GM,

Today, we have a special review of the year that was 2023 through the eyes of Web3. It’s been an eventful year, perhaps mostly for the wrong reasons, but the past few months have seen more positive narratives emerge and hope for brighter markets and skies in 2024.

We will be back with a predictive look at what is to come next year.

Without further ado, here are our three biggest takeaways from the last twelve months.

Have a great New Year and see you in 2024!

Jon and Gary

SO WHAT about 2023

1. Bitcoin is back in vogue again

The undoubted star of the year for Web3 was Bitcoin. 

We’re not just talking about investment—the price of BTC is up over 150% since 1 January 2023—Bitcoin led the charge for Web3 on a number of fronts including institutional adoption, innovation, liquidity and, of course, price.

The year started with plenty of negativity. There was noticeable industry fall-out with developers, founders and investors shifting their focus to the buzzier and warmer climate of AI, leaving behind a wounded world of crypto which had seen the implosion of FTX, Celsius, Three Arrows Capital and other major names. But beginning mid-year, a shifting narrative around Bitcoin lifted the market, particularly because of speculation that the US will approve its first Bitcoin ETFs—a move that would likely generate significant inflow of institutional capital. That type of validation could very well spur on all areas of Web3.

Beyond ETFs, the Bitcoin community saw the network’s most innovative new use-case flourish in 2023 with the rise of Ordinals, which uses a feature called inscriptions to enable new types of data on the Bitcoin blockchain, including NFTs. Ordinals, as we wrote, drove Bitcoin to new all-time-highs for daily transactions—over 710,000 on 19 November—and generated more than US$100 million in new revenue for miners.

Ordinals was ostensibly launched to “make Bitcoin fun again.” That resonated with many but it also divided the community, with a number of Bitcoin purists—“Maxis” who believe Bitcoin should only be a store of value—deriding it as “spam” because it clogs the network and increases the price of fees that are required to complete transactions. Inscriptions are now becoming common on other chains, bringing the same dilemma to many other Web3 communities in 2024.

2. Removing the bad apples

Arguably the biggest stories of 2023, and certainly the most persistent, were the legal troubles of crypto’s (formerly) brightest stars. Here’s a quick recap of the most important cases:

• Sam Bankman-Fried, the founder of FTX, was founded guilty of wire fraud, conspiracy to commit commodities fraud, conspiracy to commit securities fraud and more—he is awaiting sentencing
• Changpeng Zhao, the founder of Binance, is awaiting sentencing after he plead guilty to failing to prevent money laundering for which Binance paid a US$4 billion fine
• Do Kwon, a co-founder of Luna, is awaiting extradition after being charged for securities fraud, commodities fraud and more
• Su Zhu, a co-founder of Three Arrows Capital, was arrested as part of an investigation into the collapse of his firm—his co-founder Kyle Davies remains at large

These founders are among crypto’s highest profile figures and, at their peak, they were revered by entrepreneurs and investors for their ability to generate wealth. In each case, bar Binance, they found themselves either without a chair when the music stopped (after the crypto market crashed in 2022), or exposed for outright fraud. 2023 was the year they got their comeuppance with the law.

It might be logical to assume that the imminent jailing of major kingpins would adversely affect the entire Web3 market, but the sentiment now appears to be that removing the bad apples is good for the rest of the barrel. Web3’s ultimate goal is mainstream adoption, from  cryptocurrency ownership to tokenization and everyday services built on Web3 rails. For that to happen, bad actors must be exposed and clear, consistent rules must be enforced. 

3. Asia is the brightest star

It would be easy to list ‘regulation’ as our third highlight, but instead we are opting for Asia—yes, the whole continent. 

That’s because Asia provided most of the positive narratives for Web3, while the rest of the world seemed mired in self-pity. Take the aforementioned regulations as an example:

• Hong Kong has pioneered a regulated approach to digital asset trading for retail investors, and is on the verge of introducing world-first stablecoin regulations and real-world asset guidance
• Singapore’s central bank continues to incentivize blockchain experimentation in banking and finance, while driving global thought-leadership on how to best connect decentralized and distributed networks
• Japan has taken a positive approach to Web3 technology with major conglomerates like Mitsui and NTT Docomo publicly announcing Web3 investment and innovation initiatives, while the government explores greater use of stablecoins

Outside of regulation, Asia also played host to 2023’s top Web3 events, as we previously noted in this newsletter. Those include Token 2049 in Singapore, Hong Kong FinTech Week, India Blockchain Week, Korea Blockchain Week, Taiwan Blockchain Week, and more. Yuga Labs even brought their famed ApeFest to Hong Kong this year!

While the US has Silicon Valley innovation, Ivy League schools with blockchain associations and talent pools, Asia remains very much key to Web3 development now and for the future. Regulatory advancements in the US next year may redress the balance, but Asia’s appetite for Web3 continues to grow, and the world’s builders and investors are paying close attention.

That’s all for this year! See you in 2024!

Share your feedback, questions or requests via email to: sowhat@terminal3.io