2023 DeFi Predictions: Ethereum Continues to Outperform Bitcoin, Rise of Soulbound Tokens

Ignas, who focuses on DeFi research, shared his ten predictions for 2023, including advancements in modular blockchain protocol Celestia and Ethereum's secondary staking protocol EigenLayer, as mentioned by many analysts. He believes that while ETH will outperform BTC, its market cap will not surpass it.

1. DeFi Options

The rise of crypto options is always a common prediction each year, but the development is often limited. Ignas quoted Robinhood's 2021 fee revenue:

• Stocks: $52 million

• Crypto: $48 million

• Options: $163 million

He believes that for DeFi options to thrive, optimization of interfaces and user experience on mobile applications is necessary. Protocols of interest include:

• Ribbon Finance $RBN

• Dopex $DPX

• Lyra $LYRA

• Hegic $HEGIC

• Premia $PREMIA

2. Modular Blockchain

Ignas pointed out that modular blockchains are the ultimate path to scalability. Related protocols include Celestia, Mantle Network. EigenLayer's secondary staking mechanism is expected to be popular, and Cosmos, Polkadot, and Ethereum will benefit from this.

Modular blockchain token valuation analysis

3. ETH Outperforming BTC

The positive interpretation of Bitcoin is mainly related to money printing and inflation, but governments have now stopped printing money.

Ethereum, on the other hand, has various potential positive developments:

• Growth of L2/L3

• Real interest rates + EigenLayer re-staking

• Continued development of DeFi, NFTs

• ESG-friendly concepts

However, Ignas still believes that ETH's market value will not surpass Bitcoin.

4. Soulbound Tokens on the Rise

Vitalik Buterin, the founder of Ethereum, along with economist Glen Weyl and Flashbots researcher Puja Ohlhaver, jointly released a lengthy paper in May last year titled "Decentralized Society: Finding the Soul of Web3."

It mentioned the concept of non-transferable "soulbound tokens" (SBTs), and Ignas believes this will bring widespread adoption to blockchain and potential investment opportunities.

Related analysis tweet

5. Integration of Real-World Assets with DeFi

Integrating real-world assets helps increase DeFi yields.

For example, MakerDAO's plan to increase DAI savings rates and invest in government bonds. In the future, DAI holders will also be able to receive part of the traditional financial returns. Ignas expects more protocols to integrate with traditional finance and real-world assets to achieve higher yields.

6. Diversified Development of DEX

Fierce competition among decentralized exchanges (DEX) will drive their business models towards diversification.

Most DEXs forked from Uni V2 and deployed on various public chains. In 2022, DEXs began expanding to other chains, such as Pancakeswap deploying on Ethereum and Trader Joe on BNB Chain.

Related tweet

Ignas believes that the capital efficiency of spot trading will be crucial for the survival of major DEXs, and they will introduce new features beyond trading.

He also mentioned that Uniswap V3's "Business Source License" (BSL) will expire in April this year, which may lead to V3 forks and possibly the launch of Uniswap V4.

7. Metaverse/VR

Apple's VR headset "Reality Pro" is expected to reignite hope for blockchain's metaverse and Web3.

With more and more GameFi projects being listed on the App Store, will successfully listing on "Reality Pro" further develop encrypted projects in the future?

8. Simplified DeFi

Ignas bluntly stated that DeFi is becoming more and more complex and less user-friendly for new users. To attract new users, protocols must introduce simplified versions, similar to what Instadapp Lite and Oasis Earn have done.

9. Mainstream Web2 Companies Integrating NFTs

Reddit successfully demonstrated how to push NFTs into the mainstream. Ignas believes that in the future, other Web2 companies will also introduce NFTs to users without them noticing.

He pointed out that Polygon is working to provide similar technological services.

10. Next-Generation Hardware Wallets

The collapse of FTX made everyone aware of the importance of self-custody. Ignas mentioned Ledger's new version cold wallet "Ledger Stax" and upgrades to the Keystone cold wallet. However, he hopes for future features such as mnemonic recovery assistance, DApp integration, etc., with improved user experience.

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