Cryptocurrency is headed toward surviving its first age

Published at: Jan. 12, 2023

The past year was a challenge across the globe. Financial markets plunged deep into the red, affecting millions, if not billions, of people worldwide. Inflation rose. For crypto, it has arguably been the worst year since Bitcoin’s (BTC) inception. It has been more of an ice age than a crypto winter, and bad actors and weak projects have dominated headlines — including FTX, Voyager, Celsius, Terra, Hodlnaut, and this week, Nexo.

In 2023, the purge could continue with projects that — like Tezos, Lisk and EOS — do not develop any new technology, nor do they innovate. It’s been said frequently that 90% of crypto projects will ultimately fade away or disappear because, among other failures, they solve nothing.

The dubious actors failed to comply with transparency and decentralization and grossly corroded user trust. In the Web2 industry, Big Tech also continued to misuse user data and privacy, prompting the Federal Trade Commission to take a closer look at how Facebook, Google, Amazon and Apple handle customers’ personal information.

And as harsh as this silver-lining statement may sound, many crypto enthusiasts hopefully finally learned the lesson that if “not your keys, not your crypto.”

In the blockchain space, it has boiled down to the collapse of major centralized crypto firms rather than developers or builders.

Proof of reserves (PoR) surfaced as a critical topic in 2022 to bring trust back in light of the frauds and scams. PoR uses cryptographic proofs, public crypto-wallet ownership verification and third-party audits to attest that a centralized platform holds enough assets to match user assets.

The cryptocurrency market downturn wiped out over $2 trillion in market capitalization, while many digital assets lost 90% or more of their value. However, guess what? As of September, stock market losses had wiped out $9 trillion in wealth from American households alone.

But it’s not all gloom and doom

Despite the turmoil and collapse of several crypto companies, crypto’s risk-adjusted return actually performed in line with the United States and global stock indexes during 2022 and did much better than U.S. bonds.

Meanwhile, the blockchain market is primed to keep growing. Accounting firm PwC estimates that metaverse-related projects alone will represent $1.5 trillion in value by 2030.

There is a good reason to remain bullish on cryptocurrency. On Dec. 7, the number of wallet addresses with a balance of at least 0.1 BTC increased significantly to a new all-time high of over 4.1 million. On Nov. 28, the number of addresses holding 1 BTC to 10 BTC also hit an ATH of 800,000 addresses.

Decentralized finance (DeFi) is also rising despite the crises that caused a massive slowdown this year. The number of DeFi users around the world is increasing daily. The total value locked in DeFi was nearly $180 billion at the height of the crypto market in November 2021. But by 2030, we expect it to rebound to about $232 billion.

While GameFi also took a hit and dropped to $8 billion, credible data suggests it will bounce back to $50 billion by 2025 — although others believe it could come crumbling down in 2023. One of the most promising blockchain categories is the machine economy, or decentralized Internet of Things, which could represent $5.5 trillion to $12.6 trillion in value by the start of the next decade.

With people increasingly interested in owning and monetizing their data, blockchain — or, more specifically, smart devices connected to smart contracts, such as decentralized wireless projects — will see more significant adoption from 2023 onward.

And then comes 2023

The crypto and blockchain space has survived four crypto winters, demonstrating its resilience, and it is here to stay. In 2023, we will see increased interest in greater transparency and the need for regulations to build greater trust among those crypto and blockchain projects that continue to act in bad faith.

Bad actors will continue to be swiped left by legitimate blockchain projects and entrepreneurs working together to improve the cryptocurrency space. Where large crypto companies previously held most of the power, 2023 will uplift innovative builders creating next-generation applications that will carry the next wave of mass adoption.

Raullen Chai is the co-founder and CEO of IoTeX. He previously worked for companies including Google, Uber and Oracle. He holds a Ph.D. from the University of Waterloo, where his research focused on designing and analyzing lightweight ciphers and IoT authentication protocols. At Google, he led many important security initiatives for its technical infrastructure, including mitigation of SSL attacks, privacy-preserving SSL offloading and enabling certificate transparency for all Google services. He was also the founding engineer of Google Cloud Load Balancer, which now serves thousands of cloud services, with over 1 million queries per second.

This article is for general information purposes and is not intended to be and should not be taken as legal or investment advice. The views, thoughts and opinions expressed here are the author’s alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.