The thing about the cliché is that it always contains an uninteresting but vital grain of truth. The fact that the blue of the sky is common enough to fade into the background of everyday conscious thought, for example, does not negate its value to physics, biology, and beyond. When looking at the state of Web3 through the lens of 2022, the clichéd understatement that should come to mind is that progress is not linear. But only What progress makes your non-linear passage through the story matter a lot. It’s an irregular thing: its movement is haphazard and unpredictable, even for those well used to the volatile and sporadic.

There was a lot of frenetic movement in the world of cryptocurrencies and NFTs in 2022. Even those outside the walls of Web3 are tired of hearing phrases like “bear market” and “crypto winter”. But just as the idea of ​​stepping back is essential to maintaining a balanced mental health perspective in the NFT ecosystem, so is the idea of ​​placing the problems and successes of 2022 in the context of a bigger picture of where Web3 is headed. When we do, we find both things to be excited about and cautious about in the coming year.

NFTs Gone Green (sort of)

The conversation around NFTs and their impact on the environment has been mostly positive this year. An increasing number of people began to realize that the terrible affirmations made by the biggest detractors of the blockchain were largely exaggerated and without proper framework.

The biggest event that impacted the environmental discussion was the Ethereum merger in September. The second-largest blockchain’s switch to a proof-of-stake (PoS) validation system meant it cut its power consumption by a ludicrous 99.5 percent and acted as the final bet in the coffin of the already dubious argument. that NFTs were bad for the environment. .

Beyond its environmental benefit, the merger helped set up Ethereum for future growth. In addition to the millions of NFTs that the blockchain authenticates, many other decentralized applications and decentralized finance systems rely on the blockchain to function. Other upgrades that the merger enables include what Ethereum co-founder Vitalik Buterin calls “rise, edge, purge, and splurge.” This will ensure that the blockchain can better scale in the future and will enable a process called “sharding,” which makes the nodes in the network easier to operate.

Another benefit of switching to a PoS system was lowering the barrier to entry for those who want to participate in the Ethereum staking community. Where crypto mining required users to own and operate expensive and cumbersome equipment, with the new version of Ethereum even a dedicated laptop could get the job done. Increasing the number of validators on Ethereum increases the chances that the network will be more decentralized.

Beyond all this, the merger was a much-needed victory in a difficult year for the crypto community. Ethereum has long been the poster child for NFTs, and the fact that he executed an extremely complex engineering feat so smoothly during a crypto winter is nothing to scoff at. Like any industry, blockchain-based technology can do more to reduce its environmental footprint, but efforts like the merger have shown that doing so is not impossible.

The debate over royalties continues

The discussion around creator fees/royalties in the NFT space blew up like never before in 2022. While they have remained an important feature of the NFT ecosystem for years, royalties are not hardcoded into the marketplace or individual smart contracts that they make the buying, selling and trading of NFTs possible. As the conversation turned to the role that creator royalties can, should and play in the NFT ecosystem began to heat up throughout the year, zero-royalty websites like sudoswap and X2Y2 burst onto the scene, becoming platforms popular in the process.

In addition, several of the largest community marketplaces that support creator royalties, including Magic Eden and OpenSea, have experienced an identity crisis regarding whether or not they would respect and apply them, and for which collections these rules would apply. OpenSea stirred the pot more than any other platform, given its size and status in the industry. He initially floated a plan to remove the royalty application for existing collections before facing strong backlash from the community and dropping the idea.

Taken together, these events helped catalyze a sort of unionization movement between artists and builders on Web3 that make two main points. The first is that Web3 and the platforms that help support it today would not be what they are without royalties. Artists create the value from which the entire ecosystem thrives. If the royalties that allow them to continue creating are taken away, the whole system is likely to falter. Second, one of the most crucial ideas on which Web3 is based is the empowerment of artists. The question of royalties is a poignant stress test for that spirit and for those people and platforms who have made their fame and fortune off of creator fees.

