6 Summaries of Major 2023 Crypto Theses

Delivering Trusted Web3 Business Strategies Straight to Your Inbox

Jan 20, 2023

Every year, many of the world’s leading consulting agencies, digital asset research companies, venture capital firms, and other major market players release reports summarizing the current state of crypto, and peer into their well-researched crystal balls to offer up their view of what to expect in the coming year.

Bankless Consulting chose six of the most influential reports to review and summarize to help our readers understand where we are and what we can expect over the next twelve months.

When considering which reports to include, we wanted to bring different perspectives to our audience to provide a holistic assessment of what’s to come. PricewaterhouseCoopers and Accenture focus on what the web3 revolution means for major brands, while those by Messari, Delphi Digital, a16z, and Coinbase provide an excellent overview of the projected arc of crypto while breaking it down by its constituent parts, such as DeFi, NFTs, gaming, and blockchain infrastructure.

If we were to weave these theses together, a picture emerges of an industry that was battered in 2022, but that will become stronger because the ‘great crypto reset’ was necessary to prepare the industry for sustained, smart growth and adoption. As we say in crypto, there is no better time to build than in a bear market.

The pace of technological innovation and adoption has accelerated, and when coupled with novel opportunities for brand growth through the use of digital assets, businesses can leverage the blockchain in ways not readily apparent to the consumer, but that provide unparalleled experiences that can help propel companies into the inevitable digital future. And as the digital asset space matures this year and the scope of crypto regulations become clearer, we can expect greater institutional adoption and investment in this new asset class.

2023 is going to be a year of building, of disruption, of untold opportunities for innovative organizations who understand the transformative power of the blockchain. This year will not be smooth or predictable, and the crypto weather vane could blow in any direction, but we hope that by having a comprehensive map of this digital landscape, each reader can use her own compass to weather whatever this year brings.

Delphi Digital - The Year Ahead for Markets, NFTs, Gaming, DeFi, and Infrastructure

Core Theme: 2022 was a necessary ‘great reset’ for crypto, but things are looking bright for the future.

I. Markets:

It is no surprise that interest in crypto waned during the bear market, but the drawdowns weren’t as great as in previous cycles. One possibility is further consolidation in early 2023, which, depending on macro conditions, could prepare us for the next bull cycle.

Key Theme #1: Liquidity Still Runs the World

When the bear market set in, global liquidity dried up. But because global liquidity affects asset prices, a reopening of the liquidity taps may be the single biggest catalyst for a renewed bull market. Suffice to say, because crypto is macro, global liquidity will have significant market impact in 2023.

Key Theme #2: The Almighty US Dollar

2022 saw one of the strongest dollars on record, which proved to be detrimental to the crypto market, as crypto often moves inversely to the dollar. If the dollar continues to weaken, liquidity should unlock and breathe new life into the crypto markets.

Key Theme #3: The Narrative Shift From Inflation Risk → Recession Risk

In 2023, the U.S. Federal Reserve will likely change its focus from inflation concerns to risk of recession. U.S. policymakers may wait to see if a weakening labor market will mean its time to once again loosen its monetary policy. If necessary, the Fed may step up to provide liquidity to keep the financial system healthy.

Key Theme #4: The Great “Recoupling”

Although many in crypto are waiting for signs that crypto is finally ready to decouple from broader macro trends, this has yet to materialize, and there is no evidence of sustained divergence between traditional and crypto markets. However, if liquidity improves and corporate earnings flatten or worse, crypto could begin to break away.

Key Theme #5: Narratives Matter More in Bull Markets

During bear markets, macro dominates, but narratives drive asset outperformance during bull cycles. The ETH ultrasound money narrative may prove to be the winner during the next market cycle.

II. NFTs

Real-world use cases will drive NFT mass adoption and have the ability to be the Trojan Horse needed to get more people into crypto. Yet, in 2022, NFT trading volume collapsed. Because gas wars can often make it so transactions are more expensive than the actual NFT, low-cost transactions are key. Below are five big NFT themes for this year:

Theme #1: Cambrian Explosion for NFT Finance

As tools enabling the “financialization” of NFTs become more popular and unlock further utility, more market participants will take part, helping NFTs become an established asset class.

