“Not Bitcoin Is Rising, the Dollar Is Falling”: Year in Review and Forecasts from Vladimir Menaskop

Which fears remained in 2023, and which will continue to influence DeFi and beyond? Web3-entrepreneur and crypto enthusiast Vladimir Menaskop shares his observations and forecasts with ForkLog readers.Web3-entrepreneur and crypto enthusiast Vladimir Menaskop.

On the one hand, there is nothing more dull than year-end wrap-ups: those who are informed already know it all (to be precise — that’s what they think), and those who aren’t in the loop generally aren’t interested. 

On the other hand — there has been too much around Web 3.0 FUD, FOMO and other unflattering acronyms, and therefore it’s high time to talk about what really matters: on the top level, the mental side of HODL.

I always strive to assess niches, vectors, industries, markets and spheres by “side trends,” i.e., by global tendencies that are unlikely to disappear for five, fifty, or even five hundred years, and in some cases for 500. An example of such a trend is transactional reputation. But there are others. We’ll discuss them below. 

Абстракция аккаунта — лишь часть пазла

Account abstraction — one of the core bets of those aiming to bring crypto to mass adoption. Is that good or bad? I won’t claim it unambiguously.

Meanwhile, the two “A”s in the name (Account Abstraction) demand a stance on this issue. 

Here are a number of trends that lead us to this:

1. The complexity of non-custodial solutions (MetaMask, Trustee, Trust, Bitcoin.Core) is obvious, but it suits enthusiasts because the basic thesis of this mechanism is simple: “Your keys — your money.” But for the masses, this is unlikely to be interesting. 
2. Therefore, in particular, there appeared snaps for MetaMask and WaaS-solutions from Coinbase and Trust: a fully workable B2B approach to solving accessibility. And 2023 was defining here. 
3. Meanwhile, the low security of centralized solutions has not gone away: recall the number of hacks in the DeFi segment or even a hack with Vitalik Buterin’s SIM card. 
4. Yet non-custodiality itself does not save from gaps in centralized intermediaries: for example, servers from which updates are downloaded. 
5. Nor do they save from direct attacks (direct hacks): such as poisoning of addresses and/or transactions. 

Thus, on the one hand, there is integration of an increasing number of security solutions for the end user, and on the other — the wallet itself is becoming more like a regular app (a dapp remains the same app, but without the ‘d’). 

Is this good or bad? The question is the wrong one. What is the right question? “Who needs this?” — that’s the right question. And there are many answers to it:

1. For those who are new to the crypto industry.
2. For those who have weighed the pros and cons of wallets and decided to go further.
3. For those who, for some reason, want to sponsor primary transactions: say, projects distributing airdrops.
4. For those who… 

We could go on, but the target audiences are clearly large. The other thing is that the alternative to full-fledged non-custodial solutions must remain. Otherwise we risk entering the world of CBDC essentially naked, if we accept that digital garments have long been no less important than a roof over one’s head and access to air, food and water. 

Bear market and the CBDC era 23–25

For me, a milestone of the falling market of 2022–2023 was mass layoffs that affected virtually all giants of the industry: from Coinbase and Binance to hardware manufacturers. This is highly telling, because IT companies, including crypto, clearly do not know how to manage money and grow largely due to crazy fiat injections into the market. 

In this sense, not Bitcoin is rising, but the dollar is falling. And it is falling not for nothing: since 2023 we are witnessing the initial transition to central bank digital currencies (CBDCs) (with the zero baseline having occurred in 2019–2022). 

If you cross these two trends — a bear crypto market and a growing CBDC market — it becomes clear that the basic trend of the outgoing year was to inject even more myths than before.

And the first significant FUD myth was the direct ‘attack’ on decentralized autonomous organizations. 

The DAO world has changed, I can feel it

Looking at cases such as bZx, LBRY and other similar pre- and incident cases, it becomes clear that the industry’s key battles are not Ripple vs. SEC, but rather those where small and underfunded organizations must fight the Leviathan in the flesh and with an endless war chest. 

There are plenty of VC startups, such as SuperDAO (we analyzed it in detail), which, entirely not understanding the industry’s specifics, catalyze negativity among communities: both investors and DAO participants. 

Meanwhile, in 2023 a number of conflicts in Uniswap, EOS, Aragon and similar projects ended in the communities’ favor. At least the community learned to speak up: loudly, clearly, to the point. 

Of course there are direct, technical and organizational, attacks on DAOs that are worth learning to counter. In this sense the attack on Tornado Cash is emblematic, and on Platypus Finance — standard. But this is only the eternal clash of projectile and armor, born of the principle of unity and opposites, whereas the imposed FUD is an informational, and thus ideological, attack, and that is not easy to counter. 

And for me personally this is much more meaningful than the fear and hatred being imposed. However, another important sector — DeFi — suffers on the same grounds. 

DeFi 2.0: RWA, ReFi, NFT 2.0, and more

DeFi works well: achieving 5%–15% yields in hard currency in a semi-closed world (whether BTC, ETC, DAI or something else) is not as bad as it might seem. 

