We at Blockdaemon predict that the future of Web3 will be built on the foundation of a perfect user experience: perfect usage, perfect monetization, and perfect governance. The success of any Web3 project depends on its ability to deliver this seamless experience to all users, including developers and businesses within the blockchain space.

We believe that blockchain-based solutions are the future of digital infrastructure. However, for them to take off, we need to ensure that the user experience is of a high quality. This means that both users and developers need an easy way to access the Web3 infrastructure and the applications built on top of it.

Friedrich “Freddy” Zwanzger is the Ethereum ecosystem leader at Blockdaemon, a leading independent blockchain infrastructure platform. This story is part of CoinDesk Crypto 2023 panorama.

A year to prepare the future

The work that developers do in 2023 will lay the foundation for the next wave of cryptocurrency adoption. This foundation will be built on the building blocks of an inexpensive, modular, scalable, and reliable blockchain infrastructure. The Ethereum protocol will serve as a manifest example to prove our point.

We predict that this critical infrastructure, developed over the next year and beyond, will add billions of new users and hundreds of institutions in the future.

However, this can only be achieved through great crypto products and use cases.

The strong market conditions we have seen unfold between the end of 2020 and 2021 revealed this need for a strong infrastructure to support such applications.

Unlike previous market cycles, 2021 saw large-scale developer and institutional adoption. Both financial institutions and decentralized application (dapp) creators needed an easy way to build on top of the secure blockchain infrastructure.

Many of the companies that built during the bull market will now struggle during the market downturn. This is mainly due to not having positive cash flow combined with insufficient treasury management skills.

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Well thought out and properly funded projects will survive and thrive during this crypto winter, while those that are not will struggle or fail.

The Ethereum protocol is by far the most revenue-generating blockchain network. The merger from the energy-intensive proof of work to the significantly more efficient proof-of-stake laid important foundations for the future, and in turn achieved 0% inflation since September, when the merger took place.

The importance of a trusted blockchain infrastructure

In the last 20 years, infrastructure services have dramatically transformed the way businesses are built online.

The birth of cloud-based infrastructure has dramatically reduced overhead for web companies. Consumers enjoyed faster and more responsive applications, while developers were able to spend their time creating innovative products.

While there has technically been a need for a reliable blockchain infrastructure since the introduction of Bitcoin, it has only been relatively recently that builders have had access to the tools necessary to support the growth of this decentralized future.

Cloud infrastructure has brought powerful benefits to the web. Blockchain follows the same deflationary route of other technologies, radically reducing the costs associated with legacy systems. However, the development of killer blockchain apps is based on the same high-quality infrastructure that Web2 enjoys.

This infrastructure support is necessary to meet the growing demand for dapps, which span complex needs across a wide range of use cases.

However, projects in 2023 will need to be focused and doubled down to prepare for subsequent success, to meet these complex needs and use cases.

How crypto projects can prepare for future success in 2023

The coming year will be a turning point for crypto projects looking to position themselves well for the next wave of crypto growth.

We predict that to excel in today’s market conditions, Web3 companies will need to focus on three essential elements:

1. Focus on finding the right product for the market

Companies must adjust their product offerings to win. This concentrates scarce resources, both time and money, in key value-added areas. It means knowing the market in depth and finding the right product for the market.

Many large-scale institutional investors seek to invest in product-oriented companies. Web3 companies need to focus on building products that create better and seamless experiences for their customers using blockchain.

Enabling ether (ETH) withdrawals can be seen as such a feature and will be delivered to retail and institutional participants alike around March 2023. It removes the previous capital lock in the Ethereum PoS network, thus removing the major friction point. .

2. Integrate for vertical strengths

True long-term value is created when a company is a vertical domain expert in one (or many) of the emerging categories of the future.

A practical focus on the product must be fused with a vision of what customers will be looking for in the future. By generating value in these fertile fields, companies gain a powerful point of view for the future. Being vertically integrated in key growth areas creates competitive moats.

A company’s ability to create deep technology solutions in any (or several) of these fields really adds value to customers in the long run.

3. Prepare the infrastructure for growth

History has shown us that companies with the right product offerings can grow exponentially when markets increase.

However, for blockchain companies experiencing exponential growth in a short space of time, it is highly impractical to scale operations from the physical nodes themselves. Service outages on popular blockchain platforms are a common occurrence during a bull market, the equivalent of a power outage at a large retail store on Black Friday.

What this means is that blockchain companies must also prepare their infrastructure for that potential wave of customers that could occur at any time, while managing the associated costs and overhead.

Once again, Ethereum serves as an example by scheduling EIP-4844 proto-dunksharding in the fall of 2023 as a scaling solution for its thriving Layer 2 ecosystem. Without taking sides on which of the Layer 2 variations will succeed, The infrastructure upgrade will increase capacity 10-100 times as a major step toward the 100,000 TPS goal.

Conclution

This coming year will be a time to build. When the markets return, companies that take advantage of this moment will be in an ideal position.

The Holy Grail for the next wave of cryptocurrency adoption will be when customers seamlessly use blockchain, without needing to know or understand the underlying technology. Just as we use video calls without knowing the underlying protocol, VOIP, so too blockchain will become a frictionless, user-friendly and brandable transfer of value and data. We will see social media giants incorporate crypto payments without users needing to know what blockchain is behind the scenes.

Ultimately, reliable access to a robust and scalable blockchain infrastructure will make all of this possible.