The State of Web3 in 2023
2022 was very stressful for many web3 enthusiasts. Major cryptocurrencies have declined significantly, the community witnessed the rise and fall of interest in non-fungible tokens (NFTs), and the FTX downfall greatly impacted the whole industry. But despite all the negative things in the industry, more and more companies aim to shape the web3 field.
Here are the eight changes that will happen in web3 in 2023.
1. Regulatory changes in web3 space
One of the key areas of development for web3 in 2023 will be decentralized finance (DeFi). Despite all progress in this sector that we’ve witnessed in the last few years, the regulatory picture for web3 remains unsettled. For example, there is still no legal enforceability of smart contracts. FTX collapse clearly proves that one of the expected things in 2023 is more protection for funds held in custody. So we will likely see more regulations, especially for centralized crypto exchanges. Considering that web3 is a decentralized model of services, governance in any format is a very tricky subject. Most likely, the governance will take place in the community rather than in specific financial institutions. It will probably be decentralized governance, a governance format allowing every community member to express themselves.
2022 will also force financial organizations to reconsider the way they do compliance monitoring for crypto transactions. In 2023 we will likely see more demands for fraud prevention and transaction monitoring services that detect fraud, such as money laundering operations.
2. Changing the perception of crypto
For the last few years, the mass audience has perceived crypto as an investment. People used to think of cryptocurrency as something that would make them rich. But the 2022 crypto winter changed the way people think of crypto — many lost money either during the mid-year downfall of crypto or the collapse of the FTX exchange.
The year 2023 will mark crypto as less about investment and more about a tool used in web3 services.
3. Reducing the cost of a transaction
Metrics such as speed, security, and transaction cost are basic qualities used to evaluate any platform nowadays. Transaction cost is an essential factor that makes some technology protocols too expensive for the general audience. For example, gas fees on Ethereum, a general-purpose smart contract platform, prevent users in many parts of the world from using this network, which significantly negatively impacts network scalability. People are looking for cheaper alternatives and, most of the time, end up using networks that offer less resilience. In August 2021, Ethereum implemented a EIP-1559, also known as the London Hard Fork, to make gas fees more predictable.
However, it was not a very successful solution because there is not much difference in predictability. In 2023 we will likely see more attempts to reduce the cost of transactions.
4. More decentralization
Despite all the progress in blockchain, many services in web3 infrastructure are still too centralized. Centralization increases the risk of security breaches as well as service uptime — centralized services are more sensitive to hardware and software failure. When there is no single point of failure, it helps create a more robust system.
5. Digital decentralized identity
In 2023 we will likely see the concept of decentralized digital identity. Right now, digital wallets serve as distinct identities, but we will likely see more progress in this direction. Users can control how they want to share their private information (which information to disclose and with whom when using Web3 platforms). Digital decentralized identity is the first step towards a digital avatar, a graphical representation of a user in a virtual world, which will be used in the Metaverse.
6. Better user experience of web3 services
Right now, the interfaces of many web3 solutions like DeFi protocols are complex. Bad UX is something that prevents web3 solutions from reaching mainstream adoption. In 2023 web3 creators will start to practice user-centered design, putting the user needs front and center. We will likely see better-designed custody and asset servicing procedures, as well as clearing. Web3 service creators will invest more time and effort in educating new users on how to use products, increasing the level of transparency that web3 services have, and reusing existing design patterns to create familiar designs.
7. The rise of the metaverse
Web3 is a building block for a metaverse, an entirely virtual parallel universe. Companies like Meta, Microsoft, and Nvidia are working on creating the next generation of a platform called the Metaverse. The sense of ownership for digital assets is what will separate the Metaverse from all virtual platforms created before. Despite the skepticism many people in the tech world have about the Metaverse, user interest in this topic remains high, especially for younger audiences that own many digital assets.
There is a chance that the concept of NFT, a unique digital asset with provable ownership, will be the foundational block of the metaverse. The digital goods economy is already a gigantic market with an evaluation of billions of dollars. NFTs make a lot of sense for the virtual world because they allow users to take control of their assets. We might also see the rise of new types of digital assets, such as tokenized real estate.
Metaverse will also change the way we perceive fashion. New fashion trends will emerge in the Metaverse space and enter the physical world. Balenciaga and Nike have already started to explore virtual goods as a new revenue stream.
8. Greener web3
The Web3 community will continue to move towards reducing carbon emissions. The goal is to reduce the amount of energy required for web3 to operate. Ethereum already proved that it’s possible by switching from a proof-of-work to a proof-of-stake algorithm, which led to a 98% reduction in the overall amount of energy consumed on the network.
In 2023 more blockchain networks will follow the direction toward greener web3.
This article was brought to you by Gateway.fm, the first truly decentralized blockchain infra/node provider.
