NOAH's 2023 Predictions for the Industry

The crypto industry is rapidly evolving, and 2023 promises to be a turning point for the industry as a whole. In the realm of cryptocurrency, we are witnessing a series of evolutions that have the potential to alter the course of this emerging field.

With validity rollups, the Lightning Network, the continued rise of stablecoins, FTX's regulatory fallout, Nostr development, and advancements in Bitcoin mining, the industry is seeing advancements that will shape the future of finance.

This article outlines some of the key trends and predictions for the crypto industry in 2023 and the potential impact they could have on the industry. With exciting technological advances and the potential for increased regulation, 2023 looks to be another monumental year for the crypto industry.

The year of rollups is upon us, and 2023 promises to be a turning point for blockchain scalability. As the crypto industry continues to mature and evolve, validity rollups have emerged as a powerful solution for increasing the efficiency and accessibility of these networks.

With the ability to bundle multiple off-chain transactions into a single on-chain transaction, rollups offer a path forward for faster confirmation times, lower transaction fees, and more accessible blockchain networks. Crypto companies and entities will begin to take notice, and we anticipate that rollups will play a significant role in driving the adoption and usage of this technology.

We had the opportunity to speak with John Light, a former Validity Rollups Research Fellow at the Human Rights Foundation, in December 2022. For a more in-depth technical perspective, check out our blog post, where John Light delves into the future of validity rollups.

As for the Lightning Network, 2023 is shaping up to be a crucial year for this revolutionary technology. With public channel capacity surpassing the 5,000 bitcoin mark and a staggering 50% increase since the bear market, it's clear that confidence in the network's capabilities is growing.

As the Lightning Network continues to evolve and mature, we can expect a proliferation of new tools and services that simplify the user experience and increase accessibility. This will further accelerate its adoption, particularly among merchants and businesses looking to accept Bitcoin payments.

Furthermore, the growing interest in Bitcoin as a store of value and a hedge against traditional fiat currencies will drive demand for fast and low-cost transactions. This will further fuel the adoption of the Lightning Network as users seek to transact with greater speed and efficiency.

Despite its potential, the network is still in its infancy and will continue to face challenges as it scales. Capacity constraints, routing issues, and the need for better interoperability are just a few obstacles the network will have to overcome. As 2023 unfolds, we expect to see these challenges front and center as development seeks to improve the Lightning Network.

As the crypto landscape prepares to shift dramatically, whispers of a more hawkish stance from governments worldwide towards stablecoins begin to echo through the industry. Yet, tainted by concerns of fraud, evading regulation, and other nefarious activities, the future of private stablecoins seems uncertain. The recent FTX contagion only fuels these concerns as regulators scramble to take action.

But as the winds of change blow, a new player enters the game - Central Bank Digital Currencies (CBDCs). These digital versions of a country's fiat currency touted as having increased transparency and oversight, are being hailed as the solution to the problems plaguing private stablecoins. As governments race to develop their CBDCs, a new discourse emerges - one of political agenda-setting and lawmakers vying to adopt best practices for the digital future.

The impact of CBDCs on the stablecoin market is expected to be significant. Algorithmic stablecoins, lacking the backing of physical assets, may struggle to gain traction in the face of increased regulation. Instead, it is predicted that the market will shift towards stablecoins backed by assets such as gold or other commodities, offering increased transparency and oversight.

As governments and central banks join forces with private sector companies to develop and implement CBDCs, the industry is set to see a surge in investment and new business opportunities. As a result, the crypto landscape is about to transform, and the world will be watching as the future of money takes shape.

We predict that regulatory bodies and other financial regulators around the world will take steps to increase oversight and regulation of crypto exchanges in the coming year. While crypto changes already implement the following regulatory practices, we expect that these expectations will grow more stringent in their implementations:

• Auditing and inspections: regulatory bodies may conduct more frequent and in-depth audits and reviews of crypto exchanges to ensure they comply with laws and regulations and identify and address potential risks or issues.

