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2023 in Crypto: Annika’s Rundown

Annika Lewis
16 min readDec 19, 2023

My TL;DR on 2023:

🌀 Mainstream vibes were down bad; builder vibes were great
🛠️ We actually started using Layer 2 blockchains
🔥 Account Abstraction made Ethereum & its L2s more usable
💰 Stablecoins are starting to pop off
⚖️ Regulation was very much in the limelight

This post has five main sections:

  • General Vibes in 2023
  • Events
  • Tech Advancements
  • Regulatory Landscape
  • Institutional Interest

Intro

Since going full-time crypto a little over two years ago now, I’m continually struck by how fast everything moves.

I’ve often heard others in the space say that after a week it feels like a month’s worth of news & progress, and after a month it feels like a year’s worth — and that couldn’t resonate harder.

It’s hard to keep up.

With that backdrop, having been in the space full-time since 2021 feels like far more years than it’s actually been — we’ve been through what’s felt like the highest of highs, the lowest of lows, and everything in between — and, other than a few sporadic pieces I’ve written on specific topics here and there, I haven’t really documented throughout what it felt like in the moment and what was top-of-mind for me in a given year.

I expect we’ll look back on these years like the dawn-of-the-internet years, and I think future me will thoroughly enjoy looking back on these early 2020s in cryptoland. I’d also venture to guess there are a few people in my life who might, perhaps, enjoy seeing these years from my perspective as well—so, for both those reasons, I should do a better job of documenting what it’s like.

This writeup is an attempt to do so, and represents my first annual blog post offering my own glimpse of what it’s been like to be full-time in the space this year.

I hope and expect this is the first of many.

I should note, of course, that this is ‘the year in crypto’ through my lens, and is not an attempt to talk about objective highlights or things that I think most people will necessarily care about. This is a glimpse into where Annika’s head was at throughout 2023 — what got me thinking, what got me excited, and how, in my view, we progressed as an industry this year. Given my focus and areas of interest, this will be fairly Ethereum-centric.

With all of that out of the way, here we go.

General Vibes

I’ll start by recapping how it’s felt — what overall sentiment has been like throughout the year.

From the perspective of mainstream interest in the cryptocurrency sector, all of 2023 felt pretty bleak on the inside until Q4. Specifically, mid-October-ish.

Whenever I start getting friends & family texting me about crypto prices or scrounging for advice on what to buy, I know something is in the water. This started happening in October.

If you were to look at the left-hand year-to-date price chart below in isolation, the bleak sentiment I mentioned might surprise you. Bitcoin has generally been on the up-and-up throughout the year. Ethereum, too, has followed quite a similar pattern.

But when you zoom out and look back at a five-year time horizon (the right-hand chart), it’s obvious that we’re still well below the highs from the 2020–21 bull market—and, to put it simply: when people are down bad, vibes are bad.

Furthermore, in addition to still being down bad, from a narrative perspective we started the year on the right heels of the FTX fallout which went down in Nov/Dec 2022. Coming into 2023, crypto had a giant red FTX-shaped stain all over it — one that certainly still lingers even today, but one that was much fresher at the time. The blood hadn’t dried yet.

As personal evidence of this, see the highlighted excerpt from the Christmas letter Keith and I send annually to our friends & family around the world. Based on my account in December 2022, ’twas bad Christmas crypto vibes indeed.

Although the year had a rough start, and although mainstream interest continued to be bleak for the better part of the 2023, it felt distinctly different on the builder side throughout the year.

In a really big way.

There was a new level of seriousness in the air, along with momentum and meaningful progress on the technical side starting from very early this year. It’s hard to capture in words, but the bottled-up excitement amongst builders throughout 2023 was so evident.

It was—dare I say—fun, in a way, to have just the people who were serious about the technology and the reduced distraction from onlookers, during the time that the mainstream got bored with us and looked away for a bit. And I, personally, felt far more excited about the technology and its promise based on what I saw this year than I did even at the heights of the bull market a couple years prior.

Events

Events are a big part of the crypto zeitgeist—and they offer, in a way, a more specific extension of the ‘General Vibes’ detailing.

The number and scale of events in crypto in 2023, based on what I saw, would have made an onlooker think we weren’t in a down market. I did attend one conference that was a little sparse, but otherwise, it felt like full steam ahead.

My first recap comes from ETHDenver, the pre-eminent annual Ethereum-focused conference in North America, which I’d also attended the year prior—and am starting to use as one of my benchmarks in gauging sentiment.

