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 evolution of Web3 games and mobile blockchain access to the exploration of advanced cryptographic techniques and the potential of decentralized finance. Here are five areas represent exciting builder-worthy pursuits that have the potential to shape the startup landscape in the year ahead.
1. The Future of Web3 Gaming: Fun and Functionality
As the market shifts, top web3 studios are focusing on creating enjoyable, sustainable games that utilize blockchain technology. This means going back to the basics and considering the target audience, designing a game that exceeds their expectations, and determining the role of cryptocurrency in the overall experience. Developers will also be testing to ensure that their games are truly 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-high 800,875 daily Unique Active Wallets (UAW) interacted with the smart contracts of these games. It is clear that Web3 games are a vital 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 like Helios, Kevlar, and Nimbus allows 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 software program that allows users to interact with a blockchain network without downloading the entire blockchain. This can be particularly 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 computation, and post-quantum cryptography are all important technologies in the world of blockchain. However, there are trade-offs to consider in terms of prover efficiency, proof succinctness, and trusted setup requirements. In the coming year, it will be interesting to see if new constructions for zk-proofs can address these trade-offs and whether constant-size proofs can be achieved without the need for a trusted 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 near standardization, it will be valuable to examine 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, particularly in developing countries. In the year ahead, it will be interesting to see how cryptocurrency can be used for remittances, peer-to-peer lending, and other financial services. According to a World Bank report, remittances to developing countries reached a record high of $626 billion in 2022, and the use of cryptocurrency for these transactions could help reduce costs and increase speed and security.
5. DeFi and Central Bank Digital 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 evolves 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% rise in volumes from October to November ($97 billion). This demonstrates the value of DeFi: through the use of secure smart contracts to govern 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 bring up 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.