Here are 16 crypto trends that the a16z team is excited about in 2023

Original title: A few of the things we 're excited about in crypto

Original source: a16z

The DeFi way

Top investment firm a16z has just released a comprehensive list of "big ideas" that tech builders are likely to tackle in the coming year. The list covers consumer technology, gaming, AI, crypto and more. Here are some things that have a16z's engineering, research, and investment team partners excited about crypto and the future of gaming.

The blockchain's moving moment

"How far or close are we to crypto's 'mobile moment'? There are a large group of blockchain users and others who access the Internet primarily through smartphones but rely on a centralised infrastructure - which is convenient, but also risky. Traditionally, users have solved this problem by running their own nodes - a time - and resource-intensive effort that requires at least one constantly online machine, hundreds of gigabytes of storage, and about a day of synchronization from scratch... not to mention special skills. Now, more and more people are concerned about decentralizing access to the blockchain for all users -- even those who can't run their own nodes. With the introduction of "light" clients - such as Helios (published by a16z crypto), Kevlar and Nimbus - users can now verify blockchain data directly from their devices. I'd like to see similar trust and decentralization improvements in other parts of the stack, such as event indexing and user data storage. All in all, all of these things help make the mobile front end truly decentralized."-- Noah Citron, Engineering Partner at a16z crypto

Zero knowledge, multi-party computing, and post-quantum Crypto

"The zero-knowledge system is a powerful foundation technology, and the key to enabling blockchain scalability, privacy-protecting applications, etc. But there are so many trade-offs between the efficiency of the proof, the simplicity of the proof, and the need for a trusted setup. It would be great to see more zk-proofs structures to fill the gaps in the multi-dimensional space of these trade-offs. For me, the most interesting thing is to see if there is a need for a trusted setting for constant-size proofs (as well as constant-time proofs), which would further demonstrate the need for a more transparent trusted setting ritual.& nbsp; we also need better threshold ECDSA (Elliptic curve Digital Signature Algorithm) signature structure. Reaching a threshold eliminates the need to trust a single signer, which is why threshold signatures are important for multi-party distributed computation of private data and have multiple applications in web3. The most interesting threshold ECDSA signatures are those that minimize the total number of rounds -- including pre-signing rounds where the message is unknown. As the new post-quantum signatures approach the end of standardization, it would be good to explore which of these can be polymerization-friendly or threshing-friendly, according to NIST."  -- Valeria Nikolaenko, research partner at a16z crypto

Zero knowledge developer induction training

"Zero knowledge systems have been around for a long time, and in recent years they've moved from theory to practice, and in 2022 it feels like we've turned a corner in terms of developer orientation at ZK. Specifically, we've seen a proliferation of educational materials and the maturation of high-level programming languages such as Noir and Leo, making it easier than ever for engineers to start writing ZK applications. Given how important zero knowledge is for so many use cases, I expect that these developments and continued theoretical advances will lead to an influx of application developers. Putting things in the hands of developers often leads to unexpected new use cases, and I'm excited to see what happens next."  -- Michael Zhu, Engineering Partner, a16z crypto

VDF Hardware

"Verifiable delay functions (VDF) are an exciting cryptography tool with many applications, from verifiable lotteries to leadership elections to preventing front-running transactions. But the biggest problem has always been the hardware implementation needed to be convinced that an attacker cannot calculate VDF faster. I am excited about the arrival of the first generation of VDF hardware, which paves the way for actual deployment."-- Joseph Bonneau, Research partner at a16z crypto

Complete on-chain games and autonomous worlds

"What if you could create a game world that couldn't be deleted or censored, didn't require servers, and could live far beyond the lifetime of any of us as individuals (or even organizations)? For the first time ever, we could do that. We are at the beginning of native crypto, full on-chain gaming, or -- as others prefer to call it, superset -- "autonomous worlds" built on blockchain technology. Whatever you want to call it, it provides new support for the nascent movement to decentralize games to the greatest extent possible, making it possible to build these games online. Specifically, the ability to place the entire state and logic of a game on a publicly verifiable, censor-resistant and decentralized blockchain... and advances in on-chain procedural generation, which not only overcomes limitations such as storage, but is essentially "the trick to condensing a complex world into an executable file." What new games and gameplay will be possible that weren't possible before, and will they still be... games?"  -- Carra Wu, Investment partner, a16z crypto

NTT (Non-transferable token)

"I prefer the term" non-transferable tokens "to" soul bound "tokens, a term Vitalik Buterin borrowed from the game, which are for situations where transferring NFT doesn't make sense. I'm excited to see a variety of web3 applications that will not only be built on top of this primitive, but will also use decentralized identifiers and verifiable credentials. While discussions of these primitives often revolve around decentralized identities, there are many other applications that need to be explored: for example, tickets, numbers <> entities, reputations... and more."  -- Michael Blau, Investment Partner, a16z crypto

