Top 10 Cryptocurrency Trends in 2023

The 21st century, which, according to some prominent experts, was supposed to be a “golden age” for the world economy and economic science, brought severe tests to society and posed new difficult questions to scientists. Financial globalization has not lived up to expectations, and the increase in money flows from rich countries to poor ones has not improved the latter’s well-being but just led to a change of owners of their national property in exchange for fictitious capital. The global crisis provokes the acceleration of the centralization of global capital, the growth of social stratification, and a loss of public confidence in the global financial system. Members of the boards of various financial institutions all call for a reconsideration of the existing economic paradigm and a change in the vector of social development.

New hopes are associated with the rapidly developing crypto trends and other digital technologies and their penetration into all spheres of social life (the so-called digitalization), including the economy. Studies of artificial intelligence and big data technologies, blockchain, and cryptocurrencies are particularly relevant today, as they are seen as the forerunner of a new economic formation called the digital or virtual economy. Sometimes they are even seen as “digital gold,” the latest stage in the digital evolution of money or a miniature model of the “virtual” economy. Against the background of crisis processes and loss of trust in traditional economic institutions, interest in cryptocurrencies is growing; this topic is trendy today among the academic community and the general public.

In this article, we will talk about what cryptocurrency is, how it appeared, and how it affects our world today, particularly the financial system, and in the end, what prospects and chances it has to completely replace fiat currency in the foreseeable future.

What Is Cryptocurrency And How Does It Work?

Cryptocurrencies are digital currencies or assets that use blockchain to regulate the issuance and circulation of units of account for mutual settlements within a peer-to-peer (peer-based) network. Today’s most popular cryptocurrency trends are Bitcoin, Ethereum, Litecoin, Doge, Cardano, Ripple, and a few others. The technological principle behind the functioning of cryptocurrencies is blockchain. Blockchain is a cryptographically encrypted distributed register in the form of consecutively linked blocks that store information about the history of all transactions in the peer-to-peer network. 

A distinctive feature of most cryptocurrencies, and Bitcoin, in particular, is their decentralization: the chain of transactions is not stored in any one place but in the wallets of all participants. In addition, the chain is stored in an encrypted form, which excludes hacking or changes. All operations necessary for the network to function are performed in an electronic environment by different devices, depending on the mechanism of a particular blockchain/cryptocurrency (e.g., processors or video cards). Among other things, the blockchain cannot be changed in the absence of a consensus decision by the network’s participants because crypto assets are both open and pseudonymous (in rare cases, anonymous) systems. This means that all information about transactions between participants is available online, but information about the participants is hidden.

Essential for understanding the phenomenon of digital assets is mining – the activity of maintaining a distributed platform and creating new blocks with the opportunity to receive rewards in the form of emitted currency and/or commissions. Miners perform calculations to make transactions by cryptographically encrypting new blocks, and the reward encourages people to expend their computing power and thereby keep the networks running. This way, two goals are pursued: the first is the “money” emission, and the second is the creation of new blocks.

There are two primary consensus mechanisms: Proof-of-Work (POW, for example, Bitcoin) and Proof-of-Stake (POS, an example is Dash). In the first case, the miner with the highest processing power has the best chance to encrypt a new block and get the reward. A second method selects validators to stake crypto coins according to their cryptocurrency holdings.

Here is an example of how a public blockchain works as a payment system: two network users agree to make a transaction (e.g., cryptocurrency in exchange for some goods). The sender of the payment specifies the recipient’s wallet address, the amount of the transfer, and other information if necessary. The transaction is verified simultaneously with his private key and the public key, after which it is combined with other transactions that occur at the same point in time. This array of information is cryptographically encrypted (hashed) by the miners and goes into a new block that continues the chain. All participants (so-called “nodes”) update their blockchain versions and confirm that the block is formed according to the rules. If the block is formed incorrectly due to unauthorized interference or data transmission errors, the nodes will not include it in the chain, and the transaction is not executed. After that, the specified amount is transferred to the seller’s wallet, and the transaction is considered completed.

History of Cryptocurrency

Bitcoin, which has become the most famous, expensive, and liquid crypto asset of today, was created as the first blockchain project by a programmer/team of programmers under the alias Satoshi Nakomoto in 2008.

Back in the 1960s, professional cryptographers discussed the possibility of creating a global information network. The first practical steps in this direction were made in the 80s. With the help of the information network, they began to exchange brokerage data, which was needed for trading in exchanges. At the same time, the idea of digital money appeared. The main value of the concept was reduced to the possibility of immediate purchase of shares, various financial assets, and their derivatives.

At that time, American cryptographers David Chaum and Stefan Brands were working on realizing the idea of digital money. They described the principles of an anonymous digital payment system and proposed the first “e-cash” protocols. 

In 1990, David and Stephan created DigiCash, a company that specialized in developing and implementing the eCash money system. It had the function of supporting the confidentiality of electronic payments and had cryptographic data protection.

The main difference between eCash and modern crypto trends was its centralized management. But the very idea of fast, anonymous payments was noticed by many cryptocurrencies. In 1998, this platform went bankrupt.

A significant contribution to the formation of cryptocurrency was made by Adam Back. In 1997, he introduced HashCash — technology that is immune to spam and DOS attacks. Adam managed to create a more advanced algorithm for the control of electronic payments. The essence of the improvement was the introduction of hash-blocks in transaction processing.

