Top 5 Tech Trends to Watch in 2023

• Ethereum’s major upgrade (Shanghai, Cancun)
• Staking-related techs, products and services
• Modular blockchains’ improvement and App-specific Rollup developments like L3s
• Other non-scaling applications of ZK, like ZK Bridges
• Iterations of AA + MPC and Lightning Networks other techs for end-user

2023 will witness many significant infrastructure upgrades

• Shanghai Upgrade: the opening-up of the ETH withdrawal is expected to boost staking amount as potential staking security concerns will be eliminated. But the competition across staking protocols will also be more intensified
• Cancun Upgrade: although details of the upgrade may still change, it is set to be the most significant technical upgrade of 202

i. Proto-Danksharding: it is designed to reduce transaction fees on the Ethereum mainnet. If successful, the performance of Ethereum will be improved dozens of times, thus paving the way for L2’s future development.

ii. EVM Object Format (EOF): updates to the Ethereum Virtual Machine (EVM) will be the first modification on EVM over the past two years. The change will improve the performance of smart contract operation and reduce transaction fees.

Ethereum’s preparations in 2023 for future technology evolution

• KZG Ceremony: It has been successfully launched in January 2023, providing a cryptographic foundation for Proto-danksharding.
• Moving forward, Danksharding standards will be established to address existing technical obstacles.
• Although Danksharding is unlikely to happen in 2023, the upgrade of the standards will mark the Ethereum’s successful progression in its scaling endeavors.

Key agendas in 2023 — MEV, regulation and anti-censorship, etc.

• MEV, Flashbots SUAVE:

i. To build a chain: to achieve the decentralization of the builder

ii. To make a platform of unified MEV for cross chain or heterogeneous chain networks: to extend to a new MEV market

iii. To increase order flow: strengthen the existing share of the MEV market

• Regulation and anti-censorship:

i. The crList in the roadmap will prevent malicious activities of relayers

ii. PBS at the protocol layer: it will achieve the separation of proposal, construction and validation. Staking has encountered a problem similar to the luck value of PoW, which needs to be solved using methods resembling that for protocol layer’s PBS. Otherwise, the decentralization will be endangered

iii. Decentralized block builder network

After Ethereum Merge and Shanghai Upgrade, staking will see more development in the year 2023

• Liquid Staking: How to improve the liquidity of staked tokens? A relatively effective practice is stETH. With Shanghai Upgrade, different staking solutions will emerge, and the liquidity solution will be the key to the success of a staking solution.
• Decentralized staking: there are some decentralized staking products and solutions, but some problems also exist, for example, RocketPool has poor liquidity and need to be solved.
• Restaking: The idea of restaking proposed by EigenLayer has been well discussed by the community as an innovation, but the solution may also endanger the security of the Ethereum protocol layer.
• DVT (Distributed Validator Technology): SSV and Obol are exploring the technical solution of decentralized validators, an important step in the decentralization of staking.
• Stabilizing staking yields: at present, the yield gap between different staking nodes is too apparent, and a plan is needed to smooth the rewards.

Multiple Ethereum clients are worthy of attention

• Paradigm’s Reth: modular client design allows developers to easily combine the components for better development results.
• a16z’s Helios: it adopts an entirely different approach from most clients. Helios couples the execution layer and the consensus layer client, and we are expecting its effects.

• Explorer: to tackle the centralization of etherscan, the community has begun to develop a self-hosted blockchain explorer based on new clients, and their performance need to be attention.

Other emerging tech topics on Ethereum

• Beyond the usual topics in the roadmap, new topics have been discussed in the Ethereum community since early 2023, mainly including the Stealth Address (EIP-5564), Lattice-based Cryptography, etc.
• Still, the implementation of these technologies in Ethereum infrastructure and applications is yet to be observed in 2023.

Modular blockchain remains one of the hottest topics in 2023

• Modular blockchain technology will see progress in multiple levels and directions.
• New competitors on the data availability layer: in addition to Celestia, more competitors such as Polygon Avail will join the DA battle. Other exciting explorations include:

i. Arbitrum AnyTrust, Intmax, etc. that adopt the advantages of Plasma and Rollup

ii. EigenDA based on restaking technology, etc.

