Crypto is down but not out. The industry that took a hit last year is set to make its first major public showing of 2023 at Consensus, CoinDesks’ annual conference. Many of the biggest names in cryptocurrency, government, Web3 and more will be in Austin, Texas this week to discuss the current state of the industry, the devastating year that has just passed, and what the future may hold.
On this point, things are looking up. If the first four months of the year are any indication of where the industry is heading, the rebuilding has begun.
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However, there is still a long way to go to build, policy, educate and, yes, invest. While recent markets have given some cause for optimism, fraud and contagion have absolutely destroyed consumer confidence in the sector. Regaining that trust will be difficult, but this is the opportunity at the feet of today’s builders, regulators and decision makers, many of whom will share their views in Consensus.
Here’s what to expect this week in Austin.
If you’re not familiar, Consensus is a three day conference in Austin. It is run by CoinDesk and brings together leading figures in cryptocurrencies, finance, Web3, regulation, entertainment and more for three days. This year it will take place from 26 to 28 April. Aside from 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, you can subscribe to the official newsletter, The Node.
One of the major themes of Consensus will be how the traditional finance world should now view its relationship to cryptocurrencies.
The past year began with a series of bank runs, bankruptcies and acquisitions that seem to echo the economic conditions that gave birth to Bitcoin. The London Times didn’t exactly repeat the same infamous headline Satoshi placed on the Bitcoin genesis block, Chancellor on Verge of Second Bailout, but the financial world was more than aware of the concept of moral hazard when US regulators stepped in to bail out three banks (and bankrupt one).
The bankruptcies, coupled with stubborn inflation, have not hurt the price of bitcoin, which has skyrocketed in the wake of those events. This has helped reignite the narrative that bitcoin could one day become a legitimate hedge asset. While few companies are buying bitcoin as they did in 2021 as a way to diversify balance sheets, institutions are still building and adopting blockchain, or distributed ledger technology. Societe General, France’s august institution, recently issued a euro-denominated stablecoin, while asset manager BlackRock is backing a major bitcoin mining concern.
With the recent Ethereum upgrade in Shanghai finally allowing anyone to stake and take away ether (ETH) at will, there is growing recognition that the second largest cryptocurrency by market capitalization could become the analogue of cryptocurrencies at the rate of risk-free returns in the financial world. This reality is probably far off, but it’s notable that ETH prices started to rally after the Shanghai hard fork, going against analyst forecasts of a mass sell-off.
Clearly, opportunities exist for TradFi institutions to enter and make money in cryptocurrencies in the short and long term. Dawn Harflinger, president and CEO of the Liliuokalani Trust, will speak about the long-term position of the $1.2 billion cryptocurrency funds at the Consensus Conference. Meanwhile, CoinDesk senior reporter Ian Allison will speak with Jose Fernandez da Ponte, who runs the cryptocurrency and digital currencies business unit at PayPal (PYPL), arguably the fintech firm that has taken the lead position in developing cryptocurrencies as tool for everyday financial use.
In the first three months of 2023, venture capital investments in cryptocurrencies are down to just $900 million compared to the many billions that flowed into cryptocurrencies last year. Many crypto-native funds, however, are stocked with capital, raised or earned from the latest bull market, and are waiting for the right projects to invest in.
After the collapse of FTX, a centralized exchange, VCs have once again committed themselves to the principles of decentralization. Notably, a number of funds are allocating dollars into crypto infrastructure, the distributed (and tamper-proof) foundation upon which the larger crypto economy rests. This is by definition a broad category, including everything from level 1 blockchains to scalable systems like the recently launched Coinbases (COIN) exchange network.
Similarly, projects with their own hoards of tokens are starting to hand out millions of dollars in funding to pay for the open source development of their ecosystems. For example, Solana, which was particularly affected by the fall of Sam Bankman-Fried’s FTX empire, is showing 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, the creator of the Stacks blockchain, will both talk about the fire of development activity spreading around Bitcoin, ignited by the silent launch of Bitcoin Ordinals (aka Bitcoin NFT). Separately Sunny Aggarwal, the founder of the largest decentralized exchange Cosmos, will discuss the inter-chain plumbing that needs to be built for all blockchains to interact seamlessly and the competing visions for the most active multi-chain network ever, Cosmos .
NFT is a clumsy initialization of an even more clumsy phrase, non-fungible token. This is probably a big reason why over the last year big brands like Reddit and Starbucks (SBUX) that are looking to experiment with digital collectibles have done so without calling them NFTs. Those who saw this as an indictment of cryptocurrencies missed the counterpoint: cryptocurrency prices were in the doldrums, so simply slapping Web3 or NFT on a project wouldn’t help, but those brands still had enough faith in the concept to throw them in the first place.
Crypto is likely to continue growing like this in the background. Case in point: Solana is preparing to launch the Solana Phone, aimed not at the mass market but at busy crypto users who want to keep their funds safe but still accessible. Futurist Cathy Hackl is giving a Consensus presentation on 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 larger ownership economy that’s coming to life. There are conflicting views on what exactly this will look like and how far cryptocurrency or the metaverse will penetrate everyday life, but one thing is for sure, e-sports as one of the fastest growing entertainment segments will increasingly adopt new ownership models, GameSquares (GAME) Jason Lake will discuss at Consensus.
Similarly, Chainlink co-founder Sergey Nazarov will 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 those regulators aren’t sitting around on their hands. Last week, the European Union leapfrogged to become the first major economic region to vote on a comprehensive regulatory framework for cryptocurrencies. In the US, it’s clear the government wants to rein in the industry, though the exact form it takes has yet to be determined.
Political issues will be the focus 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 hosts the Policy Summit, a series of sessions that includes a chance to hear from Dr. Marwan Al Zarouni, strategic adviser to Digital Dubai and the UAE government, on the emergence of multi-polar crypto hubs and a policy discussion with Kristin Smith, CEO of the Blockchain Association, who is perhaps the most active crypto lobbyist in Washington.
The Consensus name is perhaps more appropriate this year than any other. While universal agreement is an unattainable, if not antithetical idea in crypto, you cannot move without direction. And bringing together many of the biggest names and most influential people in the world of cryptocurrency and finance, Consensus 2023 represents perhaps the biggest opportunity for clear direction for an industry that is clamoring for it.
