When Hypetrain dies, how will we REALLY use Blockchain in 2023?

I reached out to my clients and asked them to identify the most pressing challenges and opportunities that blockchain startups will face in 2023. The ideas they shared with me ranged from the growth and development of Web3 games and mobile blockchain access to the exploration of advanced cryptographic techniques and the potential to decentralized finance. Here are five areas that represent exciting builder-worthy pursuits that have the potential to shape the start-up landscape in the coming year.

1. The Future of Web3 Gaming: Fun and Functionality

As the market changes, the best web3 studios focus on creating fun, sustainable games that use blockchain technology. This means going back to basics and assessing the target audience, designing a game that exceeds their expectations, and deciding what role cryptocurrency plays in the overall experience. Developers also want to test to make sure their games are really fun. According to DappRadar, gaming activity accounted for nearly half of all blockchain activity in October and November 2022. This trend was further highlighted in November, when a record 800,875 daily Unique Active Wallets (UAW) interacted with the smart contracts of these games. It is clear that Web3 games are a major player in the world of decentralized applications, and their continued growth and innovation will undoubtedly have a significant impact on the industry as a whole.

2. Mobile Blockchain Access: Light Clients and Decentralization

Many blockchain users rely on their smartphones for internet access, but this often requires centralized infrastructure that can be risky. The development of “light” clients such as Helios, Kevlar and Nimbus allow users to verify blockchain data directly from their devices, leading to greater decentralization for mobile frontends. A light client, also known as a lightweight or thin client, is a blockchain application that allows users to interact with a blockchain network without downloading the entire blockchain. This can be especially useful for mobile users who may not have the storage or processing power to run a full node.

3. Advanced cryptographic techniques: ZK Systems, MPC and Post-Quantum Crypto

Zero-knowledge systems, multi-party computing and post-quantum cryptography are all important technologies in the blockchain world. However, there are trade-offs to consider in terms of evidentiary efficiency, conciseness of evidence, and requirements for reliable setup. In the coming year it will be interesting to see if new designs for zk-proofs can solve these trade-offs and if constant size proofs can be achieved without the need for a reliable setup. Threshold ECDSA signatures, which eliminate the need to trust a single signer and are useful for distributed computation on private data, also have room for improvement in terms of minimizing the number of rounds required. As post-quantum signatures approach standardization, it will be valuable to investigate their potential for use in aggregation or threshold signature schemes.

4. Cryptocurrency’s potential to expand financial access

Cryptocurrency has the potential to provide financial services to underserved or excluded individuals, especially in developing countries. In the coming year, it will be interesting to see how cryptocurrency can be used for money transfers, peer-to-peer lending and other financial services. According to a World Bank report, remittances to developing countries will reach a record $626 billion in 2022, and using cryptocurrency for these transactions can help reduce costs and increase speed and security.

5. Digital DeFi and Central Bank Currencies: Disruption and Implementation

Decentralized finance (DeFi) has the potential to shake up traditional financial services and offer new products and services. It will be interesting to see how DeFi develops in the coming year and what impact it has on traditional financial institutions. After the FTX collapse, DeFi saw a significant increase in activity, with a 68% increase in volumes from October to November ($97 billion). This demonstrates the value of DeFi: through the use of secure smart contracts to manage assets, users can gain greater insight into liquidity and have more control over their investments.

Central bank digital currencies (CBDCs) are another area to keep an eye on. While CBDCs offer many benefits, such as increased financial inclusion and faster payment processing, they also raise questions and concerns around privacy, monetary policy and financial stability. It will be interesting to see how these issues are addressed and how CBDCs are implemented and adopted.