Another rollercoaster of a year in crypto has come and gone. To kick off 2024, we reached out to some founders and builders to get their takeaways from 2023 and perspectives on where crypto is headed in the new year.

Our guests for this episode are:

- Ash Egan, Founder of Archetype

- Asta Li, Co-founder of Privy

- Nick Johnson, Lead Developer of ENS

- Sheila Warren, CEO of Crypto Council for Innovation

There’s a lot to be excited about, but some common threads formed around web3 social, onchain gaming, continued progress on the UX front, and crypto finally reaching consumers in a meaningful way.

📬 To keep up with the latest from Archebyte and receive articles and research from the rest of the Archetype team, subscribe to our newsletter: http://eepurl.com/iCApL2

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⌛ TIMESTAMPS

0:00 Intro

1:15 Biggest crypto developments

12:03 Themes we’re excited about

14:25 Predictions for this year’s crypto apps

15:18 What keeps us excited

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👋 FOLLOW US

Ash: https://twitter.com/AshAEgan

Asta: https://twitter.com/asta_li

Nick: https://twitter.com/nicksdjohnson

Sheila: https://twitter.com/sheila_warren

Archetype: https://twitter.com/archetypevc

‍Katherine: https://twitter.com/katherineykwu

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🌐 LINKS

Privy: https://www.privy.io/

ENS: https://ens.domains/

CCI: https://cryptoforinnovation.org/

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📜 TRANSCRIPT

KATHERINE

Hello, everyone, and welcome back to Archebyte. I'm your host, Katherine Wu. 

While this is the midway point of season four, t is the end of 2023. Another exciting and productive rollercoaster of a year is in the books. As is becoming tradition, I wanted to close out the year by reaching out to founders and asking them a few questions to help add some perspective to this year and guide us into the next.

Our guests are Ash Egan—Founder of Archetype, Asta Li—co-founder of Privy, Nick Johnson—Lead Developer of ENS, and Sheila Warren—CEO of the Crypto Council for Innovation. I asked them what they thought the biggest stories from 2023 were, what developments have gone under the radar, and what they're looking forward to in 2024. Big thanks to all of them for joining me on this episode. And without further ado, here are their responses.

What was the biggest story or development in crypto in 2023? 

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ASH
I think there are a few themes we're quite excited about going into 2024. I'll start off with the ossification of layer 2s where you now have billions of assets deposited across layer 2s.

It was a very different scenario just 12 months ago and we're on the cusp of a whole new design paradigm for layer 2s with the launch of ZK rollups soon to be production grade. So the design space for developers and entrepreneurs building the space is 10x what it was going into the last bull market and we're quite excited to see what the applications, protocols, and middleware comes about with not just ZK rollups, but rollups in general.

I think to elaborate on that, we also saw the introduction of company or app-specific rollups, where Coinbase launched its own layer 2 called Base. Zora launched its own layer 2—the Zora Network. And I think this is a theme that we're going to see a bunch more going into the new year. A few other things to hit on, I think 2024, we're going to see the reemergence of crypto in the mainstream, largely driven by spot Bitcoin ETFs. If you look at the data, 52 million Americans hold crypto. This is an industry that folks here in the States and abroad want exposure to, and with the ETFs soon to be approved—is the hope—we're going to see the reemergence of crypto being a mainstream industry. 

Third, sort of a larger theme that I'm excited about—and look, there's a bunch of others—but the third one I'll hit on is the rise of web3 Social.

So from web2, we have the blueprint of how you achieve network effects. One of the big changes going into the new year that we saw is the rise of mobile for web3 social, largely driven by Privy. We've also seen organic communities get built on Farcaster. And then a more speculative type community, fostered via things like Friendtech.

I think this is just the beginning of what we're going to see for web3 social. I think 2024 is the era when we'll see more approaches, more activity on these web3 social networks. And so I think it should be a really exciting year for web3 social in general. 

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ASTA

I think it has definitely got to be account abstraction. I think account abstraction is actually picking up more steam than I previously thought. And the most common reason that people want to use account abstraction is gasless transactions. And I think the concept of gas abstraction is so powerful. Abstracting away infrastructure costs from end users is a massive win for the user experience of the space. It's like if you were browsing every website on the internet and paying pennies to AWS on the way—it would be pretty crazy.

And so I love the various ways that people are looking at gas abstraction right now, and I think that's most of the starting interest for construction these days. But it's just the beginning to lots of other things, whether it's account recoverability or more programmatic permissions. I think that's probably the biggest development—4337 moving into standard this year.

