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10 Highlights From Messari’s Prodigious ‘Crypto Theses 2023’

Validated Individual Expert

Clocking in at 157 pages (a slight decrease from 2022’s masterpiece), Messari’s annual “Crypto Theses 2023” remains (IMHO) the industry’s most impressive overview of the crypto ecosystem, and thus a must-read for any crypto enthusiast.

While author Ryan Selkis, co-founder and CEO of Messari, was supported by the ~200 person Messari team (up 3X over 2022), the report was written in the first person by Selkis. I’ve been a Selkis fanboy since Jan. 2020 when he spoke at CryptoMondays NYC and mesmerized us with his discussion of his Crypto Theses 2020 and tales of breaking the Mt. Gox hack story.

The longest chapter in this year’s theses is, regrettably, “Top 10 Trends In Crypto Policies”, but each chapter is strewn with insight. The report’s provides a comprehensive state-of-the-state of crypto coupled with thought-provoking predictions about 2023 and beyond:

As amazing as the report is, few will read all 157 pages even though you should. So below the most intriguing points I found in each of the 10 awesome chapters of the epic report.

Chapter #1 “Top 10 Narratives” Highlight — Crypto Is Still Inevitable

A repeat winner from my post last year, Selkis notes that while “The long-term builders may have been temporarily hurt by association, hey haven’t been the ones who perpetuated frauds or fleeced investors”. And while the industry has less capital floating around, web3 is still attracting the smartest people in the world who are leveraging the increasing amount of critical infrastructure built to date, to change the world:

Selkis repeats the oft cited refrain that, in many respects, it’s easier to build in bear markets than bull markets. Or as Brock Pierce says:

Bull markets are bullshit, and bear markets bear fruit

Chapter #2 “Top 10 People To Watch” Highlight — CZ

Last year, I choose “WAGMI” as the highlight for people to watch, a poor choice in hindsight, as many of us (e.g. FTX, Terra Luna, Three Arrows Capital, BlockFi, Celsius, Voyager….) didn’t make it. This year I’m choosing CZ, and not just because I got to hang with him at Paris Blockchain Week:

CZ is my pick because, post the demise of FTX, Binance now accounts for for ~75% of all global spot volumes. And yet Binance “… operates in a jurisdictionally-fluid gray area of epic proportions”. So I’m watching CZ, like so many others are, to see if he’s a benevolent dictator, or if he’s cut out of the same cloth as SBF & Do Kwon.

Chapter #3 “Top 10 CeFi Trends To Watch” Highlight —The Institutions Are Coming

Ryan writes that “This is the part of the report where I pretend to care for a minute about institutional crypto efforts”. I get that it’s important that they come eventually. And they will.

But institutions are a lagging indicator of where crypto is, not a leading indicator. Institutions won’t lead the way, they’ll follow, when crypto’s inevitability is clearer, and it’s timing more certain.

Chapter #4 “Top 10 Trends In Crypto Policy” Highlight — Tornado Cash vs. OFAC

In the prologue of the report, Ryan writes that “ … there’s also a certain amount of rage that fueled this report. The bad actors have gotten all of the oxygen this year, and set back the good actors and years of progress that they had made”. But as much damage as SBF and other scammers created, Gary Gensler might have actually done the most damage. In the section titled “Everyone Hates Gary”, Ryan states that “The first thing you need to know about Chair Gary Gensler’s SEC is that they have never met a company they didn’t want to sue (except, apparently, FTX)”.

And, while I applaud those fighting the good fight in D.C., I’m most confident the issues will ultimately be addressed by regulatory arbitrage. I’m encouraged builders are leaving the U.S. for Singapore, or Lisbon, or other locales that are so welcoming to innovators, instead of jailing people for it. So my personal view is that I want to spend as much time thinking about the regulators as the regulators spend thinking about me. And that’s ZERO.

But Ryan has chosen to go in the other direction. In the prologue he admits that he “ … will probably spend more time in this report deconstructing crypto policy than you would like..”. And at 23 pages long, the policy section is 20% longer than the second longest chapter.

But of all the egregious moves by regulators and lawmakers, the most egregious was the arrest in August of of Alexey Pertsev, the Dutch co-founder (and Russian expat) of Tornado Cash on suspicion of money laundering. To date, the authorities have failed to outline formal charges against Alexey. As a result, no one knows specifically what act was deemed illegal. But the chilling effect is making crypto winter even more brutal. And the entire affair shines a spotlight on why crypto is so important to creating a better world.