Theme #2: The Great Unbundling of NFT Marketplaces

OpenSea’s domination has started to wane, with other market participants offering cheaper fees and native tokens. Projects may also launch niche marketplaces for their collections, thematic aggregators will help us sort between PFPs, virtual land, and everything else. As marketplaces go vertical, the open sea may get more turbulent.

Theme #3: NFTs Go Mainstream: Big Tech and Brands

Social media platforms began NFT integration in 2022, and we can expect to see Big Tech further embrace NFTs in the coming year. The entrance for many into web3 will be through these web2 platforms. Big brands are also starting to generate revenue through NFTs, a trend that will accelerate.

Theme #4: NFTs — The New Social Tokens

Celebrities and sports brands will launch NFTs in 2023, and we should expect to see NFTs replacing ERC-20s as the preferred social token. In addition, NFT projects may launch their own fungible tokens.

Theme #5: “Phygital” Brings Physical and Digital Together

As the lines between digital and physical items blur, we should continue to see growth at this intersection. We should expect to see more physical items with an NFT counterpart.

III. Gaming

2022 was a particularly tough year for gaming. As we look to 2023, let’s analyze the key trends that will shape blockchain-based gaming.

Trend #1 Infrastructure

Gamers flock to great content, but without well-developed infrastructure, blockchain-based games will never take off. The simple truth is that for traditional gamers to play web3 games, these games will need to look and feel familiar - this is currently a big limitation. As scaling solutions and other underlying technology improve, some of these issues will be mitigated.

Trend #2 The First Wave of Blockchain Games

The first blockchain-based games gained popularity during the bull market, but most token prices have fallen well over 90%, and gameplay has decreased accordingly. But the bear has forced some of these games to rework their in-game economies, creating an opportunity for a more solid footing for the next generation of gaming.

Trend #3 Web3 Gaming Guilds

The play-to-earn movement, led by Axie Infinity, created a market for gaming guilds, which essentially sought to industrialize the activities of the in-game economies. This was successful during the bull run, and some of these guilds have been able to partner with game developers. But the bear has exposed the weakness in the industrialization of in-game activities, and it’s predicted that these types of guilds will need to pivot to serve.

Trend #4 Virtual Worlds

The metaverse was one of the Next Big Things during the bull market, and many were certain we were on the cusp of a Ready Player One world. Unbelievably, over $120 billion was pumped into metaverse-related companies in the first quarter of 2022. This was hype, mania, and speculation, and since that time, floor prices for most of these projects have fallen by 85% from all time highs. The truth is, the metrics never justified the valuations, as the metaverse just doesn’t have many users. As daily active users increase, however, virtual land near popular locations should be able to capture the most upside.

Trend #5 A Split in Strategy

Companies behind major franchises, like those behind Minecraft (Microsoft) and Grand Theft Auto (Rockstar), have banned blockchains from their platforms, but other companies, such as Apple and Epic, have been more open in embracing blockchain technology.

Emerging Trends

On-chain gaming is still in its infancy, but has the potential to revolutionize gaming. If and when the technological hurdles are overcome, the first entrants will enjoy a major advantage.

Free-to-Own games embrace the idea of abundance, and the studios behind these games give the in-game items, as NFTs, away for free. Although this model is limited to well-funded game startups, the concept is worth keeping an eye on.

PlayFi and eSports have a lot in common, as PlayFi aims to monetize around the game, rather than the game itself. The analogy to sports, with its sports betting, ticketing, television revenue and the like provide the mental model for this new type of economy.

IV. DeFi

DeFi, of course, saw incredible growth during the bull cycle, and it’s still the main crypto sector by most metrics. That said, the opportunities of decentralized finance are not without their challenges. What themes are going to drive DeFi forward?

