2022 in Review: Our top learnings in Web3, market volatility, and industry insights

Welcome Fintech Futurists —

Today we are looking at our 2022 coverage in the Long Takes, and pulling out the core themes and lessons that have shone through.

It wasn’t pretty, but it was needed, and here we still are. If you enjoy these insights, don’t forget to share with others below. 👇👇👇

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Measuring our Attention

You can definitely say that 2022 was all doom and gloom, but it still matters where you look to draw the conclusion. Where you focus your attention will shape the problems that you notice, and the solutions you will find fruitful.

So here are the topics we found most relevant over the year —

It shouldn’t surprise you, dear reader, that a Web3 lens was applied to much of our analysis. Computational blockchains and their potential are the largest innovation and potential platform shift that has hit financial services and economic society at large. We spent time on attaching those ideas to other emerging mega-trends — the development of the Metaverse, however piecemeal, and the explosion in generative AI and creativity.

We also deconstructed the components of Web3 infrastructure to the things that mattered, like the transformation of protocols, application of tokenomics and decentralized finance, growth in NFTs and identity tooling, and associated regulation.

Another group of topics is simply titled “Learning Closely”. We bundled a few types of analysis here, from simply documenting how and why things fell apart, to applying fundamental analysis about particular companies and their financial performance in markets during stressful periods, to going broader and looking at macroeconomics, politics, and large scale strategy.

Whereas our Web3 work is about futurism, looking forward to discovering where the best case *could* go, there is also important space for marking things to market, and understanding what current case *already is*. Getting things wrong, and then understanding why and how to get them right, is part of this skillset. In 2023, everyone had to learn how to become a macro analyst to figure out why the sky fell down. But that doesn’t mean you forever have to lose your optimism and imagination.

In the last category, which we call “Industry Insight”, we dug through the strategic positioning and available vectors of competition for particular players. Why does Stripe expand to all of embedded finance? What should Goldman Sachs do to grow Marcus? How can Twitter become a fintech super-app? What powers does Apple have over market venues and third party applications? While the first two categories are about developing and sharpening our “blueprints”, our mental models, this category is about applying both the current assessment and the forward thinking strategic view to real case studies.

Web3 Top 5 Themes

1. Protocols:

   1. Implications of the Ethereum Merge for Web3, with Justin Drake of The Ethereum Foundation and

   2. Deriving Polygon Supernets and Avalanche Subnets value accrual through the Laws of Nature

2. Tokens & Governance:

   1. Deriving the benefits of tokenomics for Centralized Exchanges and

   2. The novel political challenges in Solend and MakerDAO from market pressure

3. DeFi, Dapps, and DAOs:

   1. Uploading a Digital Twin of the financial system into DeFi, with MakerDAO and HVBC and

   2. Evolution of NFT markets with automated market making (Sudoswap) and collateralized lending (BendDAO)

   3. The opportunities in the Web3/DAO CFO tech stack, compared to its Fintech counterparts

4. Realizing the Metaverse:

   1. Sizing up Roblox, Minecraft, and Fortnite as places for financial economies and

   2. The $5 trillion of GDP that McKinsey, Goldman, and Galaxy say will be built in the Metaverse

5. Generative AI:

   1. Emergence of Generative Artificial Intelligence sector, and powering DAOs with shallow labor and

   2. Generative AI creates the surreal search engine of our dreams

Source: Midjourney — economic transactions in the Web3 metaverse, rendered in Cinema 4D, high detail, big network in the background with digital currency, extra realistic --v 4

In addition to drawing your attention to the Long Takes above, we remind you about the weekly Web3 newsletter we publish as well. The topics that really emerge in that corpus are around the promises that blockchain has made coming to fruition on large public network. The biggest development, which is the Ethereum merge, delivered to us a network that can run decentralized software without high electricity consumption. Rollups, like Optimism and Arbtirum, are delivering 800,000 transactions a day at low cost, anchored to mainnet. Chains like Polygon are seeing partnerships with companies like Starbucks to launch loyalty NFT programs. And DAOs are emerging as the small business unit of a Web3 economy, beginning to mirror the development of eCommerce but for digital goods, creating a Web3 GDP.

This is the way. Looking forward to 2023, we would hope to see a lot more commerce coming to market. We want to see NFTs from large brands that are interactive and useful, not simply images highlighting tribal affiliation. We want to see high quality DeFi banking services for Web3 customers, perhaps leveraging the interest rates available in traditional markets. We expect many more on- and off-ramps, like PayPal and Stripe, coming to build embedded finance integrations. And we also expect to see progress away from centralized brokerages and towards onchain identity and increased self-custody.

Learning More Top 5 Themes

1. Market collapse:

   1. Markets wiping out value is a gift for curious learners; on Olympus DAO, SPACs, Diem, Botto and

   2. The right lessons from Terra's $40B collapse and

   3. Learning to notice the shape of Liquidity, and its impact (e.g., stETH, Celsius, 3AC)

2. FTX collapse:

   1. Understanding the fall of FTX and attempted acquisition by Binance and

   2. The mistakes we made analyzing FTX, and how to correct them and

   3. How to blow up a $32B crypto exchange, with Binance Labs MD of Token Engineering, David Shuttleworth

3. Fintech pressures:

   1. Were we wrong about neobanks and B2C fintech? With 2x digital bank founder Will Beeson and

   2. The emerging problems in banking-as-a-service

4. Responses to failure:

   1. Rebuilding ownership and identity, avoiding financial abstraction, protects us from fintech and big tech collapse and

   2. Lessons from the Application / Infrastructure cycle for future bets

5. The way out:

   1. Getting out of this macro hellscape and

   2. What can the Web3 economy learn from eCommerce and paytech? and

   3. Lex Sokolin's 2022 investing and building thesis -- the evolutionary relationship between Tech, Finance, and Web3

Source: Midjourney — financial economy collapse with fires and explosions in the background, money and stocks flying everywhere in the air, cinematic still, dramatic, highly detailed --v 4

It has been a terrible, no good year if all you care about investment returns. But if you also find value in learning how things work, and how they can go wrong, this year has delivered a PhD in financial contagion to astute watchers.