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NICK

The biggest things I can say for sure, things like a lot of strides made in optimistic rollups—like these networks actually launching mainnets and upgrading and building to the point where they're actually useful for real world applications. I think those things are going to have the longest real world impact. 

The biggest thing this year from ENS’s point of view is that we finally transferred control of the ENS root from the multisig to the DAO. So there is now no component of any sort that is controlled by anything other than the DAO itself. When we launched ENS, there were a few things that needed to be upgradable and adjustable, and so we had a set of seven key holders, of which I was one who could approve changes and upgrades to ENS. And when we launched ENS DAO, one of the first things we did was request that the key holders transfer many of those powers over to the newly formed DAO.

So for a start, that was control over ‘.eth —the ability to change the rules for registrations, renewals, change the price, etc., etc. and that was the largest component. But one power that was sort of held back initially to sort of wait and see how well the DAO did was control over the root. And control over the root lets you create or replace subdomains of the root which is basically top level domains.

And so as long as the multisig held that only they could do things like set up new DNS configurations or approve the specific DNS top level domain request to replace the name or configure it the way they want. They still couldn't affect ‘.eth’ because it was locked in a way that meant that even control of the root couldn't touch it. But all the other top level domains were still under the root multisig’s control. And the participants in the multisig rotated out over time. But it was pretty much always myself and six people from the community, none of whom were from Labs. They all served admirably. There was never any, you know, any indication that they were anything other than amazing. But ultimately, you know, the path of progressive decentralization means that we want to move everything to as decentralized a footing as possible. 

So with the last power transferred over, the DAO can now issue, replace, and update any top level domain. 

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SHEILA 

I think there were two major stories that have a profound impact going into 2024. 

One of these is the media juggernaut that was the implosion of Sam Bankman-Fried and FTX. And just watching that trial and the fact that Thanksgiving of last year, roughly November timeframe, we saw the beginnings of that whole catastrophe, debacle. And then by that time, a year later, we actually had a conviction, a criminal conviction from the court. And so the lesson there is really that there was no need for new law, new regulation, new anything. And the way the case was prosecuted was very much consistent with previous cases around fraud and malfeasance and misuse and, you know, etc., etc.. 

I think that that has put a pin in the chapter. And I do feel like Washington and other regulators and others have kind of moved on from the concept that this is all just, you know, fraud, scammy stuff. They've become more baked in their views in some ways, but in other ways. I think that was a giant story. And the story has kind of played itself out in the press with an outcome that I hope that we all support. 

The other story, of course, is the allegations around crypto and the use of crypto to fund terrorism. I think a lot of different actors took advantage of that moment to make claims, some of which are valid and some of which were wildly speculative about the role that crypto and digital assets played in the financing of that activity. Now, leaving aside the specifics, which are well covered in the press, there were articles that came out that had to be adjusted, there were some forensics that were done, etc. It did shine a spotlight on this idea, or this meme if you will, that crypto's primary use case is terrorist financing. Now, those of us in the space and even folks in the government know that that is absolutely not the case. Leaving aside the blockchain's transparency and the ability to track and trace funds in novel ways, the use by law enforcement in real time, both in the United States and abroad of that capability, all of that giving a lot of the lie to this proposition. The reality is that terrorists use any means necessary to obtain financing and digital assets, and crypto certainly are among those. 

And for a variety of reasons, this conversation came to a head in a way that going into 2024, we are seeing a lot of activity still around this question of what is the regulatory perimeter around things like the Bank Secrecy Act and to what extent should defi protocols, to what extent should other kinds of providers be obligated to follow rules that may or may not even be operationally possible for them to follow?

And I do think that conversation is going to continue into the new year. It's one that is also continuing in Europe. We are seeing AMLA, we're seeing different kinds of efforts and other things to address this topic. That all stems, of course, from a very good place, namely the idea that any penny that goes to terrorist financing is a penny too much. And if that penny is digital or that penny is from philanthropy, that penny is from bank accounts, that penny is from diverted sanctions, whatever it is, all the things that are used, all of that is bad. Now, that is something I do think we saw a large part of the industry rally behind this idea that we do want to be doing what we can to root out that use. But it also gets into fundamental questions that I think are absolutely foundational to American democracy. How do you think about privacy and such a regime? How do you think about civil rights? How do you think about preserving some of the options that we also know that crypto has been able to support, namely activism, humanitarian causes, all kinds of other things that have also, I think, been part of the conversation but are not a part of the conversation in the media around this particular moment in time.