But the beauty of DeFi lies in its ongoing development as well. Currently visible vectors include:

1. Financialization of NFT 2.0 and other programmable assets. This is the essence of DeFi 2.0, not merely the Lego-building pushed by large players.
2. The concept has matured to programmable pools and has manifested as a product: Uniswap v4.
3. And if there is worry about the DeFi market, it should be from the perspective of large players. Recall past tales (FTX, Celsius, 3AC, Terra), and the loudest current one — Binance — to understand why a DEX is better than a CEX.
4. In this vein, the Curve hack and any other project’s hack is a “minor incident compared to the SEC’s actions.” But this is not yet grasped by everyone, especially those who have not felt the three points above.
5. Finally, DeFi will continue to keep pace with time — and even outpace it, as seen in the market for RWA and ReFi. 

In general, decentralized finance will expand at least along three vectors:

• Derivatives — of the first, second, and subsequent orders;
• Insurance — various hedging practices and direct payouts;
• Routing — it will become more interesting, more feature-rich, and more complex. 

Not least, we are already on the cusp of large TVL in L2-solutions, and L3 isn’t far off. And the ETF race is another fashion trend, but not something that truly belongs to decentralized finance. The aim of centralized (i.e., public) authorities is to draw negative attention to the crypto sphere and push it away from fiat borders. Consider this assertion: “Singapore authorities froze $1.8 billion related to money laundering of cryptocurrency.” In reality — nothing, since of the $1.8 billion in cryptocurrencies, barely $27 million were in crypto. 

Coupled with possible KYC inside Uniswap smart contracts and lockups by Tether, there is much to evaluate in assessing projects that seek to find new asset types, whether Asymetrix or Maverik, Envelop or Solv, Frax or Curve. 

But let us move away from the obvious standoff between centralization and decentralization towards a world of staged evolution and talk about L3. 

L3 — already a reality

I won’t dwell on the banal — that Arbitrum, Optimism, zkSync have grown in user base, dApps, TVL and other metrics, and that on OP Stack more than one successful network has emerged (Mantle, Base, etc.). 

But I will say that both approaches to L3 work:

1. When we build a “dapp chain” and go from the top down.
2. When we pick a unified entity and extrapolate to any level: from L0 to L3, i.e., we go from bottom up. 

Therefore, L3 solutions are the same kind of “side trend” as transactional reputation, but in the sense of increasing abstraction levels: if AA helps to reach B2C users faster, then the Lego-mode in DeFi and L3 design is intended for B2B (companies, developers, DAOs). 

What’s more, they are mostly based on PoS or synthetic consensus mechanisms, and PoS systems, as the phrase goes, undergo mass stress tests and often fail. Briefly, let’s discuss this too.

stress test for PoS

PoS has many fundamental problems. I wrote about this on Forklog back in 2020: here, here and here. But a few problems became evident in 2023:

1. Ethereum and censorship (by) validators. The solution here lies in implementing ZKP modules, mempool encryption, and so on. In principle, this will always be worse than PoW with open mining pools.
2. The rush for an artificial parameter TPS led many others, where more significant aspects were left by the wayside, and as a result we have the revival of Bitcoin (for instance, its edge over the so-called fast Visa) and the development of L2 networks with EVM compatibility amid the hype around Aptos, Solana, Near and other “killers” of Ethereum (TON also failed, following the same mistakes).
3. Meanwhile, PoW did not disappear, though it changed a lot after the move to PoS, and its oracle component will show itself — and more than once. 
4. Moreover, a test for centralization of PoS systems clearly has not passed. 

All this brings us to the conclusion that the second breakthrough after blockchain should be ZKP solutions. And on the basis of zkSNARKs or zkSTARKs (or something even more innovative) — the question is secondary. 

ZKP — our all, or forecasts for the future

Yes, without this technology evolving in the world of centralized digital money, censorship, credit scores, and the like will be extremely hard. The thing is that in 2023 the technical aspect progressed, but what is needed now is business. And I see a prospect for 2024–2027. 

But technology will never defeat ideology. It can change it, but not break it. Therefore what matters more is how the technology is understood by the ordinary person, the mass user. And to be honest, they understand it poorly. Judge for yourself.

FOMO + FUD = FOOD for the masses

When there is a clear vector of attack — the bridge hacks — people don’t go looking for ZeroLayer or even EYWA. They head to CEXs, where their money is frozen, hacked, and volumes are inflated by 88%–95%. 

When people hear FOMO about ICOs (examples here and here), they reframe token sales to resemble VC products, even though ICOs themselves simply evolved into IDO, INO, IGO and other formats. 

When people hear about Bitcoin, they can no longer say it is “dirty money.” Yet even in 2023 they say it is a “CIA creation,” though it was Satoshi who taught us that we live in a trustless environment and it does not matter who produced it — we must work within it. A vivid example of past years is TOR, developed by the US military. Or the Internet. 

Therefore the number-one task for any crypto enthusiast is that people entering the crypto sphere be as educated, literate, and protected as possible, because everyone else reacts to the news cycle incorrectly.

Brief look at prospects

Undoubtedly, it’s impossible to forecast everything, but here are a few predictions that should come true (the question is whether this becomes a niche or a full-blown sector):

1. Development of decentralized social networks: Lens, Mirror, Bluesky. At the same time, the DSS migrate more toward mail and chats.
2. Transactional reputation: already realized in retrospective (Uniswap, Aptos, 1inch, Arbitrum, ShapeShift) and iterative (Optimism) airdrops, but there is still huge potential for SBT and other instruments.
3. Halving will catalyze many processes, but still not as most expect. And certainly not when they expect it; when they wait for it; 
4. Fiat metrics of top projects, NFT sector and GameFi, as well as many others will rise, but this will still have nothing to do with a “pure” Web 3.0.

That is all for now.