Theme #1: Tailwinds for DEXs — A Loss of Trust in Centralized Platforms

If 2022 taught us anything, it’s that users lost trust in centralized exchanges. Unlike the total control wielded by founders of CEXs, founders of DEXs cannot take misappropriate user funds – the smart contracts underlying DeFi prevent that. As the dust continues to settle from the implosions of 2022, more users should realize DeFi is the safe place to buy, hold, or trade digital assets. The major short-term obstacle to overcome for most DEXs is to make the user experience more like the familiar CEXs.

Theme #2: DeFi Blue Chips Rise From the Ashes

Although DeFi blue chips like Aave, Uniswap, Compound, and Synthetix saw TVL and token prices plummet during the bear, these protocols could emerge as excellent investments as fundamentals begin to matter more in crypto markets.

Theme #3: 0-1 Speculation Primitives

In spite of the risks, users love leverage. But the truth is, leveraging crypto is inconvenient and inefficient. New tools and protocols designed to improve the UX for crypto traders are coming online and 2023 may be the year that these systems gain wider adoption.

Theme #4: Undercollateralized Money Markets

While undercollateralized money marks are risky, they have unparalleled ability to increase liquidity through leverage. Because market makers need efficient access to leveraged capital to fulfill their role, and liquidity is the lifeblood of markets, expect this sector to attract interest in the future.

Theme #5: Improving the State of Passive LP Products and Emphasizing Delta Neutrality

Incentivizing liquidity providers had been on the decline, but 2023 promises to bring a new wave of DeFi protocols who cater to yield-seeking liquidity providers through making advanced strategies, like delta hedging and yield stacking, easier for users.

Theme #6: The Rebirth of UX Aggregators: A Front End for DeFi

In general, crypto suffers from a UX problem. In order to pave the way for mainstream adoption, DeFi needs to build a better user experience. Expect to see DeFi UX Aggregators unite DeFi’s money legos in ways that are better for users.

Theme #7: Ditching veTokens for More Sustainable Alternatives

VeTokens, which users can time lock to increase incentives, became popular after the success of Curve’s tokenomics model. Today, there’s roughly $10 billion in TVL in projects in or planning to implement veTokens. But veTokens will never work as well as they did for Curve, and more sustainable models are needed.

V. Infrastructure

Users like CEXs because they have a better user experience, and the four vertices of DeFi, Access Control, Interoperability, Scalability, and Privacy are still immature. Add in MEV and that encompasses most blockchain architecture, but we can do better.

Access Control

Self custody wallets are just plain hard to use, inconvenient, and scare newcomers - not to mention the fear of lost or exposed private keys. Smart contract wallets offer improvements (no seed phrases!), and with technology like Account Abstraction, which essentially provides users with a more web2 experience, there is hope that this technology can lead to more widespread adoption.

Multi-party computation (MPC) protocols also provide a bath forward for users. MPC wallets allow multiple parties to operate a public/private key pair, but without the risk of a private key exposure because each part of the key is split among different users.

Cross-Chain Interoperability

We live in a multi-chain world, so cross-chain compatibility is key to ecosystem growth. Yet bridges are a huge problem, as evidenced by the number of bridge hacks in 2022. To reduce bridge exploits, bridging standards need to be standardized.

In addition, infrastructure needs to improve the ability of dApps to operate across chain is improving, but companies like Chainlink and protocols like Cosmos are making great strides in bringing true cross-chain operability to the cryptoverse.

Scalability

User adoption is dominated by general Layer 1 blockchains like Ethereum and Solana. As crypto grows and scales, user adoption may shift away from these blockchains into appchains, like Immutable X, and modular chains, like Optimism. This shift will be gradual, and Layer 1 blockchains will coexist along with these more specific chains.

Privacy

We love public blockchains, but they are not good for user privacy — with more leaks and hacks, bad actors may be able to piece together a person’s identity and crypto net worth. There has to be a better way. Fortunately, privacy-first protocols like Aztex, often built on zero-knowledge proofs, provide this better way.

MEV: What Is It Good For? (Absolutely Everything)

Maximum extractable value started out on Ethereum, but today it’s one of the most important aspects of crypto. Wherever there is economic activity, there will be MEV, as people seek to front run or sandwich, maximize fees, and otherwise seek to make a living on-chain, MEV, is a value-accrual driver for blockchain. How MEV is distributed over time will be a critical factor in a blockchains’s success.

