07 Nov 2022 Morgan Hayze
Web3 Is Gaining Momentum, Here Is Why
The birth of cryptocurrencies managed to disrupt the traditional world of finance, generating a market capitalization of over $1 trillion in its short history. The strength and use cases of decentralized finance caused Web3 to develop naturally while shaping what the next iteration of the internet may look like.
Many Web3 endorsers, like Tascha Che, outlined the most important Web3 trends, that may secure its place as a groundbreaking technology advancement.
Web3 is perfect for payments and financial operations
Payments are the most common use case when people think of blockchain and Web3 technology due to blockchains speeding up transaction times and reducing the cost of payments.
“Traditional cross-border transfers are expensive, but sending tokens over the blockchain costs practically nothing and has a flat fee regardless of the amount sent,” according to Che.
However, the macroeconomist noted that the comparison is not entirely fair, because the Web3 environment is not subject to legal and compliance fees, while traditional payments are more expensive due to those fees.
And while the payments sector is still sufficiently controlled by centralized financial applications, extending financial assets to relatively unbanked global markets is among the key features of Web3.
“If you look at digital asset adoption around the globe, there’s something strange going on,” Che added, highlighting that digital asset adoption is not in correlation with GDP per capita, which means that rich countries are no more likely to adopt these technologies than poorer countries.
Web3 is all about digital ownership
It turns out that digital ownership is the fundamental breakthrough that Web3 made, as prior to NFTs there wasn’t a fast and reliable mechanism for digital ownership transfers. “More ways to own a slice of the economic pie.” Che said we should “think of Web3 as a co-op ownership model that’s made scalable by technology.”
Speaking of NFTs and their implication in modern finance, the economist disagreed that the NFT space is built just by hype. In contrast, Che noted that NFTs “provide a neutral, interoperable ownership layer for all intangible goods.” Also, despite the overall crypto market crashing down at least twice in 2022, the active users across the two largest NFT platforms have remained stable since 2021, while transaction volumes have increased over 200%. “Data so far is not exactly supporting the hypothesis that NFTs are just some transient anomaly,” she said.
Web3 is environmentally friendly
One of the biggest advantages of Web3, NFTs, and DeFi is the usage of proven blockchains like Ethereum. And while during the DeFi summer of 2020 and the NFT craze of 2021 both Bitcoin and Ethereum operated on the proof-of-work consensus mechanism, Ethereum diverted to a proof-of-stake one.
The much-anticipated upgrade eradicated the need for raw computing power in order to validate transactions, effectively decreasing the energy consumption of the blockchain by 99.9%. The shift also managed to address Ethereum’s scalability, which was a real concern, given the fact that the second-largest crypto in the world and its blockchain were (and still are) the backbone of DeFi, NFTs, and Web3 applications, despite Solana and Polkadot rising in popularity for Web3 usage.
Web3 might be a wonderful technology, but it is still in its infancy. Indeed, Marc Andreessen noted that it could take anywhere between 30 and 50 years for the global economy to transition to blockchains, comparing the Web3 adoption curve to that of the Internet.
“If you had asked people in 2001, after the .com bubble, whether it’s a sure thing that the Internet would take over the world, most people would’ve said no,” she said. “So whatever you imagine what Web3 will look like in 20-30 years, ask yourself if you’re thinking too small,” Andreessen concluded.Ethereum Blockchain eth technologies cryptocurrency news technology crypto news Payments Defi Decentralized Finance NFT non-fungible token