• Capital Requirements: Many countries have already taken steps to increase the required capital for crypto exchanges, and we have also had to increase capital requirements in our local entity. It's worth noting that the capital increase may be significant and crypto exchanges might be required to provide evidence of their holdings, such as the amount of Bitcoin they own.

• Reporting and Transparency: Our exchange already implements reporting and transparency measures by providing detailed information about each transaction that exceeds a certain threshold, such as those above $15,000 or $10,000 in some cases. However, the regulatory expectations for reporting and transparency may become more stringent in the future, so it's important to be prepared for any new requirements.

• Cybersecurity: Cybersecurity is a top priority for financial regulators and crypto exchanges alike. Our exchange already implements robust measures to protect customer information and assets from cyber threats, but it's important to stay ahead of the curve as new threats emerge and regulatory requirements evolve. Protecting our customers' assets is our number one priority.

We also predict that the case of FTX will lead to a decrease in trust and confidence in the cryptocurrency industry among investors and the general public. This could lead to a reduction in the number of retail investors participating in the crypto market and a shift towards more institutional investors who are better equipped to understand and manage the risks associated with crypto investments.

As a result of these factors, we predict that the crypto industry might see a decrease in the number of crypto exchanges, and an increase in consolidation in the sector as only the more established and regulated players will be able to survive. This may also lead to more mainstream crypto adoption as the institutional players are more likely to impact the industry positively.

Nostr (Notes and Other Stuff Transmitted by Relays) is a decentralized network that has been gaining traction since its launch in 2020. In 2023, we expect Nostr to be one of the most experimental projects in crypto as developers tinker with use cases.

In 2023, while Nostr may not be ready for the mainstage, its popularity will attract attention as we learn what it’s capable of. Check out our recent blog post on Nostr here.

We predict that the trend toward leveraging wasted and stranded energy sources for Bitcoin mining will continue to gain momentum in 2023, not only due to environmental concerns but also because it presents a profitable opportunity for miners. Specifically, Bitcoin miners are expected to increasingly co-locate near wasted energy sources such as flared methane gas from oil and gas operations, stranded geothermal energy from abandoned wells, coal refuse from coal mining operations, and even energy from recycled waste tires.

The use of wasted energy sources not only helps to reduce the environmental impact of Bitcoin mining but also can lead to cost savings for miners. For instance, by harnessing flared methane, miners can reduce the cost of purchasing electricity from traditional sources, and by utilizing stranded geothermal energy, they can avoid the high costs associated with drilling new wells. Using coal refuse and waste tires as energy sources can also lead to cost savings for miners.

Furthermore, the trend toward leveraging wasted and stranded energy sources for Bitcoin mining aligns well with the growing focus on environmental, social and governance (ESG) concerns. As more investors and consumers become conscious of their investments' environmental impact, they become increasingly interested in investing in companies and industries that positively impact the environment.

In 2023, it is expected that ESG considerations will become increasingly important for Bitcoin mining companies, as they will be pressured to demonstrate their commitment to environmental sustainability. By leveraging wasted and stranded energy sources, Bitcoin mining companies can reduce their environmental impact and improve their ESG profile, making them more attractive to investors.

For a review on Bitcoin’s energy consumption, check out a blog post we wrote on the topic here.

The price will go up. The price will go down. It will be a ride, as it always is, and the Bitcoin network will continue to function with no downtime — no matter what. Price predictions aren’t what we do around here. It’s not worth it. What matters is getting Bitcoin into the hands of the next billion users.

In conclusion, 2023 is sure to be a transformative year for the crypto industry. With innovative technologies such as validity rollups, the lightning network, and stablecoins, as well as the potential for increased regulation, greater transparency, and mainstream adoption, the industry is primed for unprecedented growth and development. As the industry continues to mature and evolve, the trends and predictions outlined in this article will be at the forefront of driving the sector forward, opening up new opportunities and ushering in a new era of blockchain-based finance.

DISCLAIMER: This article presents predictions for the cryptocurrency industry in 2023. Please note that investing in cryptocurrencies carries significant risk and seeking advice from a financial advisor is recommended before making any investment decisions. The information provided is for informational purposes only and the views expressed are not representative of the company or its affiliates.