At ETHDenver 2023, I was struck by two things:

1. How big the conference was, in spite of it being in the depths of the bear market—while there, I was told it was double the number of attendees vs. the year prior. (And, man, did it ever feel like it.) Heading in, I thought flat would have been a win. But DOUBLE?!

2. In spite of being much bigger, how much more serious it actually felt than the prior year.

To make this even more tangible, if you’re familiar with Denver, they moved the venue from the downtown Sports Castle out to the gargantuan National Western Complex (you know, the gigantic one you always drive by on the I70 that always has signs for cattle & gun shows?).

Yup, that place.

Anyway, it’s a much bigger venue. And, in addition to being bigger, the conference—like the industry as a whole—had an increased air of seriousness vs. the previous year.

It it was chock full of builders, people working on Ethereum scaling and complex privacy problems, and an attendee base just generally there for the technology—rather than for memecoins or NFT-pump-and-dumps.

I felt much the same vibe, by the way, at EthCC in Paris in the summer, though it was a bit more of a fun vibe — because, well, Paris in the summer vs. Denver in the winter.

But in spite of the shift in balance towards group activities like Eiffel Tower wine picnics and bike rides by the Seine, the more-serious-2023-vibes in its content, focus, and attendee base persisted.

Tech Developments

The undercurrent pushing along this level of seriousness, I think, were the technological developments that came to fruition in the space this year.

In short: It’s incredible what, as a user, I can do today onchain that I couldn’t do a year ago.

If I am to keep it as simple as possible, in my eyes, 2023 was characterized by three things:

  1. The rise of Layer 2 scaling solutions
  2. The dawn of Account Abstraction
  3. The acceleration of stablecoin innovation

1. Layer 2 Scaling Solutions

I haven’t actually gone in and looked at the specifics of my own onchain data, but I can very confidently say that this year I transacted on Layer 2 blockchains far more than I had in years prior. I may have transacted even more on Layer 2 than on Mainnet, but it’s probably pretty close.

Contributing to Gitcoin Grants on multiple Layer 2s

It feels like last year, as users, we heard a lot about Optimism, Arbitrum, ZKSync, etc. — and this year we actually experienced them in a pretty big way.

For the unfamiliar: Layer 2s are blockchains that inherit the important properties of their base chain (which, in the cases I’m describing, is Ethereum) — and allow for faster, cheaper transactions than on the main network. In essence, they “extend” the main network and make it more useable. Overview here.

Source: https://www.coingecko.com/learn/what-are-layer-2-crypto-protocols

So, why did we experience them more this year?

Applications that we already use started to build in native support for Layer 2s more and more, and interfaces to bridge tokens from Mainnet also became a lot more user-friendly. Today, I can count several applications offhand that run on Layer 2s by default — whereas at the end of last year, Mainnet was still the primary status quo by quite a long shot.

In addition, it became easier to create new Layer 2 blockchains — and people started doing just that. The OP Stack, Optimism’s open-source blueprint for scalable blockchains, was announced in October 2022 — and as of this writing, there are 23 chains built using this infrastructure, according to superchain.eco.

The long-tail of OP Stack chains is certainly still nascent (see TVL figures in the above link), but the blueprints and enabling infrastructure—projects like Conduit, Zeeve, etc.—are getting there.

Most notably in the Optimism ecosystem, Coinbase announced its OP Stack-enabled Layer 2 blockchain, Base, which launch its mainnet in August to much fanfare. Along with the announcement of Base, Coinbase announced they were joining Optimism as a Core Dev on the OP Stack.

This is pretty much as legit and as public-goods-infrastructure-y as it gets — which is, in my opinion, a pretty big deal and highly commendable for a publicly-traded company of their reach and scale.

As an aside, if I’d written a post like this last year, for 2022, I’d undoubtedly have talked about Coinbase’s rise throughout the year to increased legitimacy and respect from Ethereum developers as a result of many of their actions — and in 2023, I’d go as far as to argue that they they surpassed even their previous high bar with Base launch.

Beyond the OP Stack, a lot happened in the Ethereum L2/sidechain space. I happen to be most closely connected to Optimism ecosystem so my rundown skews there, but there was plenty of activity from other projects as well:

I’ll end with this chart from L2BEAT, a phenomenal data source on all things Ethereum Layer 2s, which shows value locked across Ethereum L2 blockchains over the past few years.