Chapter #5 “Top 10 Cryptocurrency Trends” Highlight — Stablecoins Should Be Our Leading Export

I did 26 episodes of “Stablecoins Are Killing It” in 2020, because that was the fastest-growing part of the crypto ecosystem, as it will continue to be in 2023, as on-chain stablecoin transaction volume continues to hit new highs:

And while most of crypto focuses on the battle for stablecoin dominance being waged between behemths USDC and Tether, I’m more fascinated by algorithmic stablecoins like Frax, Rai and Reserve. I’m also more bullish on the imapct of CBDCs than Ryan, who focuses on the Orwellian aspects, as though a U.S. CBDC would be meaningfully more dystopian than our current banking system. Rather, I’m more focused on the billions of people that CBDCs could onboard to the digital currencies.

Chapter #6 “Top 10 Ethereum & L1 Trends” Highlight — The New Ethereum Roadmap

My highlight last year was “Solana Summer Never Ends”, which turned out not to be a great pick. In terms of traction relative to a year ago, I think Cosmos may be the winner among L1s that aren’t Ethereum.

But while it felt like we were going down the multi-chain path at the start of 2022, by years-end, we were back to a focus on EVMs. And while non-EVM chains work to become EVM-compatible, and bridges between chains are being built and strengthened, Ethereum is leaving 2022 even more dominant than it started.

“The Merge” was the L1 highlight of 2022. And continued progress along the Ethereum roadmap below is poised to be the L1 highlight again in 2023:

Chapter #7 “Top 10 DeFi Trends” Highlight — Real World Collateralized DeFi

Like Ryan “I don’t think I can possibly be more excited about the future of decentralized finance (DeFi)”. I also believe “We need more apps to work for everyday users and to find use cases that make us proud”.

But the part of DeFi I’m most excited about is the migration of Real World Assets (“RWAs”) on chain. It’s a massive opportunity and it’s happening already, as RWAs have grown to account for 57% of Maker revenue in December:

A great example oF RWAs IN DeFi is END-Labs which is tokenizing pools of gig worker comp (e.g. from Uber, Lyft, DoorDash..), providing gig workers earlier access to monies they’re owed, while providing sustainable double digit returns to investors.

Like Ryan, I’m also very bullish on “regenerative finance”, a term coined by John Fullerton to describe an economic design that “..maximizes value to communities by regenerating what has been lost, conserving what remains and ensuring long-term financial prosperity”. I’m proud to be a member of the Celo community, which has done a lot of great work in regenerative finance.

Chapter #8 “Top 10 Trends in NFTs & DeSoc” Highlight — Decentralized Social (DeSoc)

DeSoc rearchitects Web2 social media on crypto rails, with the potential to provide “… people on-chain reputation, organization (DAOs), & ownership of their content. DeSoc also introduces new ways for people to better capture the value of their online IP. DeSoc will change how value flows on the internet”. It’s still very early in DeSoc, with early leader like Lens sporting tiny communities (relative to incumbents), but decentralizing Facebook is in our sights, and the world will be a far better place when that happens.

Chapter #9 “Top 10 Trends in DAOs & Web3” Highlights — Actual Useful DAOs

I’m in complete agreement with Ryan that “What’s lacking most in crypto isn’t talent, so much as good governance and social primitives that encode better Layer-0 values at the community level”. But we can look at some early examples of actual useful DAOs to see what the future holds.

  • New Business Models: Check out Vibe Bio,which aims to change the incentive structures in biotech. The protocol makes it easier for people affected by rare diseases to fund drug research.
  • SPACs: ConstitutionDAO was a flash mob that showed how easily single purpose communities could rally around a cause and fund investment. This concept could extend to buying a sports club, funding a crypto venture, or funding litigation versus a deep-pocketed enemy.
  • Investment Clubs: Syndicates make it easier to spin up NFT and token investment clubs like Orange DAO.
  • Impact DAOs: Gitcoin has remained one of the most innovative early DAO projects, having pioneered quadratic funding and helped seed core ecosystem infrastructure like ethers.js, Optimism, and Uniswap.
  • The Ultimate DAO .. the Network State: Balaji wrote “A network state is a highly-aligned online community with a capacity for collective action that crowdfunds territory around the world [DAO!] and eventually gains diplomatic recognition from pre-existing states.”

My passion project for the last six months has been the CryptoOracle Collective, so I’m also super excited for decentralized talent marketplaces.

Chapter #10 “Top 10 Trends in DAOs & Web3” Highlights — Why You Must Write

I’ve written over 300 crypto related blogposts, and most of the time no one cares. Sure, once in awhile I get lightning in a bottle, but that’s the icing on the cake. I write because:

I don’t know what I think of anything until I read what I’ve written about it — William Faulkner

Or as Ryan put it “Reading helps me identify blind spots, but it’s writing that helps me focus and streamline my thoughts”.

So write, and learn. And if you’re going to read, I’d start with Digital Gold if you want to learn the history of bitcoin and how we got here. Then I’d read Sacred Economic,s which has taught me the most of anything I’ve read about money and humanity in the 5 1/2 years I’ve been 24/7 crypto.

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