From Idealism to Pragmatism: Eight Trends of Web 3.0 in 2023

Author: Bi Lianghuan, Researcher at OKLink Research Institute

Source: https://m.thepaper.cn/newsDetailforward21405034

Three years of a global pandemic, the ongoing war in Ukraine, escalating geopolitical tensions, and high inflation seem to have accelerated the cyclical nature of the economy.

Looking back through history, from agricultural civilization to industrial civilization, from information connectivity to value connectivity, the vitality brought by technological innovation remains the unchanging main theme of the era. The Web 3.0 network, built on blockchain technology, underpinned by artificial intelligence, big data, and other technologies, allows value to return to producers, where what is built is what is earned. Those who create data own the value of that data; Web 3.0 will spark a transformation in production relations through an economic model that allows numerous participants to fairly acquire wealth, becoming a focal point in recent years.

For Web 3.0 technology, 2022 was a year of switching industry logic. Web 3.0 technology, which has been entrusted with the hope of changing production relations and returning ownership to users, is transitioning from idealism to pragmatism. Regardless of how the external environment changes, Web 3.0 technology continues to accumulate energy along several technological or commercial branches, building commercial value and giving long-term builders more time and space to solidify their foundations.

In recent years, the market scale of Web 3.0 technology has been rapidly expanding, with internet companies flocking to it and traditional industries beginning their exploration in the Web 3.0 field. As users spend more time online, Web 3.0 culture and life will rise alongside the evolution and maturation of technology, injecting vitality into the economy of 2023 and promising value integration and recreation.

Based on market signals and industry development trends, as well as an analysis of the current business and technological landscape, this article elaborates on eight major trends in Web 3.0 technology for 2023.

1. The Era of Pioneering is Over, the Era of Super Applications Begins

Web 3.0 has long bid farewell to the pioneering era of land grabbing. Reflecting on the experiences of the internet era and analyzing based on the theory of crossing the chasm, super applications, akin to a Swiss Army knife, will become an important link in the transition from the role of "innovator" to "early adopter" in the industry. These composable applications and architectures can fill business strategies with infinite possibilities. Research firm Gartner predicts that by 2027, daily active users of multiple super applications will cover more than 50% of the global population.

Signs of Web 3.0 super applications are already emerging. Data from cryptocurrency analysis firm Cryptofee shows that among the top ten public chains and applications by revenue, eight are super applications. Although infrastructure components strengthened in mid-2022, surpassing the market performance of super applications, these components will ultimately feed back into the Web 3.0 super application ecosystem.

(Data from cryptocurrency analysis firm Cryptofee shows that among the top ten public chains and applications by revenue, eight are super applications. Image source: OKLink Research Institute, cryptofee)

In 2023, in the battle for value in Web 3.0, we can continue to expect the emergence of more user-centered super applications, which will be one of the significant signals of improved market performance in the industry.

2. "Selfish" and Misleading AI Can Become Productivity Tools for Web 3.0

If your day starts with asking Siri about the weather, then artificial intelligence (AI) has already become a part of our lives. The successes AI has achieved so far are built on centralized networks (Web 2.0), which is starkly different from the Web 3.0 culture that hopes to distribute power and benefits more equitably through decentralization. However, at the same time, AI is quietly becoming a productivity tool for Web 3.0.

(ChatGPT Q&A)

In recent years, the AIGC (AI-Generated Content) field, which has attracted significant capital, is considered a new form of content creation following professionally generated content (PGC) and user-generated content (UGC). For example, AIGC models like Stable Diffusion use datasets that include their own works, allowing people to generate content in the same style within seconds. This can empower the creator economy in Web 3.0 and accelerate the construction of the metaverse. However, despite its power and efficiency, AIGC faces widespread criticism regarding copyright issues and misuse.

In addition to AIGC, blockchain technology can complement AI. By utilizing decentralized methods and incentive models from cryptoeconomics, Web 3.0 is expected to build a new decentralized AI paradigm from three aspects: data, models, and computing power. This approach is anticipated to reduce the costs of running and training AI and, to some extent, address the "misuse" issues of AI through decentralization.

3. Promising Zero-Knowledge Proofs Still Await Market Validation

Web 3.0 faces constraints such as limited scalability and high latency. Without sufficient transaction throughput and low enough costs, it is challenging for Web 3.0 to accommodate mainstream capacity.

Zero-Knowledge Proofs (ZKP) or zero-knowledge protocols are seen as one of the solutions in the industry, and there are already numerous use cases. Besides scalability, ZKP, as an important cryptographic algorithm, also holds the key to privacy protection applications in blockchain. In summary, zero-knowledge technology allows developers to leverage the security of public chains while improving transaction throughput and speed, and it can store users' personal information off-chain to protect user privacy. Currently, projects like Polygon, zkSync, StarkWare, and Scroll are actively promoting the application of this technology, which will become an important starting point for applications using this algorithm to conduct large-scale testing with real users.

The applicability and value accumulation of ZKP still need to be proven, such as whether DeFi Dapps can achieve large-scale migration. As technology continues to evolve, more freedoms will be released under lower-cost trust.

4. Greening Web 3.0 in Action, ReFi May Become a New Narrative

Since the advent of Bitcoin, its energy consumption issue has labeled the crypto industry as "not environmentally friendly." While Web 3.0 aims to improve human life, it must also be more sustainable.