HashCash technology became one of the key concepts in creating the first blockchain. Based on it, two developers independently launched their digital projects in 1998:

• Wei Dai – the B-money project
• Nick Szabo – the Bit-Gold project

Each of them used a decentralized registry as the basis for the system. In fact, these projects of Wei and Nick became the prototypes of cryptocurrency. The first blockchain was created by Hal Finney in 1998, and sometime later, he joined the Bitcoin project. Satoshi Nakamoto would later refer to B-money as the fundamental technology for the development of Bitcoin.

Cryptocurrency Today: Top 10 Cryptocurrency Trends in 2023

The digital industry is developing at a rapid pace. Today, blockchain has become one of the most promising technologies with exciting potential and a wide range of use cases: cryptocurrencies, metaverses, NFTs, decentralized applications, etc. These and other solutions form the basis of the concept of Web 3.0, a new stage in the development of Internet technologies when users will create content, manage it, and exchange information using decentralized services. In 2023, many exciting and ambitious projects have appeared that will undoubtedly soon change our reality in the truest sense. Let’s take a closer look at the top 10 crypto trends of this year:

• NFT

NFT (Non-Fungible Tokens) are one of the most exciting crypto trends today. In simple words, NFT is a unique digital certificate stored on the blockchain that guarantees the item’s originality and gives exclusive rights. They are used to create collectible tokens, fan tokens, digital art, in-game items, document management, and tokenization of real assets.

• Metaverse

One more crypto trend today is metaverse. Essentially, the metaverse is a permanent virtual space in which people can interact with each other and with digital objects through their avatars, using virtual reality technologies, which means that human interaction will reach a new level as social networks, payment systems, and augmented reality applications become part of the same ecosystem. Experts are sure that purchasing digital real estate in virtual worlds will no longer cause bewilderment.

• DeFi

Decentralized finance (DeFi) is a set of specialized applications and financial services based on a blockchain. The main idea behind DeFi is to create an independent and transparent financial ecosystem unaffected by regulators and the human factor. Most of the existing DeFi is built on the Ethereum blockchain, and the number of new decentralized finance applications is steadily growing.

• GameFi

GameFi is another innovative crypto trend in the field of crypto-currency technologies. This term is formed from two words — game and finance. It refers to blockchain projects that allow you to monetize the gaming experience. The essence of the idea boils down to the following: the user can make a profit for what is developing within the particular game framework. This became possible since the game concept includes using blockchain technologies and crypto assets.

• Multichain Technology

Multichain is an asset chain interoperability framework designed to be the best router for Web3. Multichain can be defined as a protocol that allows users to exchange tokens between different chains in a completely decentralized way. This is possible due to the ability of Multichain to support any exchange if the intermediate chains support asymmetric encryption such as ECDSA.

• Integrating Blockchain With The Internet of Things

The essence of the Internet of Things is that various intelligent devices, such as sensors, wearable devices, and complex actuators, collect data and connect to the Internet and other devices through gateways and routers wirelessly (Bluetooth or WiFi), and exchange information and/or commands. In addition, devices with user interfaces (smartphones, computers, laptops, tablets, and various control panels) can also participate in the formation of IoT networks. 

• DAO (Decentralised Autonomous Organisation)

DAO is a decentralized autonomous organization managed by program code and does not depend on the human factor. In such systems, there is no hierarchy. All decisions on changes in the protocol are made by all participants on an equal basis with each other. Every digital community is centered around a common cause: it could be running a library, a shared workforce, a social club, an NFT collection, and so on.

• Web 3.0

One of the most booming crypto trends recently is Web 3.0. It is the concept of a new Internet generation based on the Semantic Web’s principles. The idea was that machines would analyze information on web pages and synthesize conclusions based on it. It is expected that the main advantage of Web 3.0 will be decentralized data storage and better protection of user confidential information.

• Crypto ETFs

A cryptocurrency ETF is an exchange-traded fund whose price is linked to one or more digital assets. Crypto-ETFs allow easier access to cryptocurrency investments for investors in the stock market, both institutional and retail. To date, ETFs on Bitcoin futures and stocks of cryptocurrency companies are traded on exchanges.

• Cross-Chain Bridges

One of the most promising cryptocurrency trends today is Cross-Chain Bridges. They are decentralized applications that allow you to transfer the same asset between different blockchains. Cross-chain bridges enable you to move tokens of various standards (ERC-20, BEP-20, and others) between blockchains. There are also cross-chain bridges that allow you to transfer funds between blockchains built on different technologies (Bitcoin, Ethereum, Litecoin, Dogecoin), as well as between second-level scaling solutions (Arbitrum, Optimism).

Conclusion

Today the question of whether cryptocurrencies, and Bitcoin, in particular, can be considered “full-fledged” money is almost non-existent, but opponents and supporters speak about them in entirely different tones: the former claim that they are nothing more than a money surrogate or even a financial pyramid; while the latter, on the contrary, consider them something better than traditional fiat money issued by the state. One thing is sure: there is a certain social consensus around crypto assets as to their use (as a means of exchange and investment), and as a result, they have taken their place in the financial system.