The greatest investors look to the future & act accordingly...
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The best investors in the world donāt fixate on the present. Instead, they look towards the future to discern where things are heading & why.
This is true ALPHA.
Despite one of the worst financial downturns in modern history, 2022 was a major year for Web3 & NFTs. Economic turbulence aside, 2023 is shaping up to be the best year yet for NFTs & Web3.
So whether youāre looking to make billions or just trying to build, here are the top NFT & Web3 trends & predictions to look out for in 2023.
Keynote At A Glance
Dynamic NFTs
Though they've been around for a while, dynamic NFTs are set to take stage in a major way throughout 2023.
In 2022 we saw this innovation used to great effect - from Fluf Worldās swappable scenes & sounds, Zerionās Avatars, which change based on trading activity or Valhallaās Amory powered āRe-rollā system.
With projects like Doodles 2 enabling swappable music & wearables & Yuga Labsā Otherside allowing select assets to be decoupled from their Otherdeed land parcels, Dynamic NFTs are THE wave to watch in 2023.
Tech-Based Business Models
Given the froth of FOMO & booming market, most collections released in 2021 survived off of NFT sales & royalties. The harsh winter of 2022 has brought with it the harsh reality that NFT āprojectsā are destined to fail unless they grow into NFT ābusinessesā.
Accordingly, expect the strongest teams to begin unveiling scalable tech products as the core of their future business models. Many teams have already started down this path.
Dust Labs, the company behind the two largest Solana collections DeGods & y00ts, have raised more than $7M to build out tooling for NFT projects like the Scholarship tool & POW dashboard.
KPR is building out FocusArt a publishing platform to enable artists to create, release & monetize their works in web3, while also providing more nuanced & flexible trait design & layering techniques to enable more creative aesthetics.
AMGI, the animation studio behind MPH is building out IMMI, a real-time facial animation tool to allow AR + VR communication & content creation, as well as INTERLOOP, a framework to enable any project to build within the UE5 based game world underpinning MPH.
Of course, thereās YUGA LABS, building out their OTHERSIDE Metaverse ODK & hiring former Activision COO to help lead the effort.
Entertainment Expansions
Similarly to the pivot towards building tech products, projects with the capital, connections & creative capacity will make big strides towards becoming noteworthy IP, venturing beyond the small pond of web3 & into the oceans of entertainment, music & fashion.
Yuga Labs is kicking off a interactive narrative activation with āThe Trial Of Jimmyā
Creepz is now managed by THREESIXZERO to help guide its expansion into gaming, an animated series & fashion.
DOODLES is making music a core pillar of their ecosystem & has teased some AR concepts that may be used for more immersive storytelling.
Futureverse has been flexing their production abilities with a recent in-engine trailer, shortly followed by the release of their Party Bear/ Buzzies audio-comic book experience.
Web3 Gaming Goes Pro
Gaming has been & remains one of the clearest use cases for NFTs. As one of just 3 industries on pace to grow by over $100B in annual revenue over the next few years at a CAGR of 8.4%, its insanity to think players will keep pouring money into digital assets they don't own & canāt be used in other games. NFTs FIX THIS.
Most of the projects born from the P2E wake of Axie Infinity have already failed - but the ones that remain will lean on pro gamers & streamers to bring greater awareness to their releases, in some cases bringing on these same players as advisors.
Some games to watch throughout 2023 include:
Blankos Block Party | Big Time | FIFA AI LEAGUE | My Pet Hooligan | Illuvium | Impostors | The Watch (FKA Frontier)
āOn-Chainā Is En Vogue
Terra Luna was a lesson in algorithmic stable coins, FTX a lesson in self custody, & IN 2023, Iāve got a feeling some major project will be a lesson in the technical nuance of being āon chainā.
Despite popular belief, most NFT collections arenāt actually stored on-chain, instead only storing partial data on-chain: typically the token ID and a URL that points to the token's metadata. Sometimes metadata is stored directly on chain, but thatās usually as far as it goes.
Rare is the project storing everything about the NFT, including the art, entirely on-chain. Why? Because it can get expensive.
So why does this matter? Because if something were to happen to the company behind a collection, a major exchange hosting a collection, or the pinning sites hosting the metadata, your NFT will be rendered useless & inaccessible.
When an NFT is fully on chain, it allows the token to be reconstructed in its entirety using both on and off-chain decompressors, directly from the data baked into the chain, ensuring the NFT persists in perpetuity alongside the network itself.
One of the first PFP projects to be issued fully on chain is J1mmy.ethās Avastars & early 2022 saw Josie Bellini, one of the most established OG artists in the space, release Cyberbrokers as a fully on chain, .svg collection. After seeing the floor rocket to above 5E & settle back down to earth, I acquired one for the fund.
