2023 was a year marked by both resilience and innovation unfolding. We witnessed Bitcoin’s commanding resurgence, Ethereum’s steady gains, and the surprising rise of Solana, painting a vivid picture of a market in recovery. This narrative weaved through a tapestry where the market cap of public chain cryptocurrencies reached $1.3 trillion, revealing the intricate interplay of leading digital assets and the burgeoning promise of Layer 2 solutions.
Read on for an exclusive analysis of the breakthroughs, surprises, and hard lessons shaping crypto’s continuing march to maturity.
Public Chain Overview
Key Metrics Overview
In 2023, the crypto market shows early signs of recovery following the crypto winter — led by Bitcoin with over 150% price and market cap increase. Ethereum trails at 80% gains. Solana also stands out with its remarkable resurgence after 2022’s decline.
Overall, public chain cryptocurrencies reached a $1.3 trillion market cap by January 2023 per Footprint Analytics data — with Bitcoin commanding a 62.2% share, Ethereum 20.6%, BNB Chain 3.6%, and Solana 3.3%. Solana, Avalanche, ICP, Bitcoin, and Cardano topped 100% market cap growth since 2022.
Source: Chain Overview
On the usage front, Ethereum maintained its pole position with $55.0 billion total value locked (TVL), capturing a 72.4% market share of the $76.0 billion TVL landscape. Tron claimed the number two spot with $7.6 billion TVL, followed by BNB Chain and Solana with $3.4 billion and $2.1 billion respectively. Solana, Bitcoin, Arbitrum, and Tron achieved over 80% TVL increase from 2022, contrasting decreases exceeding 20% on Polygon and BNB Chain.
Source: Chain Overview
Layer 2 Overview
In 2023, Arbitrum led the Ethereum Layer 2 space, capturing 50.8% of the market with an $8.5 billion TVL. Optimism followed, securing second place with a 32.1% share and $5.4 billion TVL. Notably, newcomer Blast rapidly achieved a $1.1 billion TVL in just 40 days, earning a 6.7% market share. Other notable names, Base and zkSync Era, trail with market shares of 3.7% and 3.4% respectively. This diverse ecosystem, where smaller players nip at the heels of giants, mirrors a vibrant coral reef — diverse, competitive, and continuously evolving. (Here, “TVL” signifies the aggregated value of assets locked in escrow contracts across these Layer 2 solutions.)
User-centric strategies began to overshadow purely tech-driven approaches in the Layer 2 space. Established leaders like zkSync Era, Starknet, and Polygon zkEVM, once at the forefront, found themselves trailing in both TVL and developmental pace in 2023.
Source: Layer 2 Overview
Fundraising
Crypto’s infamously volatile cycles persist — 2023’s tempered $539 million fundraising across 70 rounds marks an 85.5% annual decline from 2022’s feverish $3.7 billion peak. However, conviction persists in Layer 2 scaling infrastructure amid shaken confidence. Layer 2 captured 41.4% of 2023 rounds, up from 34.5% in 2022. And average Layer 2 raises led Layer 1s by 15% in 2023. The data reveals a flight to functionality despite crypto’s winter — investors increasingly value specialized builders rather than chasing fleeting hype. Methodical infrastructure takes priority over fickle applications.
Top 10 Funding Rounds by Amount Raised (Source: crypto-fundraising.info)
Web3 Gaming & NFT
Web3 Gaming & Public Chain
In 2023, the gaming market expanded with the total number of games rising to 2,878 from 2,110. Yet, only a small fraction (6.4%) of these games surpassed the threshold of 1,000 active users, a decrease from 2022’s 10%. Dominant blockchains like Binance, Polygon, and Ethereum continued to host over 80% of these active games, significantly influencing the market.
Source: Yearly Active Games — Blockchain Game Annual Report
The year also marked notable advancements in Layer 2 blockchains. In July, SUI made strides in throughput with SUI 8192, hitting 20 million daily transactions. In August, Base made waves with friend.tech, integrating social and entertainment elements. Ronin Network also gained momentum in November, propelled by its association with Axie Infinity and the launch of Pixels.
NFT & Public Chain
The NFT market in 2023 recorded a $13.1 billion trading volume, marking a decline from 2022’s highs. While Ethereum retained its lead with a 97.8% market share, a slight decrease indicated emerging diversification. Polygon’s user base soared by 231.0% to 1.3 million, overshadowing Ethereum’s 45.2% drop to 1.2 million users, and BNB Chain’s user count surged 280.7% to 353.1K. The year also saw significant shifts due to Bitcoin’s ordinals trading and a rise in Solana’s NFT volume.
Source: Yearly Unique User by Chain — NFT Research
Highlights from 2023
2023 brings both fallout and fresh opportunities as the crypto industry enters a period of maturity. Speculation shakes out across various fronts while real-world usage accelerates. Several key trends lead the year as the market cycles into skeptic-led pragmatism.
