In 2018, we, at True Global Ventures (TGV), went out and communicated four megatrends in Web 3. One of them was blockchain gaming/metaverse and we got that one 100% right. Between 2018 and 2022, companies like Animoca Brands, Dapper Labs, The Sandbox and Decentraland witnessed spectacular growth.
The two other megatrends were blockchain financial services and blockchain infrastructure, which we got partly right; and the last one, blockchain and AI, we got wrong.
Like in 2018, the year 2022 started as a bullish market but ended as a bear market. The difference in 2022 being that the entire tech sector was impacted and not just Web 3.
The Web 3 market was especially hit during Q2-Q4 of 2022 and even if 2023 has started positively for the first two weeks, the real question is what will the rest of 2023 look like? Like in 2018, we have again listened to what is going on in the 15 countries we are covering, across Asia, North America and Europe, to give sharp megatrends which stand out in 2023.
Our objective is not to get all of them right but to be bold and take some risks on the megatrends that we are confident about:
Trend 1: Buying secondary shares in 2022’s winners
The Web 3 companies that emerged as winners in 2022 will grow stronger in 2023. We believe that investing in secondary shares of these later-stage companies, or buying from shareholders who are in distress, gives investors a unique opportunity to find good value.
Now is the time to search out these opportunities, and find the companies doing the work today that will help grow the industry tomorrow.
The Web 3 winning unicorns of 2022 are going to be stronger than ever. After every crisis, we see companies dying and giving market shares to survivors and winners consolidating the industry by doing M&As at a discounted valuation. Moreover, unicorns become stronger and better prepared for IPOs after a crisis.
Web 3 market leaders will help to sustain the entire ecosystem and as a result, it will form a much stronger community as opposed to Web 2 where the market leader takes it all. This is the reason why we see Web 3 winners appearing much stronger than the Web 2 ones.
Trend 2: Centralisation is Dead. Decentralisation is more than back
We believe that three decentralisation winners for 2023 are: Self-custody, DeFi and Bitcoin.
Continued uncertainty after the Luna Crash as well as the FTX crash and especially the lack of transparency surrounding both crashes has provoked short-term flight to self-custody. Companies in the hard wallet sector like Ledger and Trezor benefited in the short-term as well as other secure custody solutions with up to 300% growth during Q3.
“Not your keys, not your coins” has been a slogan for a long time. We believe that this is not just a short-term trend, but a megatrend for the next five years, especially for 2023.
Do we believe that centralised custody can survive? Yes, but it will need to adapt since transparency will be key. Also, technology stemming from self-custody will be adapted and used by centralised custody.
The heart of DeFi is Decentralised Autonomous Organizations (DAOs), protocols and projects like MakerDAO. The investors who have not lost in the Three Arrows Capital (3AC) saga invested through Smart Contract-based solutions with collateral. With the collapse of non-transparent, centralised organizations, real DeFi ventures will shine.
The best use case for blockchain is by no doubt bitcoin. We believe that this oldest use case of decentralisation will be one of the biggest winners in 2023. What we have seen in the beginning of 2023 is just a start with bitcoin gaining during the first two weeks of January.
Trend 3: Consumer demand will accelerate the need for security and privacy
Previously, regulators have driven the need for security and privacy, primarily through new data protection and security legislation. Recent events, such as the FTX collapse, have increased consumer awareness around this topic, so companies need to prove to consumers that they can meet high security and privacy standards.
Consumers want to be sure that they do not lose digital assets. If you trade, you want to be sure that you do it with a real person. This will increase the acceptance of digital identity solutions also among consumers, driving users away from large centralized platforms that own consumer data to decentralized systems where users own their own data.
The blockchain was built in order to give an audit trail for transactions made between parties. Going forward, this feature will prove extra valuable, especially combined with digital IDs.
After giving it little importance, consumers want to sleep well at night knowing who they do business with, that their suppliers follow relevant regulation and that their data is properly protected.
Trend 4: Open metaverses cross the chasm to become mainstream
Open metaverse is defined as a metaverse environment democratized among the user base, generally in the form of blockchain-based tokens. We believe that open metaverses will become mainstream, driven by user-generated content in 2023!
One of the main drivers will be “Phygital” experiences through cultural and entertainment events. Examples of this include cultural-verses in The Sandbox engaging with different communities, such as celebrating Lunar New Year in Hong Kong Mega City or Ramadan in Turkey-Verse. Digital twinning of world monuments can also act as a familiar bridge between the physical and the virtual world of the metaverse.
Another key driver is event-driven experiences such as FIFA’s collaboration with Upland for the World Cup Qatar 2022 . This will introduce new communities of users into metaverses. The upgrading of social features in metaverses will enable user experiences to be more fulfilling and increase the time that users spend in virtual interactions.
Lastly, governments will play a role to promote investments in metaverse ecosystems in order not to be left behind. South Korea has already started with Metaverse Seoul to launch a virtual replica of the capital city with a goal of improving its public services. Japan’s Kishida also laid out the country’s plans in a policy speech to invest in NFTs and metaverse.
Trend 5: Decentralised AI in Web 3 getting real user traction
Over the past 7 years we have observed significant progress in AI space: methods, curated datasets and supporting hardware. What was reserved for experts and enterprise usage, becomes commodity packaged as products for smaller organisations and consumers.
The success of accessible solutions like ChatGPT is also spilling over into Web3 in general as we see AI making the Web3 space in general more efficient and tools and apps in particular.
Decentralized AI in Web3 allows for the creation of trustless and transparent AI systems that operate on a blockchain. By distributing data and computation across a network of nodes, a decentralized AI system can be more secure and resistant to tampering or manipulation.
There are also a number of projects that are currently being developed that aim to utilize decentralized AI in Web3. Some of these projects include decentralized data exchange protocol that enables secure and transparent sharing of data, and decentralized platforms for AI services.
Advanced data analytics companies like Fever’s way to curate experiences will also be used in establishing experiences in the Metaverse in order to make the Metaverse experiences even better.
Authors Dusan Stojanovic, Kelly Choo, Frank Desvignes, Fredrik Adolfsson, Beatrice Lion are General Partners at at True Global Ventures.