Coinbase: 2023 Crypto Market Outlook

Core theme: Institutional adoption is coming and here to stay.

Coinbase is the largest publicly traded crypto company in the U.S. and the largest global custodian of crypto assets, custodying about 10% of the crypto market cap. Despite a dramatic and volatile market this past year, Coinbase managed to avoid the fallout in crypto lending markets and continues to be leading institutional adoption and working to gain regulatory clarity with policymakers.

Despite the fact that we are in the depths of a crypto winter, Coinbase is optimistic that the crypto thesis remains intact and that the next evolution of the crypto ecosystem will put core principles of this technology front and center. In their 2023 Crypto Market Outlook they identified three key themes that will prevail in the year ahead:

1. Institutional investors will seek out quality

Many industry players recognize that the failures that occurred in 2022 were due to bad actors in centralized finance (CeFi), companies like FTX, Celsius, and 3AC. As such, Coinbase believes there will be a concerted movement towards self-custody and DeFi protocols and that institutions will transition towards more mature assets like BTC and ETH based on their tokenomics and more stable market liquidity.

Institutional adoption remains strong and Coinbase is expecting to see greater demand for permissioned DeFi that combines institutional-grade compliance with the transparency of the blockchain. They believe increased regulatory compliance and transparency will create compelling use cases for tokenizing real world assets, which is a less risky way for institutions to gain exposure to the benefits of blockchain technology by reducing inefficiencies of the traditional financial system, opening up access to low fees, fast settlement, and cross border payments.

2. There will be more opportunities for creative destruction and consolidation

With both retail and institutions down bad, Coinbase is predicting that the year ahead will lead to further consolidation and destruction which will create opportunities in the digital economy.

Bitcoin miners have faced challenging conditions with higher energy costs and lower output value. Should the market conditions persist, they predict many miners will be forced to shut down or be acquired, leading to more industry consolidation in the year ahead.

Despite the NFT markets being down in volume and floor prices, Coinbase continues to believe in the principles of blockchain technology to drive long-term adoption and growth in the digital economy. They predict that NFTs will be critical components of the future that allow ownership and identity, and that future utility will extend beyond art and collectibles to emphasize the fundamental advantages of digital tokenization which include digital identity, property rights, and the tokenization of real world assets. It’s clear in their market outlook that Coinbase too believes that NFTs will eat the world.

3. Regulatory clarity will usher in the next bull cycle

Coinbase expects greater calls for regulatory clarity as institutional investors push for standards that make digital assets more accessible, safer, and easier to navigate. They believe that the development of regulatory frameworks and clear guidance will define a path forward and drive the next market cycle.

The fundamental benefits of blockchain technology are that it minimizes the need for trust, removes centralized intermediaries, and increases transparency. Given that much of the pain we experienced this past year was due to bad actors and human error, Coinbase is calling for a regulatory framework that balances the need for reasonable standards for centralized institutions with the need to protect the freedom to innovate at the protocol level.

While the events of the past year have created a sense of urgency among U.S. lawmakers to clarify oversight and provide regulatory clarity, many of the efforts are stalled and unlikely to move ahead. Leading economies like the European Union, the United Kingdom, Switzerland, and the United Arab Emirates are making significant progress towards creating a safe and secure regulatory environment for digital assets.

Lastly, despite market volatility and the extended bear market, institutional sentiment remains high, and Coinbase believes that inventory will continue to move from a historical retail base to institutional investors. Given the growth of their partnerships this past year, it is safe to say institutions are here to stay.

a16z - The Big Ideas Crypto Will Tackle in 2023

Core theme: Innovation hasn’t stopped, and the tech is just getting better.

Blockchain’s Mobile Moment

Many crypto users access blockchains using their smartphones, which is convenient but relies on centralized infrastructure, a problem for many crypto enthusiasts. To get around these centralization chokepoints, users often run a blockchain node, but this is not a realistic option for many users, as it often requires technical expertise and additional resources.

