First things first.
The merge finally happened.
One of the most-anticipated events in the history of open-source development took place last fall. Ethereum underwent its biggest upgrade when the network transitioned from POW to POS. “The merge” marked an architectural shift that massively reduced Ethereum’s energy footprint.
New technologies, once almost unthinkable, are maturing and set to explode.
Blockchain scaling brought about more users, more transactions, and more complex dApps in 2023. There are many promising new paths. For example, Web3 is a dynamic industry for developers trying to solve foundational challenges, such as the interoperability trilemma.
Let’s begin with the L2 blockchains – the technology designed to scale underlying Layer 1 blockchains like Ethereum by offering more blockspace, scaling transaction potential, and lower fees. In 2023, L2s counted for 1.5% of the fees paid on Ethereum. That share has more than quadrupled to 7% of the total fees paid on Ethereum, which means more dApps are choosing to build on L2s. This trend should continue as it will be beneficial to end users.
A lot of technical advancements kept “the devs” busy this year amidst the battle of zero-knowledge versus optimistic rollups, the rise of application-specific blockchains such as Cosmos, and the recent migration of dYdX. Technologies like IBC (Inter-Blockchain Communication Protocol) and the Cosmos SDK allow any dApp to build a custom layer designed to meet their needs while maintaining native interoperability with other assets sharing these standards.
Throughout 2023, there has been rapid progress in the “zero knowledge” industry – the powerful and foundational technology that unlocks blockchain scalability. It came with the massive rise of new use cases, including privacy-focused and verifiable computing applications that could enable decentralized machine learning (the holy grail of decentralized networks). These systems, including zero-knowledge proofs, involve cryptographic methods for verifying that a set of data is true without revealing any information about those.
This work has moved from theory to practice in the last few years (could have taken much longer without the explosion of all blockchain innovations). It seems that this tech is following Moore’s Law.
The acceleration of progress from software, such as smart contracts, to hardware (and decentralized computing power like Akash) and more, is incredibly promising for the future of technology, giving several tracks for blockchain projects to explore, which will champion innovative breakthroughs.
The U.S. Is Losing Its Lead in Web3
As a crucial part of emerging technologies, crypto needs an established policy and regulatory framework to grow institutional interest and reach its economic potential for the U.S. economy.
There has been a lot of heated debate on this.
Happy New Year, Senators Warren and Lummis.
But there has been insufficient clarity on regulation, which has negatively impacted the growth of the Web3 ecosystem in the U.S. As a result, America’s edge in this industry may be slipping.
Between 2018 and 2022, the proportion of crypto developers based in the U.S. compared to the rest of the world dropped to 26%. There is some hope, however, including a growing bipartisan push for legislation that could provide much-needed clarity.
Is Crypto Still in Its Early Phase?
We’re still early in Web3, but we’re no longer at the beginning. Stepping away from short-term volatility reveals a more predictable pattern.
This leads to a steady product cycle that is distinctly different from the financial cycles that saturated media attention in the earlier bull markets.
There was the “price-innovation cycle” (the observation that prices and development activity are intertwined in a positive feedback loop), which had an undervalued significance but is actually a useful mental model for navigating market cycles and understanding the indicators driving them.
When crypto prices increase, more people join the fun and the bravest stay during the bear market. This attention also inspires (and funds) new ideas, startups, and projects, some of which lead to greater adoption in the long term (think Friend.tech explosion in 2023), which will result in the rise of SocialFi and GameFi and the downfall of traditional social media.
Over time, these cycles move the industry forward in technological waves. We may be in the middle of the fourth such cycle since Bitcoin’s inception in 2009. A closer look suggests many indicators appear to be trending steadily upward.
What Does the Job Market Look Like?
There has been a slump in tech jobs in 2023. In a notable shift within the cryptocurrency sector, there has been a substantial decline in jobs for crypto-related positions. The job postings related to crypto have declined by 64.20%, while searches for these job roles also decreased by 15.20% between August 2022 and 2023. Bengaluru takes the lead, comprising 36% of the crypto job market.
The wide distribution of crypto job opportunities across the world reflects a decentralized approach, offering employment options across countries.
The data further reveals the most in-demand positions in the cryptocurrency industry are application developers, accounting for 11% of the job listings, followed by enterprise architects at 6%, full stack developers and developers at 5%, and data engineers at 4%.
Transaction Fees Are Back
After a huge slump during the bear market, transactions fees on all blockchains and protocols made a comeback in late 2023.
The rise of ordinals and inscriptions (first on Bitcoin and later on other blockchains) played a big role in bringing back transaction fees. Don’t forget that those are the main drivers of resources that validators and developers rely on. They are also a good indicator of the healthiness of a network (even if, as with everything, numbers can be played with).
Some of the leading protocols in terms of fees were Ethereum, Bitcoin, Polygon, and Shibarium (which racked up more than $1 million in fees in December alone).
Author: @Risjo_xyz
