DeFi meets TradFi, policy debate, Web3 Builders and more

Crypto is down but not out. The industry that took a beating last year is set to make its first major public display in 2023 at Consensus, CoinDesk’s annual conference. Many of the biggest names in crypto, government, Web3 and more will be in Austin, Texas this week to discuss the current state of the industry, the devastating year it just had and what the future may hold.

On that score, things are looking up. If the first four months of the year are any indication of where the industry is headed, the rebuilding has begun.

Get tickets to Consensus 2023 in Austin, Texas here.

Still, there is much more construction, policymaking, education and, yes, investment to be done. While recent markets have provided some reason for optimism, fraud and contagion have completely shattered consumer confidence in the industry. Regaining that trust will be difficult, but the opportunity lies at the feet of today’s builders, regulators and policy makers – many of whom will share their views on Consensus.

Here’s what to expect this week in Austin.

If you’re not familiar, Consensus is a three-day conference in Austin. Powered by CoinDesk, it brings together major figures in crypto, finance, Web3, regulation, entertainment and more for three days. This year it takes place on 26-28 April. Short of going to Austin or attending with a virtual ticket, the best way to keep up with what’s happening at the conference is to follow CoinDesk. For regular daily updates on the show, subscribe to the official newsletter, The Node.

One of the biggest topics at Consensus will be how the traditional financial world should now view its relationship with crypto.

The past year started with a series of bank runs, failures and acquisitions that seem to mirror the economic conditions that gave birth to Bitcoin. The London Times didn’t exactly repeat the same infamous headline Satoshi inserted in the Bitcoin Genesis block, “Chancellor on brink of second bailout…”, but the financial world was more than made aware of the concept of “moral hazard” when US regulators stepped in to saved three banks (and let one fall).

The failures, combined with stubborn inflation, did not hurt the price of bitcoin, which rose in the wake of these events. It helped revive the narrative that bitcoin could one day become a legitimate means of hedging. While few companies are buying bitcoin as they did in 2021 as a way to diversify their balance sheets, institutions are still building and adopting blockchain, or distributed ledger technology. Societe General, the towering French institution, recently issued a euro-denominated stablecoin, while asset manager BlackRock is backing a major bitcoin mining operation.

With Ethereum’s recent Shanghai upgrade finally enabling anyone to stake and unstake Ether (ETH) on a whim, there is a growing realization that the second largest cryptocurrency by market cap could become crypto’s analogue to the financial world’s “risk-free” rate of return. That reality is likely some way off, but it’s notable that ETH prices started to climb after the Shanghai hard fork, bucking analysts’ predictions of a mass selloff.

It is clear that there are opportunities for TradFi institutions to enter and make money from crypto – in the short and long term. Dawn Harflinger, president and CEO of the Liliʻuokalani Trust, will talk about the fund’s $1.2 billion long-term position in crypto at the consensus conference. Meanwhile, senior reporter Ian Allison of CoinDesk will be speaking with Jose Fernandez da Ponte, who runs the crypto and digital currencies business unit at PayPal (PYPL), arguably the fintech company that has taken the biggest position in crypto development as an everyday tool. economic use.

In the first three months of 2023, venture capital investment in crypto was reduced to a trickle – just $900 million compared to the many billions that poured into crypto last year. However, many crypto-native funds are stocked with capital, either sourced or earned from the latest bull market, waiting for the right projects to invest in.

After the collapse of FTX, a centralized exchange, VCs have committed themselves to the principles of decentralization. In particular, a number of funds are allocating dollars to “cryptoinfrastructure” – the distributed (and tamper-proof) base upon which the broader crypto-economy rests. This is by definition a broad category, including everything from layer 1 blockchains to scalable systems like crypto exchange Coinbase’s (COIN) recently launched Base network.

Similarly, projects with their own token taxes are beginning to use millions of dollars in funding to pay for open source development of their ecosystems. For example, Solana, which was hit particularly hard by the demise of Sam Bankman-Fried’s FTX empire, shows the “stickiness” of crypto projects with committed developer communities and the funding needed to pay for them.

There is a lot to build. Udi Wertheimer, a prominent bitcoiner, and Muneeb Ali, creator of the Stacks blockchain, will both talk about the wildfire of development activity spreading across Bitcoin, sparked by the quiet launch of Bitcoin Ordinals (aka Bitcoin NFTs). Sunny Aggarwal, founder of Cosmos’ largest decentralized exchange, will separately discuss the inter-chain plumbing that needs to be built for all blockchains to interact seamlessly, and competing visions for the most active multi-chain network to date, Cosmos.

“NFT” is a clumsy initialization of an even clumsier phrase, non-fungible token. That’s probably a big reason why big brands like Reddit and Starbucks ( SBUX ) that want to experiment with “digital collectibles” have done so without calling them NFTs. Those who saw this as an indictment of crypto missed the counterpoint: crypto prices were down, and it wouldn’t help to just slap “Web3” or “NFT” on a project, but these brands still had enough confidence in the concept to launch them in the first place.

Crypto will likely continue to grow this way – in the background. Case in point: Solana is preparing to launch the Solana phone, not aimed at the mass market, but dedicated crypto users who want to keep their money safe but still accessible. Futurist Cathy Hackl gives a presentation at Consensus about our “post-smartphone” future, when augmented reality and artificial intelligence are ubiquitous.

The market for crypto phones and wearables may still be small, but it’s all part of the broader “ownership economy” that’s booming. There are competing visions of what exactly this will look like, and how far the crypto or metaverse will permeate everyday life, but one thing is certain, eSports as one of the fastest growing entertainment segments will increasingly adopt new ownership models, GameSquares (GAME) Jason Lake wants to argue at Consensus.

Chainlink co-founder Sergey Nazarov will also discuss the role blockchain oracles and data providers will play in an increasingly digitized world.

The whole industry is feeling the pressure from regulators, and these regulators are not sitting still. Last week, the EU took a leap forward by becoming the first major economic region to vote on a comprehensive regulatory framework for crypto. In the US, it is clear that the government wants to rein in the industry, although the exact form that takes is still to be determined.

Political issues will be at the center of Consensus 2023. Jeremy Allaire, CEO and co-founder of stablecoin issuer Circle, will speak on stage with CoinDesk Chief Content Officer Michael Casey about the future of the stablecoin industry, which bridges the traditional and emerging financial sectors.

On Friday, Consensus is hosting the Policy Summit, a track of sessions that includes a chance to hear from Dr. Marwan Al Zarouni, a strategic advisor to Digital Dubai and the Government of the United Arab Emirates, on the rise of multipolar crypto hubs as well as a policy discussion with Kristin Smith, executive director of the Blockchain Association, who is perhaps the most active crypto lobbyist in Washington.

The name Consensus is perhaps more apt this year than anything else. While universal agreement is an unattainable, if not antithetical, idea in crypto, you cannot move without direction. And by bringing together many of the biggest names and most influential people in crypto and finance, Consensus 2023 represents perhaps the biggest opportunity for clear direction for an industry crying out for it.