As we move into 2023, options for decentralized access to blockchains are increasing. As more companies develop decentralized options, such as light clients which give users decentralized access to the blockchain, it’s likely that other parts of the blockchain tech stack will begin to offer decentralized alternatives to mobile users.

Zero Knowledge, Multi-Party Computation, and Post-Quantum Crypto

Many believe that zero-knowledge technology, a type of blockchain scaling solution that has built-in privacy protections, will take off in 2023. As this technology gets ready for widespread adoption, there are still many aspects that need fine tuning, including the ways in which the technology is set up and authentication is obtained.

Developer Onboarding for Zero Knowledge

Many years in the making, zero knowledge technology is getting ready for widespread adoption, particularly because many blockchain developers are beginning to learn about this technology and programming languages that build zero knowledge applications are becoming easier to use. As these trends accelerate in 2023, expect developers to invent new use cases.

VDF Hardware

A Verifiable Delay Functions (VDF) is a function that takes a certain amount of time to compute, and there is no way to accelerate the computation. This new technology can be used to prevent front-running, and has practical use cases in everything from lotteries to elections. 2023 will see the hardware required to run VDFs come to market.

Fully On-Chain Games and Autonomous Worlds

Blockchain-based gaming started to gain traction during the bull market, but a prolonged crypto winter put a chill on its adoption for many users. As more games are built fully on-chain, these autonomous worlds enable developers to create gaming experiences that aren’t bound by fiat-space constraints, such as storage. With developers able to build games that can’t be censored and can theoretically last forever, the potential to unlock new types of gaming experiences is great.

Non-Transferable Tokens

Non-transferrable tokens, also known as soul-bound tokens, are cryptocurrency tokens that cannot be transferred to another wallet. While we often talk about the utility of these tokens in terms of decentralized identity and verifiable credentials, this is really just the tip of the iceberg of what this technology enables. Practical applications outside of identity and credentialing can be found in everyday transactions, like event ticketing.

Decentralized Energy

The incentivization engine enabled by blockchain technology can also be applied to energy. In the case of power grids, tokens enable incentives to align with capital to build distributed power systems, including microgrids, storage, and transmissions systems. Equally exciting is the nascent market for on-chain carbon credits and renewable energy certifications.

Accenture Life Trends 2023: Control and Power

Core Theme: web3 offers users the chance to help brands evolve while retaining full control over their personal data.

This report is more general than our previous entries because it caters to companies and focuses on branding, but it also examines where we are as a society, where we might go, and how we might get there.

The locus of the report centers on how small changes in control and power dynamics can have outside, even revolutionary impacts. For our audience, we’ll focus on the parts that touch crypto, but the report is beautifully laid out, informative, and optimistic.

Blockchain technology will change the way brands and consumers engage with one another, but the less the consumer knows that it’s interacting with blockchain-based architecture, the better. Although the blockchain gives brands better access to their customers, the relationship needs to be sustainable and organic and one which enhances the power of community and enables them to participate in bottom-up innovations.

Digital wallets built on blockchain will be the way in which we carry our online identity into the future, and this expansion of digital ownership will shift the power dynamic to users. In the near future, we will carry our digital identity, money, and culture with us, all secured by the blockchain and accessible by our wallets.

Yet because the user is in control of their data, they can choose with whom, how, and when to share it. Minimal disclosure by users to receive desired services may become the norm. One of the key takeaways from the report is that companies will also need to educate consumers about digital wallets and how to use them, and that it’s still uncertain whether businesses, government, and consumers will engage with this new technology and whether consumers will understand it, trust it, and engage with it.

The conclusion, although short, is worth reading in full:

“Shifts in control ultimately lead to shifts in power, and these seemingly small shifts in control will alter power dynamics on a systemic level. The outcomes will look different from what we’ve seen before, thanks to changes in attitudes and maturing technology. Marketing relationships will be altered as the power dynamic shifts between brands and customers —the latter will have casting votes on brands’ permission spaces, and they’ll be able to ringfence their data as they please. Leaders will need to be prepared to reshape the power dynamic with hybrid workers, for the good of innovation and working relationships. In their roles as leaders, workers, customers, consumers, creators, and human beings with rights, people will be seeking ways to claw back some control. When the aftershocks finally settle into a calmer pattern, people will open their eyes to see a new picture of progress.”

