The collapse of Terra LUNA/UST, Celsius, Voyager Digital, Three Arrows Capital and most recently the FTX saga makes 2022 a difficult and tumultuous year for many in the industry.
According to CoinMarketCap, the total cryptocurrency market capitalization had dropped to $821 billion as of the end of November, while on-chain crimes have grown in frequency and sophistication as the industry has grown. As of November 22, 2022, there have been 290 security incidents with a total loss of more than $3.6 billion, as documented by Slow Mist Hacks, an archive of blockchain-related incidents.
Regulations have been at the heart of ongoing discussions about how to reduce cryptocurrency crime. Effectively regulating the market, protecting retail users, providing stability to some systemic challenges – these are some of the most pressing issues that need to be addressed.
On the other hand, this year has also brought regulators and the public closer to the cryptocurrency and blockchain trend. As a result, the policies related to cryptocurrencies have also become more transparent, which will eventually help the overall growth of the blockchain trend.
Besides regulations, what other areas should the industry focus on in 2023?
Increased focus on security audits
In October 2022 alone, there have been more than 20 attacks on Web 3 cryptocurrencies, related projects, and trading platforms. Most of these are attacks and exploits due to security flaws in the project code.
In order to allow users and projects to quickly join the ecosystem, many cross-chain bridges have been launched with zero fees and fast transactions – all at the cost of ignoring security as the most important consideration.
The cross-chain bridge has high liquidity and low degree of decentralization, and most of the decentralization is in the multi-signature wallet: once the hacker obtains the signature, he can fully control it.
Additionally, while cross-chain bridges are rarely subject to security audits, the community offers little in terms of security monitoring. As such, cross-chain bridges are often a popular target for hackers.
With the increase in security-related incidents, we expect more projects to recognize the value of auditing in the future. Based on the deep knowledge and expertise accumulated by SlowMist in the field of blockchain security, we believe that the project needs to conduct a comprehensive security audit of the front-end and contract, and use other methods such as bug bounty to protect the security of the project. Improve project security throughout ongoing operations and development.
A multi-chain future with enhanced interoperability
In 2021, Solana, Avalanche, etc. began to expand multiple Layer 1s. In 2022, this trend continued, and Aptos and Sui attracted a lot of investor funds and media attention.
Although the merger of Ethereum from PoW to PoS did not bring significant improvements to its transaction costs or speed, this theme of scalability will continue in other L1s. Various layer 2 projects have also been developed to reduce the network layer load and increase its efficiency. Scalable aggregation platforms, such as Arbitrum, will continue to gain traction as medium- to long-term solutions to the Ethereum network congestion problem.
The impossible trilemma in blockchain—security, scalability, and speed—cannot be achieved simultaneously, which means that there are now multiple L1s that serve different user needs.
Therefore, we look forward to further developing cross-chain solutions where EVM and non-EVM compliant chains are connected for interoperability and compatibility.
These developments should give the community the opportunity to find a balance between fast cross-chain bridging, ample liquidity, and a secure user interaction experience.
Anti-money laundering and on-chain tracking analysis
The importance of on-chain crime tracking is also more prominent. On-chain data can greatly benefit blockchain trend analysis and anti-money laundering investigations, and we are already starting to see a plethora of on-chain tracking and analysis platforms and tools.
Through the data aggregation of these tracking tools, users can find information such as the location of their funds, and determine whether their assets are related to stolen funds.
In the near future, tracking tools will continue to evolve and add capabilities for AML investigations.
More emphasis on backup keys
Even with the variety of self-custodial wallet offerings available today, the loss of private keys and seed phrases is still a very common reason behind many cryptocurrency theft cases.
To address this issue, backups such as multi-party computation (MPC) have gained attention in recent months as a viable solution to the single-point backup problem.
Using MPC, when a private key is initially generated, it can be split into shards and distributed to a group of individuals. Using this specific method, the original private key can be recovered if necessary. In the near future, we expect to have an open source solution that meets the industry standard for this topic.
Zero-Knowledge Proofs: Scalability and Privacy
Zero-knowledge technology is a subfield of cryptography that can solve privacy and scalability issues for numerous layer-1 blockchain projects.
Although it’s not a new technical term, but has only become a hot topic in recent months, zero-knowledge proofs may be one of the most important Web 3 and blockchain solutions in the next few years.
DAOs: Will their use cases expand?
In 2022, DAOs will be one of the hottest topics in the cryptocurrency space, although most DAO organizations and their creation tools are unique to the Ethereum ecosystem and less developed on other L1s.
How DAOs overcome incentive challenges, realize cross-chain asset management and interaction capabilities, and expand use cases will be the key to their next stage of development.
NFT market shifts to multi-chain
Previously, the Ethereum ecosystem was the ecosystem that handled the vast majority of NFT transactions.
NFT transactions are likely to increasingly take place on different chains in the coming years, so projects that help facilitate such transactions will be very welcome.
The game industry is a new field with promising NFT applications, and the number of new players and developers of NFT-related games in 2023 will continue to increase.
One thing we know for sure: the blockchain trend will be a driver of many developments around the world. We look forward to a compliant blockchain and Web 3 crypto currency world, a world with scalable capacity, multi-chain balance, mature technology, and stable ecology.
Source of information: Compiled from CRYPTONOMIST by 0x Information.The copyright belongs to the author Cryptonomist Editorial Staff, and shall not be reproduced without permission