As major ecological participants in Web 3.0, several public chains are seeking more environmentally friendly paths. For example, after Ethereum completed its merge, its carbon emissions were reduced by 99%. In June 2022, Polygon announced that with the help of KlimatDAO, it repurchased $400,000 worth of carbon credits, achieving theoretical "carbon neutrality." Polkadot employs a "Nominated Proof of Stake" (NPoS) consensus mechanism, and based on the activity of about 1,000 validators in its ecosystem, its energy consumption is 0.8 GWh, only 0.001% of Bitcoin's.

Based on this, regenerative finance (ReFi) is quietly rising. As a new narrative, interpretations of it vary among institutions, but generally, it advocates for addressing climate change, supporting environmental protection and biodiversity, and creating a fairer and more sustainable financial system. Thus, ReFi can be seen as a new narrative that shines with the brilliance of humanity.

5. A Market with Trillion-Yuan Prospects Needs a Balance Point

For both internet giants and the financial industry, the debate between centralization and decentralization is a well-worn topic. In the world of Web 3.0, decentralized finance (DeFi) has been a hot topic since 2021, with its absolute advantage being the ability to provide transaction support in a trustless and efficient manner. In 2022, we saw decentralized institutions also leaning towards centralization, seeking a balance point for long-term stable industry development.

Taking wallets, an important component of DeFi protocols, as an example, some projects have begun to make seemingly less "decentralized" adjustments for compliance and later review. For instance, MetaMask updated its privacy policy in November this year, stating that when users use Infura for default remote procedure calls (RPC), Infura will collect users' IP addresses and ETH wallet addresses when users send transactions. This is also an experiment for the future large-scale adoption of the industry.

In Web 3.0, one must balance "fish and bear's paw"; a utopia filled with idealism is not reality. As an industry still in its early stages, finding a balance point between centralization and decentralization is essential to leverage this trillion-yuan market.

6. This BaaS is Not That BaaS; Good Wine Fears No Dark Alley

Blockchain as a Service (BaaS) is not a new concept. According to statistics from Caixin Venture, in November 2022, there were 71 financing rounds in the global Web 3.0 field, with a total financing amount of $1.034 billion. In the nearly trillion-dollar market cap of the crypto field, over 90% is generated by leading projects.

For example, Yuga Labs not only created the top-ranking NFT (non-fungible token) blue-chip BAYC but also acquired other blue-chip IPs, including CryptoPunks and Meebits. Because of this, its brand effect has attracted more market attention. For Web 3.0 projects, in addition to seeking shortcuts through blockchain as a service in development, the brand effect is gradually overshadowing the community reputation effect that the industry focused on in its early days.

(NFT special rankings. Image source: OKLink)

Brands are increasingly valued by users and investors, leading to the emergence of Brands As A Service. Especially for Web 3.0 teams, as the development team occupies a significant proportion of the project team, the market demand for Brands As A Service will gradually increase.

7. Survival of the Fittest, Not the Strongest: Web 2.5 Achieves a New Paradigm of Business Models

Not everyone's journey in Web 3.0 is a smooth sail. Zuckerberg's Meta, renamed to enter Web 3.0, has incurred losses of over a hundred billion dollars, while Nike, seemingly unrelated to Web 3.0, has made profits. According to data from blockchain research firm Dune, Nike's NFT revenue reached $185 million from December 2021 to August 2022, while Adidas earned only $11 million during the same period. Additionally, Time magazine released its first fully decentralized magazine on the blockchain in NFT form on March 23 this year. The largest cinema operator in the U.S., AMC, also launched NFTs in the first half of this year and added virtual assets as payment methods for users.

Tech companies are no different; almost all companies are incorporating Web 3.0 elements such as membership point tokens and NFTs into their products. The Reddit Avatars digital collectibles program and the Reddit Vault digital wallet were launched on October 22, 2022, attracting 3 million new Web 3.0 users. Twitter also introduced NFTs into users' profile avatars in early 2022.

More and more industry giants are integrating Web 3.0 technology into their Web 2.0 or existing consumer bases to upgrade their original service experiences and reconstruct new business models. In 2023, it is believed that more tech companies and industry giants will accelerate their entry into Web 3.0, with most of them choosing Web 2.5 as their first stop on this journey.

8. The Unseen Champions Should Not Be Underestimated

Beneath the frozen ground lie seeds ready to sprout; once the harsh winter begins to recede, everything will break through the soil. As Web 3.0 gains more recognition, new narratives and concepts always capture people's attention first. Some niche tracks are also home to unseen champions ready to emerge. For instance, security audit companies remain worthy of investment, as the $3 billion in on-chain attacks in 2022 highlights the need for security audits. Additionally, the on-chain data track has built a commercial closed loop in terms of company valuation and profitability, while other Web 3.0 projects with lifespans exceeding three years are few and far between.

(A group of tech companies providing different services based on on-chain data. Image source: OKLink Research Institute)

Moreover, in the growth tools track of Web 3.0, whether CRM or reward platform tools, they have already become indispensable parts for users or developers as Web 3.0 grows. "To do a good job, one must first sharpen one's tools," and this is the true value of niche tracks.