• More flexible and efficient execution layer:

i. Fuel adopts UTXO and highly parallel virtual machines to improve the execution efficiency of smart contracts

ii. Additionally, other more flexible execution layers such as Rooch will be available

Layer2 optimization solutions

• AltLayer adopts a modular Rollup approach, similar to that of the Cosmos application-specific blockchains.
• OP Stack will support developers to quickly build and launch Layer2
• Stackr and dymension provide “Build Your Own Rollup” to quickly build application-specific Rollup

Layer2 optimization solution — sequencer centralization

• To solve the problem of sequencer centralization

i. As Layer 2 grows, the problems of L2 MEV and censorship will become increasingly apparent, and how to decentralize it will soon become the focus of the market

ii. Shared sequencer, matched with Rollup services, provides sequence services for Layer2 and Layer3 projects through shared sequencer, including Espresso, OP Stack, etc.

More Layer2, “subnet” and Layer3

• It will become more common to build an ecosystem on top of L2 “subnets”. The competition of application chains in the past may continue in the competition of “subnets”.
• The noteworthy ones: Avalanche (Subnet), Binance Chain (Beacon Chain, zkBNB, Sidechains, Greenfield), and Shiba (Shibarium) that has transformed from meme to a L2 ecosystem
• L3 supports larger blockchain scalability and adoption, with a similar goal to Rollup modularization but a completely different solution. Based on L2, it provides development tools and an execution environment for further vertical scalability such as Slush from Starknet and Opportunity from zkSync.

The zkEVM mainnet launch but the tech needs more time to mature

• zkEVM is undoubtedly one of the most noteworthy scaling developments to watch in 2023. There will be several testnets and even mainnets launched in 2023, including ConsenSys zkEVM, Polygon Hermez, and Scroll.
• However, it will take time for the technology to mature (to achieve EVMs compatibility, etc.)
• Additionally, relatively mature and production-ready hardware products (ASICs) supporting zkEVM proofs are expected to appear by the end of 2023 soonest.

But ZK applications are worth looking forward to

• The application of ZK in other fields has made significant progress in 2022 and will probably continue in 2023, especially zkBridge

i. One kind of methods is to change the verification of the validators’ signature (consensus state) on the light client to ZK proof

ii. The other kind is to implement the PoS (consensus process) in ZK

Other trends of cross-chain: omni-chain applications, MEV, interchain security, etc.

• There will be more multi-chain (omni-chain) and cross-chain applications

i. The application of state aggregation, such as cross-chain authentication of identity and records related to DID. ENS and others are exploring in this direction and have achieved some interesting results.

ii. Liquidity sharing based on cross-chain general information, especially between L2s, will be more universal

• Cross-chain MEV is likely to repeat the development seen on single chains. In 2023, we can keep an eye on customized node consensus solutions such as customized Tendermint solutions like Skip Protocol and solutions for Cosmos 2.0 modified protocol layers. As L2 develops, the MEV problems on L1 and L2 will become more prominent. And L2 MEV tools will also improve accordingly.
• Interchain Security: A shared security solution will be implemented on Cosmos in 2023. The idea of restaking solution is also similar to it, using staking to provide more services.

Wallets and client applications

• MPC (TSS) is likely to become a must-have feature: the application of MPC in TSS (threshold signature) is fairly mature and will support more application scenarios such as custodial services and no-mnemonic-phrase services for users
• Some designs (such as EIP4337) of AA (Account Abstraction) is nearing completion, and the code development is progressing smoothly and will mature in 2023; wallet products combined with MPC will be eagerly anticipated
• Applications such as payment and financial services on the Lightning Network will see more mind-blowing developments in 2023:

i. OmniBOLT and Taro introduce stablecoins and custom asset types to expand the application scenarios of the current Lightning Network;

ii. The DLC non-custodial solution may enable some financial derivatives applications

iii. The social protocol Nostr and its combination with the Lightning Network and the integration of the Lightning Network may bring a new wave of traffic

• In addition, the L2 payment solution after Proto-danksharding will reduce cost and improve efficiency at an unprecedented level

Web3 developer tools are constantly improving

• New programming languages and new ecosystems worth looking forward to

i. The Move language ecosystem may enter a key period of developer growth with Aptos launched in 2022 and Sui coming in 2023

ii. The L2 development ecosystem, especially the development environment for products like zkVM that requires translation

• New developer tools are paving the way for the next business cycle with new technologies

i. Low-code/no-code tools, new developer suites, etc.

ii. Data middleware layer and related tools will help achieve better on-chain data indexing and data processing

iii. Endpoint services allow decentralization, faster execution, and richer functionality

Appendix: Noteworthy mainnet launches/upgrades in 2023

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