All it takes is one metadata related fiasco & Iām confident will see a renaissance of fully on-chain projects w/ genuine persistence & immutability.
Corporates Double Down
As behemoths like Starbucks & Nike commit to making Web3 a core vertical of their business with the likes of Odyssey & Dot.Swoosh respectively, expect to see multi year partnerships & significant investments across consumer brands, entertainment, gaming, sports, luxury goods & fashion from corporates as they realize its better to align with an existing player & lean on their foundations, tech & competencies than to struggle to create something worthwhile internally.
Warner Bros invested in Palm NFT Studio back in 2021, Epic Games raised $2B alongside Sony to build a āfamily friendly metaverseā & Disney kicked off a web3-centric accelerator program while also appearing to have a close relationship with the Aku World project.
Whoās next?
Unicorns, Everywhere
Building on the prior point, many projects raised hundreds of millions in 2022 despite it being a rather crushing year.
Digidaigakuās parent company Limit Break raised $200M to build Web3 MMOs, Yuga Labs raised $450M at a $4B valuation, & Doodles raised $54M.
While most fundraises have been in the high 7 figures, expect several more checks above 100M in 2023.
Hyper Scarce & Mass Scale Mints
The 10K PFP meta is dead. By no means have we seen the last collection using that well-worn model, but in 2023 and beyond, weāll see far more projects opting for extremes of the sizing spectrum - from hyper scarce mints of a couple thousands down to a few hundred to mass market mints in the hundreds of thousands & millions.
Why the change? Audience Segmentation. Aside from the āApe See, Ape Doā imitation games driving new projects to mint 10K collections, most established projects have only remained faithful to this formula in effort to ensure existing holders each have a chance to mint at least 1 new NFT from companion & follow up drops.
As teams assess their inaugural collections & reconcile their existing communities against their future aspirations - itās become clear that āsplitting the differenceā doesnāt work. Instead, smaller collections with higher mint prices will allow for more tailored, exclusive experiences & deeper connections than is otherwise possible with larger mints. Oppositely - massive mints intended to drive market penetration, awareness & inclusivity will be sold for less than $50 or given out for free. This scaled approach is critical to growing the community without devaluing genesis holders.
Some folks have already created a blueprint here.
REDDIT onboarded millions with their collectible avatars, ManchesterUnited is looking to do the same with their Tezos partnership & Starbucks is slowly opening up its Odyssey program before granting access to their legion of caffeine fiends.
The Metaverse Takes Shape
The metaverse is not a singular place, but a standard for handling digital assets, digital identity & their associated metadata in an interoperable & composable fashion. As such, Iām confident 2023 will be the year the metaverse begins to take shape in a truly palpable way.
While Iām not quite as confident the hurdles of active users & engaging activity will be completely remedied, the release of the Otherside SDK will arrive alongside plenty of hype & attention, marking a significant move forward in empowering creators & non-technical users to connect with others in a world that blends socializing, commerce & creativity into a fluid gamified experience.
Aside from Otherside, Spatial is pushing adoption forward by enabling anyone to craft a VR/AR world in minutes & ensuring accessibility from something as simple as a cell phone browser.
Alongside more user generated content populating these worlds, I anticipate major milestones from lesser known platforms like WilderWorld & The Third Kingdom, & metaverse centric networks like Lamina1 to drive the open metaverse forward in a big way.
Network Migrations
The two leading Solana collections, DeGods & y00ts, recently announced a migration away from the network & over to Ethereum & Polygon, respectively. The teamās motives aren't crystal clear, but its safe to assume there were doubts about Solanaās post-FTX future.
Though DeGods & y00ts could be viewed as edge cases, many of the trends weāve covered will force teams to adapt & adjust their tech stack to ensure their plans are feasible. Despite recent upgrades, Ethereum remains too slow & too expensive to support the next generation of NFT innovation at the scale of hundreds of millions.Ā Hence why Doodles is migrating to a new network in February. Their next phase, Doodles 2, is intended to take the brand from a few thousand to a few million by focusing on digital identity, enabling swappable wearables & music to customize each Doodle. Again, this is a perfect use case of dynamic NFTs - but it requires a more flexible & affordable network to ensure holders arenāt priced out by wild gas fees.
The team havenāt announced which network it will be - but its safe to assume Polygon is high on the list. Still, I, alongside many in the Fluf World & Futuerverse community, have speculated the project will opt for the Root network, a layer 1 chain built by the Futureverse team & purpose built to bring NFTs, DeFi & DiDs to the mass market with a little friction as possible.
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