Decentralized energy

"How can we apply the spirit of decentralisation to energy? For example, the grid is old, centralised and faces other issues such as high up-front capex and misaligned incentives. By addressing issues such as high capex and different incentives addressed through tokens, there are great opportunities to build microgrids and storage and transmission networks. The market for renewable energy certificates (RECs) and on-chain carbon credits is also booming. I am excited to see builders continue to expand the possibilities of such decentralized energy categories coordinated by blockchain."  -- Guy Wuollet, Investment Partner, a16z crypto

Web3 games are here to stay and will thrive

"We're on the cusp of unlocking a new generation of web3 native games that are going to be fun, have broad appeal and are uniquely enabled by blockchain technology. It often takes a few tries for developers to learn to build on a new platform. Take mobile games: Pokmon Go was one of the first truly mobile native games, made possible by smartphone-specific features like GPS and an integrated camera, but its prototype, Ingress, wasn't released until five years after the iPhone launched in 2007. We can't rush the product cycle, and I believe we will see the first web3 native games in the next few years, perhaps sooner than we think. In the past, the next big game was often generated by player "mods" such as DOTA (League of Legends) or DayZ (PUBG). Game mods are enhanced by web3 composability, giving creators the freedom to exploit each other's assets through code that automatically gives them ownership and financial rewards."-- Jonathan Lai, General Partner, a16z Game Team

Generative AI for all types of game assets

"The biggest revolution to hit the games industry in 2023 will be the creation of productively generative AI models for all asset types needed to make modern games.

Games are by far the most complex form of entertainment, involving dozens of different types of creative assets, combined in a complex production pipeline. Game asset types include 2D art, 3D models, textures, sound, music, characters, animation, level design, animation, and more. Each asset type has its own highly specialized production process, with dedicated tools and artists.

Today, generative AI is getting the most attention for creating 2D graphics. But a revolution is happening: Scientists are working on AI models for all asset types, including 3D models, music, sound effects and more. Much of the work is still in the research phase, but we see startups forming rapidly around each model type with the goal of productizing the work.   By the end of 2023, it will be possible to use text prompts to generate almost any asset needed to make a game. "The effect of footsteps on gravel by a heavy woman in high heels", "3D model of a future main battle tank with a laser gun"... This will unleash creativity we've never seen before."-- James Gwertzman, General Partner, a16z Game Team

Game creation platform for mobile devices

"What will the next big UGC game creation platform look like? What will the next Roblox be? I'm sure we'll see more mobile games. Let's say I'm in love with a racing game, but I want to replace the car with Santa and his sleigh, add snowdrifts and Christmas trees along the way, and then reconfigure the map. I click on "remix" and the level and terrain editing tools appear. I used generative AI to generate my Santa and then moved the game from voxel style to clay style. Click to publish and share with my friends.&nbSP; 72% of Roblox's sessions take place on mobile devices, but the creation tools are locked to the desktop client on PC, which cuts the flywheel between player and creator. Roblox Studio, a PC editor app, is still too technical for most users, which explains why less than 5% of players are creators. With AI-assisted and cloud-based tools, there will be a new UGC mobile-first platform that will have a more TikTok-like discovery-mode user experience than Roblox or Netflix, with users instantly delighted when they open an app."  -- Troy Kirwin, Partner, a16z Game Team

Games are Theater

"Red vs. Blue" was one of the first hits on YouTube. The 2004 web series gave birth to the "machinima" style, which used manipulated game character models and modified camera angles to tell stories in video games.

Minecraft, Fortnite, Roblox, and Grand Theft Auto have all invested in tools and models for creators to "hack" in-game assets for dramatic purposes. Games are quickly becoming a canvas and a paintbrush for young creatives.   More than a decade after its release, Minecraft remains one of the most enduring generational games of its era, being the first identifiable IP to reach a trillion views on YouTube. This is mainly due to the unlimited creativity of IP, coupled with newer worlds, physics and assets.

In the industry's transition to F2P and Live Ops, developers are less focused on custom rooms, bystander tools, and the idea of games as theater. As the metaverse concept evolves, I expect developers in 2023 to return to it, focusing on creative tools, features, and infrastructure as part of a game's core loop."  Lester Chen, Game Creator Partner, a16z Game Team

Games replace social networks

"In 2023, I see games replacing social networks in new and meaningful ways.

