It’s been a rough year for the digital asset industry. Crashes and collapses, job losses, tumbling prices, record-high inflation, bankruptcies, massive hacks and war in Europe – the cryptoverse has seen it all in 2022. And now that we are heading into a new year, many are wondering what 2023 will look like for the crypto industry. Let’s take a sneak peek.
The contagion effect is far from over
It’s true, the contagion from one of the worst possible years in crypto history is not over yet. FTX went bankrupt in November and the fallout has affected some of the top digital asset firms, such BlockFi, Galaxy Digital, Sequoia Capital, etc. And according to a report by CoinTelegraph, the FTX collapse will continue to cause pain for the cryptoverse in 2023.
“The unfortunate events surrounding FTX have undoubtedly damaged investor confidence in the digital asset class. Remediation will take time, and very likely this could extend the crypto winter by several more months, perhaps through the end of 2023 in our view,” says the report.
Ethereum staking rewards and sharding
Perhaps, one of the only good things that came out of 2022 was the Ethereum Merge. On Sept 15, the second-largest cryptocurrency by market capitalization transitioned from the energy-intensive Proof-of-Work (PoW) consensus mechanism to the energy-efficient Proof-of-Stake (PoS) consensus mechanism.
After the successful completion of the Merge, Ethereum’s energy consumption dropped by 99.5 percent, which is incredible, to say the least.
And it seems like The Merge is a gift that keeps on giving. As a follow-on step from the transition to PoS, Ethereum will implement the Shanghai update in the first half of 2023. This will begin the phased unlocking of staked ETH and staking rewards garnered so far, a huge bonus for investors who have been staking ETH since the PoS Beacon chain was introduced in Dec 2020.
Another upgrade to follow The Merge is the introduction of sharding on Ethereum. This is a process wherein a blockchain’s workload is broken into smaller pieces to speed up processing.
As such, sharding is expected to considerably enhance the scalability of the blockchain network. Combined, these two developments could spell a turnaround for Ethereum, and act as a market-boosting catalyst.
The XRP verdict
Further, 2023 could be the year when a final settlement between Ripple Labs and the Securities and Exchange Commission (SEC) could be reached. The SEC filed a lawsuit against XRP in Dec 2020 alleging that Ripple Labs raised over $1.3 billion since the coin was launched through an unregistered securities offering.
Ever since the lawsuit, XRP has failed to gain a footing in the market and has been trading well below its all-time high of $3.02 from June 2018. The case has dragged on for nearly 2 years now, but the end is in sight. This is because, in September this year, Ripple and the SEC filed a motion to reach a verdict as soon as possible.
As a result, the case won’t be presented in front of a jury. Instead, a judge will have complete authority over the verdict, and this should speed up the process. Barring any unforeseen complication, the XRP lawsuit could see a verdict in early 2023.
Former US congressional candidate David Gokhstein mentioned that if Ripple wins, it will have an incredibly positive impact on the whole crypto industry. However, the decision is still pending, but according to judge Torres, a summary judgement may be passed on or before March 31, 2023.
Stricter regulations are on their way
After the Terra and FTX collapse, it is quite natural that the regulatory status of the industry will take on a stricter approach. However, increased regulatory measures are not necessarily all bad. It could also result in the development of better policies and create safety nets for new and existing users in the crypto space.
Moreover, increased regulations will automatically help increase trust in a largely volatile market and will attract many new users. Although crypto exchanges are rushing to provide Proof-of-Reserves (PoR) audit reports to maintain a certain level of transparency, 2023 will probably see further developments in the area of transparency and more credible ways of maintaining trust and confidence among investors and traders.
A greater push for decentralization
One of the main goals of Bitcoin, the oldest cryptocurrency in the market, was to move away from centralized authorities. The Terra and FTX crashes further highlight the need for such a transition. These events prove that putting the responsibility of user funds in the hands of a few is never a good idea.
As such, following the FTX meltdown, there has been an exodus of sorts, with investors fleeing to decentralized exchanges and pushing for DAO-controlled projects. And if these platforms can live up to their promise, they could restore investor confidence in the tattering digital asset industry.
Conclusion
It has been a brutal year for Web3. However, people are still hopeful that the next year will be a better one for the digital industry. Several innovative protocols are coming up and threatening to change the crypto space for the better. Hopefully, these innovations will pave a positive path for the future of cryptocurrencies and blockchains.
But on a practical note, it will not happen overnight. So as the saying goes, let us hope for the best, but prepare for the worst.
