My Predictions for 2023

A list of smart & not-so-smart predictions for the year...

Hello!

I'm excited to be back; I spent my New Year's on the slopes in the French Alps while eating raclette - I'm officially a cheese convert.

It's fashionable to start the year with some predictions (like I did last year - although I made it easier for myself by just borrowing off others’ predictions and curating the best picks), so I thought I’d stick to the trend.

I'll keep these predictions light, but always with the goal of making you, my loyal readers, informed, entertained, and a little bit more educated after reading this newsletter. I don’t take these too seriously, but I have some conviction behind them all.

As you’d expect, there are many crypto/web3 predictions, but I’ll also weigh into other topics I’m an expert about (not) like artificial intelligence, e-commerce, macroeconomics, and geopolitics.

On that note, let’s dive in!

What about 2022?

Before, I dive into 2023, how’d I get on with my curated predictions for 2022?

So I didn’t do too badly from my picks - maybe I should stick to web3 and leave climate change predictions to people who know what they’re talking about…

Crypto gaming went on a blitz (crypto funding went from $4bn in 2021 —> $7bn invested in 2022), and Layer-2 blockchains have become increasingly popular, offering users faster, more efficient, and cheaper services.

The most slam-dunk prediction was that brands would actively participate in NFTs and the metaverse - a post has been circulating on LinkedIn, showing the projects some have been involved in:

Alright, I’ve left you waiting long enough…

My Predictions for 2023:

1. 📈 The rise of web3 loyalty programs

It’s not as easy to acquire customers as it is to make your existing customers happier.

In this environment, existing customers can contribute the majority of revenue and more companies will realise this.

We’ll see 2-5 brands adopt web3 loyalty programs by mid-2023.

By the end of 2023, I can imagine more brands will reap some results from redesigning their loyalty programs on web3 platforms.

I wrote about Starbucks’ Odyssey program in August - you can play trivia challenges & mini-games, take part in events like workshops and contests to win prizes (like winning coffee for life).

I expect them to post some big numbers in six months’ time before a host of other brands pile in.

2. 🕳 Continued bottoming out of the market

Startups are going to continue having a tough year.

2022 has already been pretty tough for the market - many have had their wings clipped, balance sheets ripped apart, and burn rates tamed.

Most startups are still losing money and will probably need to go back to investors for more $ in 2023. This also means there’s a lot of cash waiting to be deployed, and VC’s will be much more selective and profit-driven, compared to their previous emphasis on growth.

I don’t say this as a bad thing - the market still needs to bottom out from the growth-at-all-costs approach. We need to continue getting rid of unsustainable/profitable projects.

3. 😵 Recession Fears

Interest rates have been on the rise for the better part of a year, inflation is still high (albeit being tamed) and unemployment is a lagging indicator.

A lot of people are predicting that after the first half of the year, inflation fears will ease and the economy will stabilize - I think we’ll see things get worse at the end of 2023, before a bounce back in 2024. These things take a while to play out.

“Gradually, then suddenly.”

-Ernest Hemingway

4. 🤝 Tighter relationships between fans & creators

User-generated content in the 2010’s opened up access for anyone to become a creator - now, any ‘fan’ can become a creator (and a star) from using existing content (see TikTok fans remixing content).

I can imagine a scenario where something like this were to play out:

  1. A creator provides tokens for fans to purchase

  2. These tokens give fans an exclusive opportunity to remix content or vote on content they’d like to see the creator make

  3. Fans with the best ideas or remixes could win rewards (more tokens, co-creation opportunities or similar).

I can imagine more creators will start leveraging tokens and other forms of creation to form tighter bonds with their fan base.

5. 💥 At least three large institutions will blow up

In 2022, we saw the blowups of 2022: FTX, Celsius, Voyager and 3AC. I think many institutions (hedge funds, exchanges, venture capital firms etc) have so much tied up in last year’s valuations and are already facing contagion from portfolio companies that held funds in FTX or similar.

I can see a scenario where the lack of appetite and diminishing consumer sentiment lead to a domino-ing effect.

Saying all of that, I predict funding will probably stay consistent (if not, increase), even with the challenging environment.

6. 🤪 Standout DAO’s doing crazy things

We'll see much more about DAOs (decentralized autonomous organizations) in 2023. These organizations are run by a computer code, with no central authority or board of directors.

We’ve seen some DAOs support environmental initiatives (like KlimaDAO) as well as DAOs trying to buy an NBA team (Krause House) - even the old ConstitutionDAO coming back from the ashes.

I believe that we'll start to see some standout DAOs doing some pretty crazy things this year - whether that’s buying a sports team, funding science research, and more.

7. 💸 DeFi on the rise

DeFi didn’t have a good 2022. Multiple hacks, TVL (Total Value Locked - essentially how much $ has been deposited) dropped from $230bn to $50bn and entire blockchains collapsed.

Given all of this, there were some big wins for DeFi:

  1. AAVE launched an institutions-focused lending protocol that was KYC and AML compliant

  2. Curve Finance has an upcoming liquidity market maker for a new stablecoin design

  3. Uniswap (a leading decentralized exchange) launched NFT trading on their platform

With the upcoming Shanghai Ethereum update to unlock staked ETH solutions, I can imagine there will only be a rise in innovative DeFi solutions in 2023.

8. 🤖 Moats in AI

The past few months have been a whirlwind in the AI space - everyone, their child, and their pet have been reading, watching, experimenting, or building with AI tools.

One of the biggest challenges right now is that the majority of AI companies derive their value from publicly available AI models. This means many companies don't have any technology advantages - or 'moats' - to deter new entrants from coming into the space.

However, there are other forms of defensibility, such as distribution advantages and network effects. Companies will likely find ways to carve out their own unique moat. This could be through more powerful, custom models fine-tuned for a given sector, or industry-specific partnerships that make a specific tool the go-to for professionals in a certain industry.

Conclusion:

There’s probably a lot more I could write about from geo-political situations (I think Russia will pull out of Ukraine by the end of the year) to football (I think Manchester United will win the Premier League), but I’ll end it there.

Curious to know what I’ll be right and wrong about - feel free to reply if you think I’ve missed something.

🔗 Links Of The Week

A great article on Every about the role work should play in our lives. I have always thought about the importance of finding intrinsic motivation in our work, as well as the concept of ‘satisficing’ to move on to the next decision quickly.

Some key graphs you can easily skim - main ones would be around business confidence, real estate, and the economic landscape.

Insights on how David Beckham negotiated a salary that focused on the long game - and has played out quite perfectly for him.

Until next time

I hope you enjoyed this week’s edition - I'd love it if you shared it with a friend or two.

Got feedback? Reply to this email or tweet at me and let’s chat.

Fahim