Although many centralised companies faced challenges or closures over the past year, the decentralised finance (DeFi) ecosystem has remained relatively stable in comparison. The prolonged bear market and damage to consumer trust in cryptocurrencies have impacted some DeFi players, but there have also been positive developments. It is possible that the difficulties faced by centralised companies have highlighted the benefits of decentralisation and the resilience of the DeFi ecosystem, and that they may have been a necessary evil for DeFi’s eventual success.
In 2023, here are some potential DeFi trends that could present huge benefits or side effects for the industry.
Web3 Gaming Leading the Pack
In 2022, a number of gaming projects with decentralised finance (DeFi) integrations attempted to gain market share and investment. These projects are likely to continue developing and growing in 2023, with DeFi as a key driver. Investments in this space tripled between 2021 and 2022, offering a lot of hope to Web3 gaming developers and projects.
Web3 gaming has the potential to be a major growth area for the wider Web3 ecosystem. While these games may still have some playability issues, they can offer unique earning models, staking, and farming options that traditional games do not have. These features could provide value propositions that bring mass adoption to Web3 gaming.
Continued Stablecoin Growth & End to Japan Ban
Stablecoins, which are cryptocurrencies pegged to real-world assets, have remained popular despite bear market conditions. Examples of stablecoins that have maintained high market capitalisations include Circle’s USDC and Maker’s DAI. These types of cryptocurrencies are widely accepted and have strong use cases.
Recently, Japan, which has traditionally had strict regulations on cryptocurrency, announced that it will lift the ban on the domestic distribution of foreign-issued stablecoins in 2023. This could be one of the DeFi trends to accelerate the adoption of stablecoins in general and reduce the time and cost of international money transfers in the coming year.
Developing New Security Measures to End Rugs/Scams
Improving security is likely to be a major focus in the cryptocurrency industry over the next few years. In addition to enhancing transaction speed and reducing costs, the use of ZK proofs* can also increase the security of on-chain interactions. There have been numerous instances of funds being stolen from DeFi platforms in the past year, leading the FBI to caution investors about the risks associated with this space.
Unless there are significant efforts to improve security, it will be difficult to attract a wider audience to the cryptocurrency market. Expect major breakthroughs in this area in 2023, especially after the FTX fiasco, with security being one of the major DeFi trends to unlock mass adoption.
The Merge to the Surge: Scalability Set to Improve
The Ethereum Merge was a significant event in the cryptocurrency industry last year, but issues such as high gas fees and slow transaction speeds continue to hinder ETH’s mainstream adoption. As the network undergoes its next phase of development, known as “the Surge,” DeFi developers will likely focus on incorporating zero-knowledge (ZK) technology and layer-2 solutions to improve scalability and performance.
DAO Growth: More Decentralised Organisations
Decentralised autonomous organisations (DAOs) have generally avoided regulatory issues over the past year, despite ongoing uncertainty in this area. Nick Almond of FactoryDao (also known as @drnicka on Twitter) believes that their strong performance and growing maturity could lead to a shift away from centralised institutions towards decentralised ones. The increasing adoption of DAO governance in 2023 could increase the legitimacy of these organisations and make decision-making in the cryptocurrency industry more transparent, potentially reducing the risk of collapses similar to the one experienced by FTX.
*ZK proofs are a type of digital verification that can significantly enhance the efficiency of blockchain networks by allowing them to handle a larger number of transactions in a shorter period of time. Improving these aspects of the Ethereum ecosystem could make it more attractive to a wider audience.
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 Crypto-News