What awaits us for cryptocurrencies in 2023?

2022 has not been a great year for cryptocurrencies. It started with a bang when cryptocurrency ads went mainstream in the Super Bowl.

And then the year ended with an implosion.

Crypto hacks piled on scandals and falling valuations, one company went down and then another, culminating in the spectacular collapse of cryptocurrency exchange FTX and its founder Sam Bankman-Fried, who is now under investigation for fraud.

So will this crypto winter start to thaw in 2023 or will it go into a deep freeze?

Marketplace’s Meghan McCarty Carino spoke to crypto journalist and host of the “Unchained” podcast, Laura Shin, about what she thinks is in store for the industry this year.

The following is an edited transcript of their conversation.

Laura Shin: There will probably be a big battle over how to adjust the space. There has already been something of a turf war between different agencies for a few years now. And I think we’ll probably see that warm up a little bit. I also think there’s a perception in the community that some types of legislation don’t fully understand how the technology works and so they will definitely fight tooth and nail on this. We actually saw this happen about a year and a half ago with the infrastructure bill in August 2021, where there was a provision on cryptocurrencies that they said didn’t make sense, fundamentally, to how the technology works. And the top lobbyist told me later, he said, the crypto community flooded Congress with 40,000 calls in just a few days. And other lobbyists called her to ask how they got the community involved so much, and she was like, “oh, I didn’t have to do much.” It’s just that they’re paying attention, they’re very passionate about it. Like I said, I’m expecting something pretty similar [to] what happened because this FTX fraud case, of course, was so large and so massive, for sure the regulators will take notice.

Meghan McCarty Cute: To what extent do you expect, you know, less money or interest in investing in cryptocurrencies, due to all these recent scandals or potentially a broader economic slowdown?

shin: We will definitely see a decrease in interest, I don’t know if it will be more decreased than we have already seen this year. If you look back at the history of cryptocurrencies, basically, some people are saying that cryptocurrency markets are “breathing” and what they mean by that is that there will be periods of quiet activity, at least in terms of the markets, and then suddenly you will see sort of bull market potentially often leading to a craze or a bubble. And in general, because of the larger macro environment, like with high interest rates, the cost of borrowing money is high, people aren’t willing to put their money into risky assets. And so with all of the failures this year and the general public misperception of cryptocurrencies at the moment, I would expect the cryptocurrency markets to not recover too much.

McCarty Cute: So it looks like for the general public, this type of bear market is going to pose a lot of risk and probably, you know, it’s not going to be too appealing. But what about when we talk about, you know, the true believers, the ones who are really committed to this idea of ​​decentralized finance?

shin: Yes, well, it’s exactly the true believers who see this as the perfect buying opportunity. Many times you will hear crypto people say things like, bear markets are actually more fun for them. And these are definitely those, you know, real builders, entrepreneurs who really believe in technology, [they’re] in a way for more than just a get-rich-quick scheme. And it’s during bubbles that they’re a little less happy, because that’s when they hear a lot of scammers enter the space, a lot of people who just want to get rich quick and who don’t understand technology [and] you don’t really care on a deep level. And so basically, a lot of my real or more real sources that, you know, help explain the technology to me, are actually happy enough right now that things are a lot quieter than they were a year ago.

McCarty Cute: Now, cryptocurrencies are not just about finance. There is also all this technological innovation behind it, the blockchain. Have there been any interesting developments, you know, behind these systems that you think could go forward into the next year?

shinWell, what I would say is that because of the FTX case, there’s a renewed interest in solutions that help people manage their private keys. When you own coins, you keep them in this “address”. Now that address has what’s known as a public address, which is a random string of numbers and letters that you can send to other people, and they can use it to send you money. So it’s kind of like your mailbox, right? So your private keys are what allows you to send money from that wallet or location. When you hold crypto on an exchange, you’re either giving your private keys basically to the exchange or they manage those private keys for you. They are managing your ability to send your coins. Now obviously in the case of FTX, allegedly there was massive fraud and they were using client funds in a way the clients had not authorized. This is why you will hear many people in crypto saying things like not your keys, not your coins.

Shin: And that means that if you don’t manage your private keys, then you could very well lose that money if you trust someone else to do it and they don’t do it right. The risk now of managing your own private keys has traditionally been that many of these people lose their private keys. You know, it’s a tricky situation trying to keep them in a secure way where other people can’t steal your private keys and thus your coins as well. But there are newer solutions that have gained a lot of interest, where you can manage your private keys, but without running the risk of losing them. And they use things like biometric solutions and stuff like that. You can manage them in a little more intuitive way. So that’s an area that I think people will focus on.

McCarty Cute: Where do you think we are in the kind of trajectory of the fall of this industry? Is it this kind of, you know, are we at the beginning or in the middle? We are at the end of things [hitting] bottom? You know, it’s kind of a purifying fire and things are going to start rebuilding from here? Where we are?

shin: Yeah, well, I don’t think the industry will completely fall. In fact, you know, when I started covering all this stuff in 2015, it was so much smaller than now it’s so big that I have, it’s basically impossible for me to keep up even as a reporter. But what I will say is, you know, Bitcoin was born out of the great financial crisis, the white paper for Bitcoin was released in the middle of that. And all of the big failures this year have been from these centralized entities. I have heard from many people that they will double decentralization, that they will no longer trust any intermediary. And they find it very ironic that the community basically, you know, was born to be an antidote to the great financial crisis. And then years later, [it] it essentially created its own because it went back to the centralized model. So I think the community at this point will definitely move away from centralized entities and lean more towards decentralization.

Laura Shin mentioned the importance of private and public keys for people who hold cryptocurrencies, but you can read this Coindesk article which explains the difference between the two.

In general, a public key is a kind of mailbox while a private key is like a password that unlocks your “crypto wallet”.

As Laura explained, forgetting how to “unlock” your private key or losing it altogether is really bad. It means you lose access to your cryptocurrency.

And yes, you can absolutely miss it.

James Howells, a computer engineer from the UK, accidentally threw away an old hard drive in 2013 that held the keys to a wallet with more than $100 million worth of bitcoins. He’s trying to get permission from his city in Wales to search the landfill.

Officials have so far denied his claims, so he came up with a proposal to use a combination of human harvesters, robot dogs, and a machine with a mechanical arm that uses trained artificial intelligence to search hard drives. (Robot dogs have to provide security, of course.)

Howells told Business Insider in July 2022 that he has a team of experts and the backing of venture capital. The scheme could take up to three years and cost up to $11 million.

This is all from the guy who has literally already thrown away more than $100 million.

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