Consensus 2023 transformed Austin, TX into a vibrant epicenter for all things crypto. While last year’s conference was rife with discussion of arguably superficial metrics, this year was characterized by inspired discourse around new groundbreaking technology. In an environment where transactions are irreversible, it’s reassuring to witness so many teams working to build a robust defense for the crypto world.

After meeting with many amazing teams at Consensus, we left the conference feeling optimistic for the future of the crypto industry. The sheer number of talented builders working to drive adoption for every use case of this technology is genuinely inspiring. Here are three of our takeaways from Consensus 2023.

I. Institutional Capital On-Chain

In today’s volatile crypto landscape, it’s worth noting that institutions remain genuinely engaged and are actively building in the sector. Historically, interest in the space has fluctuated with the macroeconomic climate, but there has been sustained attention on tokenizing¹ traditional financial products.

Institutional asset managers venturing into tokenizing assets on-chain include Franklin Templeton, which recently unveiled a second tokenized fund on Polygon. This follows their successful launch of a tokenized US Government Money Market Fund (FOBXX) on the Stellar blockchain, which raised over $270 million. Tokenized assets enable access to investment opportunities that are often inaccessible to the masses, such as private credit, private equity, and venture capital. Tokenization facilitates more affordable and accessible investment, allowing for smaller units, simplified trading, reduced fees, and enhanced liquidity.

In the realm of permissioned decentralized finance² (“permissioned DeFi”), Avalanche’s Evergreen “Spruce” testnet provides a platform for financial institutions to experiment with the potential applications of permissioned decentralized environments. Institutions such as T. Rowe Price, WisdomTree, and Cumberland have already begun utilizing the Spruce subnet on Avalanche. Compared to public blockchains, these permissioned DeFi applications, which could cover a broad scope of transactions from foreign exchange trades to interest rate swaps, may be valuable for financial institutions due to enhanced security, compliance, and control offered by permissioned blockchains.

The integration of traditional financial institutions into the crypto ecosystem—as demonstrated by recent developments on Polygon and Avalanche—signifies a step towards bridging the gap between traditional finance and the crypto world. We believe tokenization and the advent of permissioned DeFi platforms have the potential to revolutionize the way traditional investments are made, unlocking previously inaccessible opportunities for a wider range of individuals. As an asset manager, we have taken notice that collaborations between layer 1 institutional teams and traditional financial players have broad implications for accessibility and efficiency. These advancements will likely pave the way for a more democratized and interconnected global economy, where a diverse array of investment opportunities becomes available to all.

II. Advent of Executable Non-Fungible Tokens

One problem that has plagued decentralized applications has been the reliance on centralized front-end websites. Although smart contracts reside on the decentralized blockchain and can be accessed via the command line, average users typically interact with them through front-end websites hosted on legacy web servers managed by centralized companies. For example, when interacting with a dApp like Uniswap, a user typically would go to uniswap.org and use a user interface (“UI”) to assist in interacting with the smart contracts. This reliance has led to instances where front-ends are blocked or taken down, impeding access for users who are not as technically proficient. A potential solution to this issue lies in the form of executable Non-Fungible Tokens³ (“xNFTs”) on the Solana blockchain.

Figure 1: xNFT Overview

xNFTs enable developers to build and display web3 applications locally while maintaining the ability to communicate with external sources and function by directing to decentralized code. When a user opens an xNFT, the associated code is executed through an isolated environment. This capability to run code within the NFT itself unlocks a plethora of use cases and may address the challenges associated with front-end censorship. By leveraging xNFTs, we believe the decentralized application landscape can become more resilient.

III. AAA Gaming is Here

AAA gaming⁴, which was a frequent topic of discussion at last year’s Consensus, was noticeably absent until now. With an estimated 3 billion gamers worldwide and a projected market value of $260 billion by 2025, it remains a formidable and growing industry. Blockchain infrastructure, with its emphasis on digital ownership, allows gamers to utilize unique on-chain personal assets. Given that game development typically takes around two years, the numerous projects initiated in 2020 and 2021 are now starting to enter the market.

One game we got to play was Shrapnel, the first blockchain-enabled AAA first-person shooter game developed by a studio spun off from HBO Interactive. In development since 2021, the game made its live debut on the Consensus floor. Shrapnel utilizes Avalanche’s subnet architecture to accommodate its specific requirements. Our playthrough of the game exceeded expectations. From the first moments, we were captivated by the exceptional quality of the graphics and the seamless gameplay experience. The stunning graphics and intricate designs immediately drew us into the game’s world. The gameplay mechanics were balanced, with responsive controls that made maneuvering through the map easy. The integration of graphics and gameplay created an experience that left us feeling like we played a similar AAA game like Call of Duty or Battlefield. Beyond mechanics, game sessions and in-game asset trading occur within Shrapnel’s dedicated Avalanche subnet. Since subnets can communicate with other subnets, players can seamlessly transfer assets from the game’s subnet to the Avalanche C-chain⁵, enabling trading of Shrapnel’s in-game assets between the broader Avalanche community.

The emergence of Shrapnel and similar projects signals a new era for the gaming industry, where blockchain technology enhances asset ownership and community engagement. As more games integrate blockchain capabilities, this could result in a surge in innovation, improved user experience, and cross-platform collaboration, further expanding the possibilities and opportunities within the gaming landscape.

Looking Ahead

As we reflect on our Consensus experience, from engaging in insightful conversations about technological advancements with seasoned industry veterans to networking with fresh faces entering the space, the event was truly a testament to the resilience and determination of the crypto community. Even in the midst of a bear market, the crypto ecosystem continues to forge ahead, making strides in innovation and collaboration. It is crucial to remember that this journey is a marathon, not a sprint, and we believe those who diligently sow the seeds today will undoubtedly reap their rewards in due time.

(By Michael Zhao, Matt Maximo, William Ogden Moore)

Read more: https://grayscale.com/market-byte-highlights-from-consensus-2023/