You can see my cursor on Jan 1 2023 (the black vertical line), when TVL was about $4.6B — it has more than 3x’ed to over $16B throughout the year to date, after having been relatively flat in the year prior.

https://l2beat.com/scaling/summary

Those numbers sum it all up: Layer 2s stepped boldly into the spotlight in 2023, in a really big way.

2. Account Abstraction

In 2022, I started to hear rumblings about “ERC-4337” and “Account Abstraction”, but, in spite of listening to every podcast I could find on the topic, I still didn’t quite grok what promise this concept held—let alone how much it would enable never-before-possible experiences onchain.

From the perspective of your-typical-non-technical Etherean like me (i.e., people in the thick of it, but not, like, protocol engineers), talk really started in earnest about Account Abstraction around ETHDenver timing in March, where a big Account Abstraction milestone was unexpectedly announced.

But after the initial news break in March, things felt kind of slow, and it took a few months for the enabling infrastructure to actually get to a point where builders could really implement AA within working products.

By the way, I really don’t like the term Account Abstraction (even though I use it because it’s the commonly-used term)— it’s written from a developer perspective, and those two words don’t really explain or imply anything direct to people who aren’t deeply technical. I wrote a thread breaking down my thoughts on that here.

So what does this Account Abstraction thing actually do? Unlike Layer 2s, whose basic premise is simple — make Ethereum faster & cheaper — the value propositions of Account Abstraction are several-fold and somewhat disjointed, so it’s a little hard to explain in catch-all terms.

If I had to try, my one-liner would be: make Ethereum easier to use. It’s kind of like an amalgamation of user experience improvements that, if implemented well, can make a big impact altogether, but might appear to be somewhat minor features on their own.

For example, Account Abstraction can enable:

  • Paying Ethereum transaction fees in other tokens (i.e., if someone sends you, say, USDC into a new Ethereum wallet, you then don’t also have to go out and buy ETH to be able to transact)
  • Letting product developers themselves actually pay your Ethereum transaction fees for you
  • Accessing an Ethereum wallet like how you’d access a traditional app (i.e., with a password or biometric auth, not a lengthy seed phrase)

And a bunch more that I won’t bore you with. As I said, the AA benefits are kind of like a laundry list of features to which, to each one in isolation you might go “enh, okay”, but the combination of them unlocks usability for Ethereum-based applications in a really, really big way.

Want to see how? I’m biased, but try Beam. It actually combines the two developments I’ve spoken about — it’s a Layer 2-native wallet app that incorporates the Account Abstraction-enabled features I referenced.

There are many other projects implementing Account Abstraction, too — it’s been great to see the progress on this front in the back half of the year, in particular.

And, it’s still so incredibly early. I can’t wait to see what new onchain experiences AA enables in 2024.

3. Stablecoin innovation

Crypto’s intended killer use case has always been payments — but for much of the technology’s infancy, we’ve spent a lot of time focusing elsewhere, with largely good reason.

BItcoin Whitepaper: ALL THINGS PAYMENTS

The tech just hasn’t been there to do transfers that compare with off-chain transactions on the bases of speed, cost, and usability. While we still have a ways to go, we’ve made material progress on all three of those fronts this year as evidenced by the two prior developments I discussed.

Looking at the big picture, from a payments perspective, the long-term promise of crypto is two things:

  1. Better payment rails — as discussed above re: the speed, cost, and usability dimensions we still need to improve upon
  2. Better money—in addition to providing better infrastructure, the construct of crypto very naturally opens the door to innovate on money itself

On a very long-term time horizon (very possibly decades), I believe it is inevitable that crypto will be the technology that will enable new money to come onto the scene in a big way: money that ditches much of the baggage and assumptions that come with the fiat money construct today, and money that isn’t necessarily nation-state-specific.

Crypto enables us, globally, to materially innovate on money itself for the first time in a very long time.

I wrote about this last year

But in the near-term, actually using “new money” everyday is a far cry for many. Fiat currencies aren’t going anywhere. And the concept of money being a malleable and not-set-in-stone construct is tough for most people to grok; it’s just not something most people think about or question, really, ever.

So, while the early innovation on money itself is already ongoing in the cryptosphere — case in point: Eco, which I wrote about when I joined the project earlier this year — I think the most pertinent near-term application for transactions, at scale, will come in the form of transferring value onchain that people are familiar with: most obviously, US-dollar denominated assets (aka stablecoins), given the US dollar’s status as the dominant global reserve currency, and the friction associated with transferring US-dollar denominated assets across borders, which crypto actually solves pretty well today.

