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With 2023 well underway and some stability restored to the crypto markets after an extremely turbulent 2022, it seemed like a good time to assess the markets’ general state. Here, Wolf investigates the current situation, as well as what we expect from crypto in the near future. Click each subsection for further insight.
Macroeconomic Trends
Rising inflation, hawkish economic policymaking, and consumer asset de-risking have greatly reduced the market capitalization and sentiment of cryptocurrencies. This is lengthening the crypto winter.
Regulation
Regulators must keep up with the rapid demand for digital commerce use cases, while balancing critical risk considerations such as anti-money laundering (AML) and know-your-customer (KYC) provisions to accommodate the growing market.
Centralized Finance vs. Decentralized Finance
Acts of fraud, economic unrest, and danger from unexpected regulatory changes have hurt consumers leveraging centralized custodians and exchanges. Decentralized finance has held up well compared to market-shifting scandals like FTX/Alameda and Three Arrows Capital. Therefore, centralized and traditional finance entities will continue to look for new ways to utilize blockchain-based technology, including via “Permissioned DeFi” and “smart contract” development.
Crypto and the “Real World”
Innovation typically expands in the troughs of capital markets. We saw this with second-generation internet companies developed after the 2001/2002 dot com bubble and the 2008 financial crisis, and more recently with pandemic-era companies innovating for a new age. Crypto, which has entered another winter, can expect many entrepreneurs and innovators to work on new real-world use cases based on information gained through the most recent market capitulation for the next era of consumers. These use cases will broaden and expand the many blockchain-related concepts such as play-to-earn, metaverse, non-fungible tokens (NFTs), peer-to-peer streaming, and social networks. That, coupled with a stronger understanding of regulation, market interests, and the globalized adoption of digital consumerism, is bound to create a new market boom in the future.
DAPP Framework
There are many ways for businesses and consumers to engage with the foundations of Web3 infrastructure. The “new internet” is more than the sum of its parts, and getting the lay of the land is imperative to understanding how consumers and businesses can engage with this innovation in the future. This article summarizes these foundational components into a useful acronym – DAPP: Doors, Applications, Primitives, and Protocols.
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