Games have always been powerful social networks. Facebook and World of Warcraft were both launched in 2004, and by the end of 2005, Facebook had about 6 million users and World of Warcraft had about 5 million users. In each case, long-term retention is driven by reciprocal and competitive behavior. The most durable games are social network games because they turn the player into a more sustainable source of content than creating more levels, monsters, and questlines.   Today, games and social networks are even harder to tell apart. Fortnite is a massively synchronous hit-and-run game with an independent winner, but it has become part of the zeitgeist, expressing itself not through balanced gunplay or map design, but through shareable/streaming avatars/emojis and team-based collaboration. This year, Ready Player Me signed thousands of partnership deals with game developers, giving millions of players access to ultra-customized avatars. 2022 also saw the rise of Diablo: Immortal, the first massively multiplayer online game (MMO) for millions of mobile-first gamers. By 2023, I expect gamers will be spending more time hanging out and connecting with friends in games and virtual worlds."-- Joshua Lu, Partner, a16z Game Team

Games are never ending Turing tests

From ELIZA to ChatGPT, computers have successfully disguised themselves as humans. This phenomenon has also appeared in games through the massive popularity of "bots." Bots have historically been scripted programs, but are increasingly becoming true neural network-based artificial intelligence. As games get bigger, more complex, and more realistic with AI, these bots are increasingly able to convince humans. Think of the rumored concurrency bots in Words with Friends, the bots in Call of Duty Mobile, or the ubiquitous cheaters/bots in chess. The next generation of robots will take "humanlike" to a whole new level with startups like inworlddai, ConvAI or Charisma. Artificial intelligence is creating in-game agents that can understand game states and have goals, emotions, dialogue, animation and more. Imagine walking in the wilderness and not knowing if your tribal mage is a robot, building a town with strangers but not knowing the humanity of the local farmers, playing diplomacy and not knowing if Turkey is an AI whose sole purpose is to rule Europe.

In the coming year, you may not know who's who anymore, but you won't mind. Playing alone is great, but playing together is even better. Or so you think."  -- Jack Soslow, partner, a16z Game Team

AI Native Games

"Game development is one of the first industries to undergo a major disruption due to generative AI. New tools have allowed artists and writers to shift the initial (mechanical) creative spark to generative models and refocus their efforts on editing and optimization. But AI innovations that affect players will be more exciting than those that benefit developers. AI continues to redefine what is possible in game design and play. I'll always remember the wild excitement of the original Unreal Tournament, the unique thrill of exploring Minecraft's endless frontiers -- the awe they evoked and the inspiration they gave to the next generation of games. We'll see emerging, procedurally generated worlds, each with its own rich history, inhabitants and mysteries, interactive novels, stories that evolve through the player's choices and are told through generated graphics, video and audio. The possibilities are endless and what is only possible today will soon be everywhere."  -- Justin Paine, Business Development Partner, a16z Game Team

Web3 games redefine fun

"Given the long development cycle of games -- anywhere from two to seven years -- I expect the current bear market to separate developers from tourists. The powerful web3 studios have realized that financial returns, great art, and token-economics alone are not enough to drive a sustainable game over time, and these games need to be fun.

Over the next year, developers will find out what makes their games intrinsically fun -- and why web3 is a necessary component. Speculation and trading are a form of entertainment (see Runescape or World of Warcraft or even Wall Street Bets), but the range of fun in games is vast. Does your game focus on intense real-time team combat and strategic choices, like League of Legends? Or an extended progression system like Diablo? A simple, repetitive but enjoyable puzzle game like Candy Crush, or a comfortable decorative experience like Animal Crossing? Web3 game studios may go back to their first principles about who games serve, how they serve those players, and what role crypto plays in their games. And then they test, test, test to see if they're having fun."  -- Robin Guo, Partner of a16z Game Team

The metaverse leads the fashion trend

"Players know that character skins are an important form of self-expression in games like League of Legends and Fortnite because they are part of the player's identity, which is why character skins are big business, even though they are not good for gameplay. Digital natives, Gen Z and Alpha demand that brands be able to express themselves in a metacomverse. Two in five of this group already believe that expressing themselves through fashion is more important in the digital world than in real life, and three in four say they spend money on digital fashion. Brands like Gucci that lean in will be rewarded with the hearts and wallets (both physical and digital) of consumers. As physical brands go digital, more digital brands will go physical, leading to greater competition and wider adoption. Those that don't buckle down will be left behind.

Consumers will demand interoperability across experiences in the Metaverse, so over time brands will favor platforms that allow them to wear Nike shoes across different games and virtual worlds. Gen Z and Alpha move seamlessly between the physical and digital worlds, and fashion brands that embrace that will win."  -- Doug McCracken, Marketing Partner, a16z Game Team

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