This goes back to my point #1, that it seems inevitable to me that crypto will become the new default rails for money globally. The early rise in stablecoin interest and infrastructure in 2023 is an indication that this may be in its infancy of starting to play out.

Nic Carter’s recent Regime Change in Stablecoins presentation offers a great fly-by of the stablecoin landscape at a macro level and compares where we are in stablecoins today to where the Eurodollar market sat in the early 70's.

Source: Nic Carter’s Regime Change in Stablecoins

The logarithmic scale graph of stablecoin volume vs. other financial systems is staggering — with, as Nic says, stablecoins going from “~0 to near parity with Visa” over the last several years.

Source: Nic Carter’s Regime Change in Stablecoins

I’d initially titled this section “the acceleration of stablecoin adoption” as a development for 2023, but after looking at the numbers and reflecting on it, I think “the acceleration of stablecoin innovation” characterizes it much better.

We are, after all, in a down market in 2023 — and, given how early crypto still is, stablecoin volumes correlate heavily with where we’re at in the bull/bear cycle.

As you can see in the chart below, stablecoin velocity levels—although highly volatile on short timeframes—are flat-ish over the past couple years. As Nic loosely implies, in such a down market, flat is up — it’s impressive that volumes remain steady, in spite of where we’ve been at in the cycle.

Source: Nic Carter’s Regime Change in Stablecoins

So: volumes are flat, which is impressive considering the market, and—perhaps even more critically—it really feels like something is brewing here.

Why? There’s a) way more talk about stablecoins than ever in the builder community, b) more and more interesting stablecoin projects are popping up, e.g.:

Source: Bridge.xyz

…and, crucially, c) the aforementioned developments around improved speed & cost coming from Layer 2s, and ease-of-use from Account Abstraction, which make transacting with stablecoins much more viable.

Combine that with a global macroeconomic backdrop of demand for US dollars (this 13-min on Economist video on Argentina’s economy highlights it very acutely on the level of the individual) — and you have a recipe for a big market.

This is an area to watch in 2024. I’m not typically one to make predictions, but if things go the way they’re continuing to go, I expect stablecoin payments could enter the spotlight in a big way next year.

Regulatory Landscape

Moving on from the tech, I’d be remiss not to at least mention the regulatory landscape as part of this 2023 vibes assessment — this was a big part of the year for anyone following crypto in any capacity.

I don’t consider myself to be an expert on regulation, by any means, but this year it was very much at the forefront, even on the most mainstream of crypto Twitter.

And while I won’t spend time going into any sort of assessment or recap of what happened on the regulatory front (there was, well, a lot), I do want to highlight Coinbase’s work in this vein: this year, they were bold, loud, and extremely well-articulated — in my opinion — in advocating for crypto policy in a very rational and professional way in the United States.

Their “shields initiative”, their day on the hill bringing all sorts of crypto operators to — those all stand out as memorable moments this year in crypto, even beyond just the regulatory realm. I give them huge props for their work.

Institutional Interest

Although general mainstream interest in crypto was pretty weak for the better part of the year, there were a few notable moments to call out on the institutional front.

I’ll end this section with a quote from PayPal from when they launched PYUSD: a pragmatic, succinct encapsulation of why all financial institutions should be taking crypto seriously today:

So, why crypto? The answer is a practical one. Crypto gets us closer to what people desire: fast, cheap, global payments. And, as we’ve said before — we are in the payments business.

Blockchain is the new financial rail — the new payment rail. Blockchain technology collapses how payments look and how they actually operate. Settlement times are near instant to both a customer and a business — at any time, anywhere in the world.

This cannot be understated; blockchain technology is the only technology that offers a fundamentally new way of doing payments. Though it may look like a fad to some, to PayPal, blockchain looks like rationale.

— Pay How You Want, PayPal’s PYUSD Announcement

Shoutout, by the way, to the great Boys Club writeup on stablecoins wherein I discovered the above quote.

In Closing…

2023 mostly felt like a “revving the engines” year.

The rest of the world didn’t really think too much about us being around, and then they all-of-a-sudden did a big double-take and started hanging out again in Q4.

I’ve said many times this year that I can’t imagine not working in crypto in this day and age — and, ending the year, that couldn’t ring truer.

I’m closing out the year grateful to work at the forefront of financial innovation, and with immense gratitude to everyone who’s advancing this space with the right intentions. It is a privilege—and, crucially, it is so much fun—to work with you all every day.

Let’s get after it in 2024.

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Annika Lewis

Written by Annika Lewis

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