What’s in store for the Blockchain space in 2023: Beyond Web3

Art Malkov is one Columbia University Blockchain Accelerator Adviser. Former CMO for leading web3 companies.

As we start the new year, we can look back on 2022 with a new perspective. Last year will surely be remembered as one of the blockchain industry’s most dramatic and turbulent years. While it came on the heels of the tremendous growth of the previous year, spurred by technological advances and favorable economic conditions, 2022 saw significant declines in the blockchain market, the consequence of a series of devastating economic events.

It was a year of great pain and confusion for both private and institutional investors, pushing many out of the industry altogether.

Where does that leave us in 2023? Will there be more crises? Should we move away from the Web3 space, or is it now time to dig deeper, to search for trends and companies poised to reshape the industry? First, let’s take a step back and see what brought us here.

Blockchain Space Collapse of 2022

In May 2022, a popular “stablecoin” cryptocurrency crashed, and a chain reaction of collapses and failures followed, including that of the major crypto exchange FTX. Kevin O’Leary, a prominent investor and host of Shark Tank, reflected on the crypto exchange collapse: “The one unique thing about this situation versus other financial collapses and disasters and disasters, everything that happened here is on the blockchain. … Every single transaction will be found, so there is no hiding it.”

This statement suggests a fundamental truth about the industry: Through it all, the underlying blockchain technology has never been the point of failure.

What’s Next for Blockchain?

I appeared as a speaker at Benzinga’s Future of Crypto event in New York City to discuss my views on the future of the blockchain space. Despite serious headlines, the high-profile collapses of the blockchain industry have failed to slow the pace of the industry’s fundamental growth. High quality projects will always continue to be built, regardless of temporary economic conditions or adverse public sentiment.

In contrast to the decline of the previous year, I believe that 2023 promises to be one of the most productive and central in the industry’s history. This is not the time to turn away from technology, but rather to deepen our understanding of it – to find indicators of what lies ahead.

Ethereum: A strong leader only gets stronger

Ethereum, the second largest blockchain network (after Bitcoin), recently took a significant step on its far-reaching roadmap. In September 2022, the Ethereum network switched from the electricity-intensive “proof of work” consensus mechanism to “proof of stake”, reducing its electrical consumption (and carbon footprint) by 99.9%.

High transaction costs and slow speeds have hampered the network in the past, but these obstacles are now being overcome thanks to Layer 2 solutions, such as the Polygon network, which runs on top of Ethereum, reducing fees and transaction times – supporting true scalability and paving the way for mass adoption.

Blockchains built for real use

Many layer 1 networks have attempted to overtake or supplant Ethereum as the dominant smart contract blockchain, but none have succeeded. Solana, for example, was once hailed as a serious threat to Ethereum’s leading market share position, but has since declined dramatically in popularity, in part due to its close association with the fallen exchange FTX.

Instead of looking for the next “Ethereum killer”, we should look more closely at blockchain companies that specialize in targeted use cases. MachineFi, for example, connects networks to smart devices, merges blockchain and “real world” technology, and protects and monetizes the data of individuals on the chain.

The future is interoperable: Uniting blockchains

As more of these independent “altcoin” networks emerge, it’s only natural that the demand for network integration continues to grow. “Interoperability” refers to technology that allows users and decentralized apps (DApps) to seamlessly transition from one blockchain to another, drawing on the unique strengths of each network. Newer blockchains, such as Polkadot, Unilayer and Cosmos, approach this challenge head on by building interoperability into their basic design.

Securing the industry: decentralization and regulation

If there’s one thing we can learn from the debacles of 2022, it’s that deviations from decentralization often lead to serious security risks. The major failures of the past year were all due to problems with centralized entities—organizations that were devolved or had concentrated power with little or no oversight.

This leads to another problem, regulation, which is probably needed to protect consumers and enable greater investment in the industry. While regulation itself is limited by jurisdiction (and blockchains exist beyond regional borders), it can still have a huge impact on consumer safety when applied to crypto-ramps (exchanges) within a state or country.

Business meets blockchain: mass adoption is coming

Many very notable Web 2.0 and Web3 partnerships are already coming together today. Amazon Web Services recently announced its integration with Ava Labs, the company behind the Layer 1 blockchain Avalanche. This collaboration will streamline the integration of blockchain technology in companies and authorities.

NFTs have also drawn the attention of large corporations. Starbucks and Instagram are both planning to release NFTs, and Reddit recently launched a highly successful NFT marketplace, in partnership with Layer 2 blockchain network Polygon.

Now is the time to keep your eye on the prize and stay on top of blockchain developments while they still fly under the radar. The blockchain industry continues to build and innovate, and chain activity shows that there has been no reduction in developer activity.

2023 promises to be an exciting time for Web3 growth and development – ​​a year not to be missed.

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