At the beginning of each new year, I spend some time thinking about how our industry has changed, and what the next 12 months might bring for technologies like cryptocurrency, tokens, and smart contracts. It’s an important exercise that helps me understand what we need as an ecosystem going forward – when 2021 was drawing to a close, I saw that the Canadian Blockchain Consortium needed to support more essential services for blockchain companies, like insurance, government advocacy, and education, and needed to broaden the scope of our committees to reflect our changing industry.
This resulted in our development of a Captive Associative Insurance project that will unite major Canadian crypto companies to create access to low-cost insurance that reflects the needs of our businesses, the creation of diverse committees at the Consortium that address important issues like inclusion, ESG, banking access and government relations, and successfully built a series of blockchain education courses with the Northern Alberta Institute of Technology (NAIT).
After a volatile 2022, it’s more critical than ever to reflect on the lessons our industry needs to learn, as well as the successes – in spite of Crypto Winter – that our talented companies have been able to achieve. I think that one of the biggest lessons is that governance needs to take far higher priority going forward. From hyped-up bubbles that left people bankrupt, to collapses of tokens like Terra/Luna and criminal fraud by FTX/Alameda, there is one commonality – human failure.
Buyers piled into trending coins and projects with the expectation of massive profits, despite evidence that bubbles have never ended well and are impossible to time. The founders of Terraform Labs, the company behind Terra/Luna, are under criminal investigation for misrepresenting the safety of their stablecoin to investors. It’s now known that the FTX exchange group and Alameda, the investment firm behind it, had no checks and balances on the behavior of executives, and misused customer deposits to fuel bad investments and wasteful spending.
People were behind the challenges of 2022, not the technology. Governance – the rules that create boundaries around behavior, disclosures, and the use of technology, and enforces consequences for breaking them – is the only solution that will protect the industry and its users, and I predict that this will be a major focus for blockchain across all areas in 2023.
“Small bubbles – like blockchain gaming, driven by emerging markets – might pop up here and there, but there will be less speculation, and more focus on navigating new regulations, integrating with government and traditional industries, and building solutions for real problems.”
While the positive parts of 2022 have been overshadowed by FTX and issues like rising energy prices and risk-averse investors, there was also significant progress made, and it’s vital to remember that we’re an industry that is continually evolving, and setbacks don’t diminish its importance to our future. Here are five of the top bright spots that I think people should know about as we enter a new year:
- Bitcoin has new utility: The world’s first and most fully decentralized blockchain network got a major upgrade with Taproot, which uses a process called “batching” to group transactions together, resulting in faster transaction times, greater scalability, more privacy protection and new features like smart contracts. As it gains adoption, this upgrade will be key to making Bitcoin more functional for daily transactions, which will have big benefits to its use as a currency in developing nations.
- Women’s contributions grew: 2022 was the year when blockchain became more inclusive, and new technologies and applications drew an unprecedented amount of activity from women. The successes of female leaders like Elizabeth Stark, CEO of Lightning Labs and Jaime Leverton, CEO of Hut 8 Mining, showed women what the industry had to offer, and more than half of women in some global studies expressed interest in using crypto – significantly higher than men.
- Investment surged: While 2021 was the height of the crypto market, reaching more than US $3 trillion in value, Crypto Winter saw a big interest from venture capital. Although monthly funding declined after May, investors still took big positions in value-adding projects, becoming more selective with their money and preferring longer-term plays like digital infrastructure.
- Ukraine showed huge value: One of 2022’s biggest success stories was how the crypto sector rallied around Ukraine after the collapse of its banking infrastructure. It was a powerful demonstration of how the technology can support people when traditional systems fail – more than US $54 million was raised for the war effort in crypto by August, and with no payment systems operational, the UN began using USD-pegged stablecoins to send funds directly to those impacted in Ukraine, as well as refugees crossing international borders.
- Emerging markets adoption skyrocketed: Overall, the peak adoption for crypto was at the height of the market in 2021, but some areas – especially Africa and Asia – have seen a flood of new users adopting crypto to overcome lack of banking access, runaway inflation, or government repression and corruption. In Vietnam, the highest adoption country for the second year in a row, 21% of the population uses crypto. In Nigeria, where inflation is 20%, high adoption by citizens recently pushed the government to legitimize crypto in an upcoming bill.
What will the next year hold for blockchain? Like most people, I’m wary about making predictions after the last year of unexpected events – who ever imagined that they’d see one of the most established CEOs in the industry in handcuffs? – but there are distinct patterns that I believe we’ll see more of in 2023. The first, of course, is that governance will be a huge focus and gain a lot more scrutiny.
Another big trend is transparency. We’re now seeing a movement of exchanges publicly disclosing their reserves, and users, investors and governments will demand more verified information about the stability of companies and platforms. Similarly, education will grow in importance, as consumers and regulators realize that they need to gain a much better understanding of the industry before they engage with it. For the mining industry, companies will get creative about energy sources with more historic price highs expected in 2023, and pivot more to partnerships with renewable projects and to integrating with oil & gas operations.
Overall, in 2023 I think the industry will take a pause, regroup, and lay the foundations for a stronger future. Small bubbles – like blockchain gaming, driven by emerging markets – might pop up here and there, but there will be less speculation, and more focus on navigating new regulations, integrating with government and traditional industries, and building solutions for real problems. I definitely hope it won’t be as dramatic as 2022 – but a stable year of progress that will set the industry up for long-term success.