Redemption Arcs Aren’t Just For Fiction

Several NFT projects have returned from difficult situations this year that have left them with battered reputations and disgruntled or outright angry investors. The most egregious offenses to NFT communities resulted in prosecution by the Department of Justice. Still, barring illegality, a handful of communities once thought to be dead in the water made surprising comebacks in 2022. DeGods Rise to Fame, Pudgy Penguins’ clever strategy to leverage their family IP to expand further Beyond the Web3 world, and Pixelmon’s Lazarus hack all fall into this category.

These projects are not only noteworthy for their ability to change price floors and investor attitudes; they show the NFT ecosystem that constant innovation, patience and commitment still walk the land of Web3. The world of cryptocurrency and NFTs is rife with scams, and to some extent cynicism and skepticism are necessary tools to navigate a decentralized space where no third party has your back. But like any tool, they can be misused. Against the backdrop of a crypto winter, it was refreshing to see such redemption arcs. With any luck, 2023 will see more, and we shouldn’t envy them their blossoms.

Cryptocurrency and NFT regulation is changing

The complicated relationship between US regulators and the cryptocurrency and NFT sphere became even more complicated in the wake of events like the crash of algorithmic stablecoin Terra USD and the calamitous collapse of FTX earlier this year.

While it is too soon to say precisely how these events will alter regulatory efforts in the US and abroad, the pressure to rein in the crypto space to prevent such collapses in the future has only increased because of them. While speaking to nft now in July, SEC Commissioner Hester Peirce expressed her dissatisfaction with the way the organization and its president, Gary Gensler, had formulated a seemingly punitive relationship with the cryptocurrency world instead. of a constructive relationship. 2022, she said, is shaping up to be the year in which a more cooperative foundation for future legislative and regulatory regulation in space will be established.

However, that hope has been dimmed in the wake of events like the FTX crash. Sentiment inside and outside the Web3 sphere is divided, with people in both spaces attributing the failure of FTX to too much or too little decentralization and oversight. That picture is further complicated by allegations from people like Rep. Tom Emmer (R-MN), who accused Gensler’s relationship with SBF and the crypto world of being problematically close to each other, a view of things that stands in stark contrast to the SEC’s moves this year.

While the existence of such backdoor ties remains a possibility, Emmer’s positions are apparently in conflict, as he received donations from figures linked to SBF and FTX, helped write a letter in March urging the SEC to stop of researching crypto exchanges (including FTX), and has a habit of declining to comment when asked about the type and amount of donations he has received from the cryptocurrency exchange.

Emmer’s (and other regulatory skeptics’) goal may ultimately be to get federal institutions to cool off oversight efforts in an emerging industry whose pockets are deep but whose reputation has taken hit after hit in 2022. Regardless. , expect that the spirit of decentralization in crypto will face a solid acid test in 2023. Likewise, expect bad actors to use the upcoming (and necessary) talk about the future of decentralization as a cover to shoehorn themselves into policies that tear apart the best aspects of Web3 in the name of protecting traditional financial structures. that they are the ones that will lose the most with their continued growth.

Web3 problems strengthen the space (in the end)

There was no way those in the space wouldn’t have the most proven lessons from Web3 this year. Some of the biggest rug pulls in the space happened in 2022, sharpening Web3 denizens’ intuitions about the NFT red flags we should all be aware of by now.

The collapse of Three Arrows Capital, FTX, Luna and TerraUSD showed everyone how playing fast and loose with people’s money is not going to go well, no matter the amount of Web3 evangelism behind it. The space is having a tough time, it’s true, but like an immune system dealing with a particularly potent infection, Web3 is likely to emerge stronger from the difficulties of the year as a whole precisely because of the challenges they’ve thrown at it.

Damn the cliché all you want, but nothing worth doing was ever easy for those who did it. If Web3 is as valuable and potentially revolutionary as its most prominent proponents say, and it could be, at least in some respects, then we should expect its difficulties to be on a scale equal to its ambitions. If they weren’t, it would probably be a sign that we’re not aiming high enough. And who wants to do that?