So I think that these two big media—one I think is kind of completed and there's a cycle there that I do see is largely put to bed. The other I think we're going to see a long tail of this activity and of the conversation in Washington, Europe, and even in the UK and in other places as well around what is it that we should do, how do we how do we address these issues and how do we do them in a way that balances safety and security and soundness and consumer protection and the need to actually root out this evil with considerations like privacy, civil liberties, civil rights, and other things that are truly critical, I think, to our American democracy?

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KATHERINE

What are some big themes within crypto you're interested in right now and why? 

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ASH
I think a bunch. I think the intersection of crypto is going to be fascinating where you can truly build open source type systems and have the ability to monetize via crypto networks. And so we've been quite excited about that theme and what that design space is going to look like for the months and years to come.

Web3 gaming feels like it had, you know, sort of a moment in the sunlight back in the last bull market. It feels like ‘24, ‘25 is going to be a really exciting time for web3 gaming in general, specifically onchain gaming. So that's a theme that I'm quite excited to watch. And the zero knowledge, ZKPs, coming to production grade, and the types of applications that are going to be able to launch there with higher throughput and lower cost.

So yeah, quite excited about all three of those categories. 

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ASTA
I am really excited about consumer crypto. I'm excited about specifically products built for consumer users who may or may not know anything about crypto at all and are using products that couldn't have been built without blockchain, where touching decentralized tech meaningfully changes the nature and trajectory of those products.

An example is a restaurant loyalty app called Blackbird, founded by the former Resy founder. And all of these users who are checking into New York City restaurants with Blackbird these days don't necessarily know that this app is built with blockchain, but the fact that it is has long term implications for the relationship between users and the restaurants that they engage with and the notion of the assets that they're receiving along the way. 

This is like one example of this larger theme around consumer products that are built with crypto that couldn't have existed before, and that our onboarding people who are not technical experts. So I'm really excited about that.

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NICK

Not every project lives up to the hype of decentralization, but a lot of them do. And I think a credible goal of removing not only your own power over something, but also sort of reducing human interventions in the protocol as a whole is admirable and really does stand out as being unique to web3. 

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KATHERINE

What do you think will be the most used crypto application by this time next year? 

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ASH
It's really hard to predict these things, but just given all the momentum, excitement, and existing behavior around social networks, I think Farcaster, in terms of its ability to reach the mainstream consumer, I think we're going to see Farcaster get to an insane amount of DAUs and activity and things like that.

But the hope is, you know, we have a bunch of heavily used applications across the space, so time will tell whether it's Facraster or a net new kind of application or something in a very different category. 

ASTA
I have absolutely no idea. A year is a very, very long time. I'm really excited about both the developments of new product launches by existing large players in the space as well as the new products that are coming out.

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KATHERINE

Lastly, you've been building in crypto for a number of years. What continues to excite you or keep you in the space?

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ASH
My ethos is aligned towards building more fair and equitable software and financial systems. And so I think we've seen glimmers of that in years past and we've seen success stories, etc., etc. But I'm driven by that ethos and what gets me more excited than anything else is disrupting the status quo. And crypto is designed exactly for that. Rails that are aligned with users and actually building products that are for the benefit of users versus these conglomerates. 

So that ethos is something that despite bull and bear markets I think continues to drive entrepreneurs around the world and is something that I wake up every day very excited to be a part of.

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ASTA
I feel like this is the best time to be building crypto because right now people are building the foundation and infrastructure and also products that need to have really, really good product market fit in order to continue growing.

And that means appealing to—whether it's consumers or other mainstream audiences or building deeper value in terms of infrastructure—I think there's just no wiggle room for things that aren't incredibly valuable to be growing right now. And so I think that that's something that's really exciting about the current stage and setting up the foundation for much more widespread adoption, for the future, one that comes about from having the rails that are being built right now.

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NICK
What continues to excite me? It's all very easy to get excited about, you know, progress and stuff, but you really only have to look at what we have now that we didn't have a year or two or three years ago to see that we're making real progress in terms of turning these into actual practical systems. I guess the Ethereum that was when I joined is almost unrecognizable now. You know, all the updates have been incremental, but they've added up to just complete sea changes in how Ethereum works and what it can do. And so what continues to excite me is, you know, what's next? What's the next evolution?

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