The Block released 2023 Digital Assets Outlook. The report focuses on 2022 key developments from 10 sectors in the cryptocurrency industry and trends to look out for in 2023.

10 Key Highlights

Market performance: All top ten cryptocurrencies (BTC, ETH, BNB, XRP, DOGE, ADA, MATIC, DOT, OKB, and LTC) by market capitalization experienced negative price returns as low as 81%.

Mining: As bitcoin’s price dropped more than half throughout 2022, many miners faced increasing financial distress. Core Scientific stated it would consider bankruptcy if its financial situation did not improve.

Investment trends: The number of funding deals increased 18% year-on-year, and the NFTs/Gaming vertical attracted the most funding this year at $8.3 billion. Nevertheless, there are indications of a slowdown as the overall growth of funding decelerates compared to the previous year.

Crypto hires: Number of employments in the digital asset industry jumped over 351% to 82,248 from 18,200 in 2019. Yet, the number of layoffs peaked in 2022 at 9,564, with Crypto.com laying off the most employees, contributing 24% to the total attrition, followed by Coinbase, Kraken and Bybit, each contributed ~6%.

Layer-1 networks: As developers work towards abstracting blockchain complexities, 2022 saw an emergence of application-focused chains, such as Cosmos ecosystem, Avalanche subnets, and Polkadot’s parachains.

Layer-2 solutions: Optimistic rollups are currently dominating Ethereum-based rollups. It remains to be seen whether it can maintain its position as rollup space becomes increasingly competitive, with Celestia set to launch next year.

Decentralized Finance (DeFi): DeFi space experienced a contraction in 2022. Value locked in DeFi decreased 74.6% from $166 billion to $42.1 billion. Terra’s ecosystem collapse in May marked the most drastic crash in value locked.

Non-fungible tokens (NFTs): 2022 had been a seminal year for NFTs, with Solana becoming the second home for NFTs, a heated debate over creator royalties, Yuga Labs’ ecosystem expansion, a war on IPs, storytelling NFTs, and much more.

Web3 Games: Web3 games have not proven market-proof as they suffered from user retention and token price crashes. They have also undergone unsuccessful rebrand attempts from play-to-earn to play-and-earn, play-to-own, and free-to-own. We believe that Web3 games in 2023 will focus more on game launchers, wallets, and on-chain games.

Metaverse: Web3 Metaverse struggled to find the right product-market fit in 2022, and it will continue in 2023. That said, we are looking at The Sandbox, which may do a full launch in 2023 and change the trend.