Regulatory Guardrails Emerge After Industry Shakeout
The FTX collapse and discovery of an $8 billion hole in balance sheets send ripples demanding greater coordination between global policymakers early in 2023 to avoid regulatory gaps. This follows the $4.3 billion Binance paid to settle a probe by the US regulators regarding anti-money laundering procedures. The consecutive shocks trigger responses balancing greater protections without stifling progress after crypto’s multi-year boom turns to bust. Barriers fall through regulatory clarity and improvements bringing accessible experiences to mainstream users.
Layer 2 Solutions Move to the Forefront
Layer 2s rose in 2023, while chains such as Base, Linea, and Blast became quite the hype. Rollups gained traction by reducing costs for users, with zero-knowledge technology attracting particular interest over optimistic rollups. However, despite the prominence of Layer 2, challenges remain. Scalability remains more slogan than reality, with most chains failing to meet throughput-matching ambitions. And seamless interoperability between Layer 2s remains an ideal rather than the norm. In addition, breakout dApps or vibrant, differentiated ecosystems have yet to emerge around many of the hyped Layer 2 infrastructure plays.
Mass Adoption Accelerates Across Fronts
Cryptocurrencies and blockchain technology see increased real-world traction spanning finance, media, gaming, and beyond. In finance, Visa expands support for stablecoins by incorporating Solana blockchain capacity to settle transactions in September 2023. This follows previous integrations with USDC and allows improved access to crypto capabilities. Gaming also brings new users to Web3 experiences like virtual worlds and true ownership of assets as some blockchains build platforms catering to players. However, poor market conditions slow the pace of adoption as consumers remain skeptical amid crashed token prices despite technology promise.
Bitcoin Finds Renewed Purpose Amid Market Chaos
In 2023, Bitcoin’s narrative evolved beyond its traditional role as a digital gold equivalent. The advent of “ordinals” — unique digital collectibles on Bitcoin’s blockchain — reshapes discussions around its utility. This innovation marks Bitcoin as a foundational layer for emerging applications, boosting its relevance in volatile markets. December’s record transaction volumes, driven largely by ordinals trading, signal an expansion of Bitcoin’s market scope. This trend positions Bitcoin not just as a store of value, but as a versatile asset with a widening field of applications.
Looking to 2024
In 2024, Bitcoin is set to be the central focus in crypto narratives, especially with the upcoming halving event. Additionally, other key themes like Ethereum’s Dencun upgrade, the push for decentralization, and advancements in Artificial Intelligence(AI) will also capture significant attention.
Layer 2s Continues Prosper
In 2024, Ethereum and its Layer 2 tokens are expected to surge following the implementation of EIP-4844, driven by reduced fees and a renewed focus on scalability. Key topics include the decentralization of sequencers, debates on modular versus monolithic development, and interoperability. This growth isn’t just confined to Ethereum; Layer 2 solutions on Bitcoin and BNB Chain are also anticipated to experience a rally, reflecting the market’s interest in integrated scaling strategies.
Gaming-focus Blockchains Evolve
In 2024, gaming NFTs are on track to outshine art and collectible NFTs in popularity. The crypto gaming sector is expected to mature, intermittently capturing mainstream interest but primarily solidifying its position among dedicated gamers. Web3 gaming, with the backing of advancements in generative AI, is set for positive strides. This growth is further bolstered by the continual enhancements of gaming-focused blockchain platforms like ImmutableX, Ronin Network, and Oasys, which are dedicated to refining the gaming experience on the blockchain.
The Intersection of AI and Blockchain
The intersection of AI and blockchain represents an up-and-coming niche brimming with disruptive potential in 2024. Crypto’s exceptional capacity to fund speculative AI experimentation will likely give rise to an influx of innovative on-chain AI services and marketplaces. Although core infrastructure around computing capacity and reliable data requires maturation before large-scale adoption is viable, increased incentives to transact AI resources via crypto tokens forecast strong growth. Any product-market fit and regulatory issues plaguing the sector seem transitory rather than intrinsically terminal. With practical foundations built out this year via considerable speculative hype and funding, the stage is set for more sophisticated blockchain AI applications to progressively flourish.
Conclusion
This year, while price movements might be subdued, significant strides in real-world applications were evident. Enhanced infrastructure paves the way for broader adoption, and novel use cases in gaming, NFT, AI, and other sectors signal an impending wave of industry disruption. This evolution sets the stage for a transformative year in both technological advancement and market dynamics across various blockchain platforms.
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About Footprint Analytics
Footprint Analytics is a blockchain data solutions provider. It leverages cutting-edge AI technology to help analysts, builders, and investors turn blockchain data and combine Web2 data into insights with accessible visualization tools and a powerful multi-chain API across 30+ chains for NFTs, GameFi, and DeFi.
About ChainPlay
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