According to Huobi Research, the cryptocurrency market will peak in 2023 along with significant advances in on-chain storage and two-tier rollups.
According to Huobi, the market will peak in the first quarter of 2023.
Huobi believes that market anxieties triggered by the decline of FTX will bottom out for the cryptocurrency industry in the first quarter of 2023 when leverage in DeFi protocols decreases and the Fed has likely survived the worst stretch of its tightening plan.
To forecast how the landscape would change in the coming year, Huobi analysts have been studying major events that occurred in the cryptocurrency market and industry in 2022.
Former Binance chief strategist Gin Chao claims that historical trends indicate that Bitcoin experiences a spike 18 to 24 months on average after a trough. Given the current macroeconomic climate, market players can expect a spike in late 2023 or possibly a bit later, depending on where they thought the 2022 low was.
A total of $6 billion was invested in the third quarter, of which $625 million went towards building Layer One (L1) applications on the Sui and Aptos blockchains.
Investor interest in L1 projects is extremely high.
Huobi's analysis predicts that industry investments in Web3 projects would surpass $27 billion by 2022 despite continued poor market. Despite this number being lower than in previous quarters, he indicates that institutional interest in decentralized finance is still high. Investor interest has increased over the past year, as evidenced by an increase in the number of unique DeFi users.
Investors also preferred middleware applications such as decentralized identities and oracles, zero-knowledge stacks, and infrastructure projects on L1 blockchains.
The fundamental framework and regulations for handling and concluding transactions in a blockchain environment are provided by a layer one blockchain. The scalability of layer one (L1) chains is enhanced by special layer two (L2) chains known as roll-ups. To achieve this, it runs batches of transactions and posts the resulting data to L1.
Amid the bear market, a number of new L2 DeFi initiatives have been introduced; This pattern is expected to continue in 2023. Between January and October 2022, the total value locked in decentralized applications increased by 131% to 7.5% of the total value locked in Ethereum. Instead of relying on users to offer liquidity in exchange for rewards, DeFi's success in 2023 will likely come from protocols that ensure a steady stream of revenue.
To undermine the concentration of power of a few protocols, they must also determine whether they can provide derivative financial products. Finally, the protocols must contain the rules required for survival and growth. Regulations for the DeFi sector are included in the proposed EU law on crypto-asset markets, which is scheduled to be enacted in 2023. According to Huobi, dedicated blockchains built specifically to enable decentralized applications are also expected to become popular in 2023. .
On exclusive layer 2 dApp blockchains, projects like Axie Infinity and DeFi Kingdoms are already operational. The substrate for these L2s could come from various existing L1s, including Polygon, Avalanche, and BNB Chain. Furthermore, social media dApps will likely shine brighter in 2023 thanks to interest in cryptocurrency from wealthy Web2 moguls like Jack Dorsey and Twitter CEO Elon Musk.
In 2023, work will continue on rollups with minimal knowledge.
A class of summaries known as zero-knowledge (ZK) summaries publishes an overview of the adjustments that must be made to L1 as a result of L2 operations. L2s send a Proof of Validity along with the proposed modifications as a cryptographic guarantee that the proposed L1 changes are, in fact, the result of processing the transactions in an L2 batch. Huobi says that ZK digests may need specialized hardware to generate proofs faster because they are sophisticated proofs of validity. In 2023, he will increase the development of ZK roll-up, but not before.
ZK backlog projects to watch in 2023 are Starknet and zkSync 2.0, the latter being the faster ZK L2. Work is underway to reduce backlog costs by compressing transaction data sent to L1. These upgrades will start in the second half of 2023 and continue through 2024. Huobi predicts a dramatic increase in demand for on-chain storage
Next year, the demand for blockchain storage will also increase, Huobi predicts.
News summary:
- On-Chain Storage Demand and Crypto Market Bottom in 2023
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