Indeed.

PwC 2023 Digital Asset Predictions

5 crypto and NFT trends that matter right now

Core Theme: Companies we are already familiar with will adopt web3 technology and people won’t even know they are using it.

PwC is one of the Big Four accounting firms and believes digital products and services are at the heart of innovation. In their 2023 Digital Asset Predictions, they take a look at how digital assets will reinvent much of the physical and digital economy and lay out their predictions for how business leaders can best use this new technology to disrupt their industry.

They offered five predictions businesses can use to drive innovation:

1. Trust is critical: Based on recent market events, the companies that thrive will be those that build trust into their digital assets. This trust may be established by using self-custody where users can secure their own assets, or by secure, institutional-grade hosted custody solutions. Institutions will increasingly show proof of reserves and be pushed to adopt third-party validation of solvency, assets and liabilities, and controls.

2. Regulation is coming, but maybe not a complete framework: PwC expects to see regulatory clarity this year, especially regarding which digital assets are commodities and which are securities. Despite what has become a bipartisan issue in the U.S., given the complexity they do not expect much progress in legislation and agency rulemaking.

3. Traditional finance will strike the balance of exposure and risk: While blockchain technology was developed to disrupt traditional financial systems, PwC predicts that moving forward legacy financial institutions will be well positioned to dominate the digital economy. With their history of risk management and brand prominence, they are well positioned to benefit from opportunities to acquire new companies during the bear market and to hire the talent necessary to build out faster and cheaper financial services.

The foundation of the digital economy will start with custody, and they believe TradFi will offer the right balance of exposure and risk to a wider market.

4. NFTs will be a core building block but they will be invisible to the user: A common thread among the 2023 crypto theses is the NFTs will continue to drive the adoption and growth of web3.

PwC predicts that people will increasingly want to gain control over their data and identity and that NFTs will be the core building block that companies use to exchange data and digital assets. They also predict that most people will never know they are using web3 tech as these will be integrated with the platforms they are already using.

5. Merchants, social media, and consumer engagement will drive adoption: While past adoption of crypto has often relied on moon shots and meme coins, PwC expects the next phase of adoption will be driven by real life utility, like merchant payments, social media, and consumer engagement.

They believe that social media platforms are well positioned to be on-ramps for digital assets as their users use digital assets to secure their identity in the metaverse. Social platforms are also well positioned to develop practical use cases of this technology by driving customer engagement and exploring revenue generating opportunities.

Messari Crytpo Theses 2023

Core theme: Crypto winter is here – It’s time to build.

Messari is known as the leading crypto research firm and their yearly Crypto Theses Report never disappoints. This years exhaustive research covers everything from crypto narratives and investment themes, people to watch in the year ahead, trends in CeFi, crypto policy, L1 and L2 ecosystem updates, DeFi, NFTs, DeSoc, DAOs, and emerging trends in web3, including the newly coined DePIN.

It’s a lot to digest, but the report can be distilled down to a core question: How do we survive the long crypto winter? The answer: It’s time to build.

Messari predicts the next cycle is going to be driven by real world use cases and sustainable business models. We’re still early, but here are the biggest opportunities for the year ahead:

Decentralized Finance (DeFi) Trends

This year was a disaster for centralized institutions. DeFi was built to solve these problems.

The transition to DeFi is inevitable given the progress crypto has made in building out the bitcoin lightning network, upgrading the scalability of the Ethereum network, increasing the adoption of stablecoins, and developing new financial products and services. In order to be ready for the next wave of adoption, DeFi needs to focus on the following opportunities:

Prevent systemic risks: in order to avoid the financial collapse we saw this year, crypto will need to focus on fundamentals like investment disclosure standards, proof-of-reserves, on-chain monitoring infrastructure, and standardized accounting principles.
Increase security: preventing hacks and social engineering attacks through robust smart contract design, sound business models, and resilient governance systems will be critical as adoption scales.
New lending primitives: DeFi lending protocols like Aave and Compound use over-collateralized lending to avoid the risk of major default. To compete with the under collateralized lending of traditional finance, we will need new identity and reputation primitives that bring credibility on-chain.

