decades, but in recent years you have focused on blockchain technology. What attracts you to this technology?

I see enormous potential in blockchain technology to fight inequality and poverty worldwide. These problems still exist and await an immediate solution. According to the International Monetary Fund (IMF), about 15% of low-income countries experience debt problems, and another 45% have high debt vulnerabilities. This will inevitably lead to a decline in the fight against inequality. According to the World Bank, there are approximately 1.4 unbanked adults in the world. They do not have access to financial services, they cannot open a bank account or order a credit card.

I am convinced, and I am not alone in this, that businesses should have a social function in addition to their primary goal of generating profit for creators and shareholders. It is impossible to accumulate wealth without being affected by the general economic situation of the region or the world. By fighting inequality and improving living standards for all members of society, entrepreneurs also reap personal benefits. Their companies grow at a faster pace than those that focus solely on enriching their creators and shareholders.

Blockchain technology is ideal for achieving these goals. It actively involves all participants in the system running on the blockchain, increases liquidity in the system, and promotes active participation rather than passive expectation of benefits.

In blockchain systems, the opportunity to increase wealth among a wide range of users is much higher than in traditional centralized systems, where the circle of beneficiaries is narrow and has a high barrier to entry. This approach to organizing and managing the system benefits everyone. Every year I see more entrepreneurs realizing this simple truth. Therefore, blockchain systems will continue to grow, especially in developing countries where the problem of inequality is particularly acute.

2/ But isn’t there a high risk involved in participating in blockchain projects due to the volatile nature of cryptocurrencies?

Before getting involved in a blockchain system, it is absolutely essential to conduct a thorough study of the project. It may not be possible to consider all technical and financial aspects since one cannot be an expert in everything. However, users can approach the study of the project and its development strategy using common sense. Asking simple questions such as where the liquidity comes from, why the project creators expect new users, why the users will use these particular services and not others, whether the project has a well-thought-out inflation control mechanism, and what calculations the project is based on, may be sufficient.

3/ Even if the project has answers to these questions, there is still no guarantee of success in the future.

Absolutely. Not every project can effectively build a competent business model and marketing strategy. In this regard, blockchain projects are similar to venture financing. According to the National Venture Capital Association, 25 to 30% of venture-backed businesses fail. There are risks that must be carefully considered. Studying the biography of the project creators can also help to avoid complications. Assessing their competence in launching new projects, their relevant successful experiences from the past, or whether they are talented developers but inexperienced entrepreneurs can all play a significant role. In fact, it is a common story where a group of developers, inspired and talented but lacking entrepreneurial experience, attempt to start a blockchain project and encounter difficulties. Blockchain systems are heavily dependent on the number of users. They must be motivated, retained and recruited. The community is the primary resource of the blockchain system, and achieving true decentralization is impossible without it. This requires a well-planned marketing strategy in the coming years.

4/ What has changed in the blockchain industry recently? What new trends have emerged?

The blockchain industry is still very young and it is constantly changing – sometimes even quarter to quarter. There are some important trends I’ve noticed lately. First, there is a noticeable general increase in interest in cryptocurrencies worldwide. We’ve been dreaming of mass adoption for a while now, and while it won’t happen all at once, we’ve reached a certain level of acceptance that can’t be ignored. It is a trend that has been building for the past five years, and it indicates that cryptocurrencies are likely to become a ubiquitous means of payment and a familiar tool in the everyday life of many users.

Second, I’ve seen a lot of user interest in mining opportunities over the past year. More specifically, people want to participate in the creation of new coins in various blockchain systems. However, there is also some disappointment that this area has largely been taken over by large companies that have the resources to buy expensive bitcoin mining equipment, or the ability to stake large amounts of coins. After the transition of ETH to Proof-of-Stake, many small miners entered the market and they have been looking for ways to remain in this market and continue to mine coins. This led to the explosive growth in popularity of services with wrapped tokens, such as Lido Finance, which allows even those without 32 ETH to bet and profit from Ethereum stakes. This is partly due to the rapid rise and development of blockchain systems based on Proof-of-Stake and Delegated Proof-of-Stake. DPoS takes it even further – it allows anyone with a non-zero balance of system tokens to contribute to the operation of the blockchain and receive a reward for doing so. And that is what my team and I are currently developing and getting ready to launch a Smart Blockchain platform as I see great potential in DPoS blockchains for their efficient incentive approach.

They can then use this reward in decentralized services that operate within the ecosystem. This is a big incentive for user retention and participation in the life of the blockchain, and I see this approach being increasingly used in ecosystems with different services. I expect this trend to mature and grow in the near term.

Finally, there is a gradual shift from centralized cryptocurrency services to decentralized ones. These include decentralized crypto exchanges, various DeFi protocols, GameFi and more. This suggests that users are losing confidence in centralized structures, while finally understanding the main essence and meaning of cryptocurrencies – decentralization and its benefits in terms of control over their assets. This also contributes to the improvement of the market, which was teeming with questionable projects five years ago.

5/ You didn’t mention the current banking crisis in the US. Is there a reason for that?

I did not address the US banking crisis since it was not unexpected. From the beginning of the economic stimulus program launched to combat the effects of the coronavirus pandemic, analysts predicted that it could result in such a crisis. Therefore, it cannot be considered a new factor that suddenly appeared this year. Experts have predicted such shocks for years and have highlighted the need to modernize and rethink the current financial system. This crisis only reinforces the inevitability of decentralization in the global economy.