NFT Trends

NFTs saw significant mainstream adoption this past year but we are still in the early stages of adoption. While trends like generative art will persist, the real opportunities this year are in the following areas:

Brand loyalty: Big brands like Starbucks, Gucci, Nike and many more have used NFTs to build their brand and connect directly with their audience through unique incentives, offerings, and experiences.
Platform adoption: We have seen significant NFT integration with tech companies this past year. Reddit has onboarded millions of users to its avatar marketplace, Meta is integrating NFTs with Facebook and Instagram, Twitter has already experimented with NFT profile pics and will likely see more integration.
Metaverse: Digital fashion may be the fastest growing trend. Tokenized fashion is a huge opportunity, whether it is digital only fashion in the metaverse, or digi-physical NFTs that can be redeemed for physical goods. We have already seen big brands like Gucci and Nike entering this space, and we will see more adoption in the coming years.

Decentralized Social (DeSoc) Trends

Web2 social is built on platforms who own our content and use our data to drive profitable business models. Web3 social gives users ownership of their data and the content they create. DeSoc will create new opportunities for on-chain reputation, new ways for communities to interact (DAOs), and change the direction value flows on the internet (to the user).

DeSoc is currently split into three layers:

Front ends like Lenster, which resemble social media apps like Facebook or Instagram.
Social graph layer where users read and write data on apps like Lens and Farcaster.
Content storage layer where user content is stored like IPFS and Arweave.

Messari predicts that value in DeSoc will accrue to the social graph and content storage layers rather than the front end application. Once a user’s connections and content are stored in the social graph, they can migrate from front end to front end, bringing their reputation and value with them.

The biggest challenge facing DeSoc is scalability. Currently, blockchain networks like Polygon cannot accommodate the broad adoption we find on web2 platforms. As DeSoc protocols invest in scalability solutions, the broader crypto ecosystem will benefit as well.

Decentralized Physical Infrastructure Networks (DePIN) trends

DePIN is the decentralized network of physical hardware, and includes storage, wireless access, and cloud computing. Each of these areas needs significant upgrades if we are going to scale the crypto ecosystem. We have already seen significant growth by companies like FileCoin and Arweave, but will require more capital investment to compete with the likes of Amazon or Google.

Decentralized Autonomous Organization (DAO) Trends

2022 was the year of the DAO and we will continue to see communities use this organizational structure to solve our biggest coordination challenges. While we have seen many examples of successful DAOs, if they are going to continue to make progress they are going to have to figure out a viable legal framework. This means figuring out how DAOs actually work from a legal, tax, and compliance perspective.

While DAOs continue to innovate around new ideas, Messari predicts the biggest opportunity lies in the creation of new business models, small SPACs, investment clubs, Impact DAOs, and Social DAOs. The potential of organizing people around a shared mission, and giving them the resources and communication they need to do work they are proud of has never been greater.

Web3 Discovery Sprint

Do you want to know how web3 tools and technology will improve your business?

Bankless Consulting's Web3 Discovery Sprint will give you the knowledge and tools to start or grow your business in web3. Guided by world-class web3 experts with decades of relevant professional experience, our human-centered approach focuses on helping companies chart a clear business strategy from ideation to execution.

We are the world’s first web3-native consulting firm.

Wherever your business is on its web3 journey, we are here to help.

We're on a mission to help our clients understand how to design and implement web3-focused business solutions.

Most business-oriented content is from non-crypto natives who don't fully understand web3 technology or its potential. We only share high-quality content focused on building better businesses.

If you enjoyed this newsletter, please share it with your friends. The best way to support us is to share our content with founders, builders, and marketers.

See you next week!

siddhearta, HiroKennelly