The evolution of Web3 and the year of crypto gets serious
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The passing year can very well be considered the manuscript when it comes to the development of electronic money And Web3 Generally speaking. More events across the globe, some tragically, have placed digital assets in the purview of financial regulators than ever before — leading many to conclude that the sector is finally “serious.” ” in this year.
At the same time, mass adoption of cryptocurrencies continues unabated for ordinary users as well as institutions, and this trend will only grow in 2023 and beyond.
Hard lesson to learn
The main event that has affected cryptocurrency — and the whole world — over the past year has certainly been the war in Ukraine. As it started, governments around the globe realized that it was possible to send millions of dollars worth of digital assets to a country to buy weapons — without any oversight. While the Western world agrees that this is acceptable in the case of Ukraine, policymakers recognize that the same can be done for any terrorist organization. .
As a result, the German Federal Intelligence Service (Bundesnachrichtendienst) and the FBI began to hire technology experts. series to mitigate the risk of Russia subverting sanctions through cryptocurrency.
This is where Western law enforcement agencies start to focus more on regulation.
In turn, and in the second major event for crypto, came the Queen’s Speech in the United Kingdom, laying out the government’s plans to introduce legislation for reduce economic crime and help crypto businesses grow. Correspondingly, the European Parliament has introduced a legal framework for crypto assets in the EU in March 2022 to “enhance the benefits and limit the threats” of cryptocurrencies. Furthermore, the U.S. Securities and Exchange Commission recently announced that it will focus on cryptocurrencies in the future, laying out plans to issue its own regulations.
While heated debates over crypto regulation have raged for years, we now know that regulators are in favor of advocating new technologies while ensuring consumers are protected. protect and eliminate criminal elements. This represents a watershed moment for cryptocurrencies — a time in which the industry evolved.
Cryptocurrency technology needs to “disappear”
As for where we are going next, when it comes to the mass adoption of cryptocurrencies, we really need the technology to “disappear”. In other words, the average retail user shouldn’t see it and they don’t need a degree in network security to be able to interact with it. This starts with the basics, i.e. user experience. You can’t expect people to remember very complicated addresses or write down 12 random words on a piece of paper.
Furthermore, the idea of decentralized finance (DeFi) and “Not your keys, not your money” is a mistake — more money lost due to people misplacing their keys than any other. any exchange hack. DeFi is a great tool when you know exactly what you’re doing, but that’s not applicable to the vast majority of users, especially those who don’t use cryptocurrencies.
Most people don’t care whether they spend crypto or fiat when swiping their phone at the grocery store. To be truly useful, these intricacies need to disappear “under the hood” so that users are not inundated with unnecessary technological challenges.
Institutional Participation in 2023
Meanwhile, not only retail users can benefit from the seamless integration of cryptocurrencies into traditional financial systems. Over the years, many institutional companies and brands have begun to dip their toes into decentralized technologies, and this trend will grow even more in 2023.
For example, brokerage giant Fidelity Investments recently launched a Cryptocurrency trading products for retail investors. Meanwhile, many non-crypto-native companies and even home offices have begun actively looking for new ways to get involved in digital assets.
Notably, some of them got into crypto through well-known and respected crypto platforms, at least at the time — some of which were not very successful. . So in the future, these companies will focus more on due diligence and that is why the regulatory frameworks will need to be further developed.
Companies will be able to discover the backgrounds of their crypto partners, where assets are located, how they are stored, and whether they are compliant — basically, everything you’d expect there to be. Learn about your bank.
Furthermore, more non-crypto platforms will likely start offering digital products in 2023. This will likely lead to an ecosystem where financial services tend to consolidate. . Instead of different apps for insurance, savings, bank accounts or cryptocurrencies, we will see a concentration of different trading options as well as savings and retirement plans in the air. fintech space.
However, for this to happen, certain elements need to be anchored in authority. Even DeFi platforms still depend on centralized miners, such as stablecoin issuers, so there is no such thing as “absolute” decentralization.
Eventually, digital assets will become “the norm” and become so ingrained in our daily lives that even the term “cryptocurrency” itself will disappear in just a few years. Web3 will become an integral part of the global financial system and services in the future.
Larry Fink, CEO of investment block Blackrock, gave a nod to this future, note that “the next generation for markets, the next generation for securities, will be tokenization of securities.”
With blockchain offering technology that reduces fees, reduces reliance on intermediaries, and instant payments, its inclusion in the traditional financial system is understandable. In turn, this will bring much-needed legitimacy to the field, further validating existing products and driving wider adoption.
“Crypto Winter” is a time to build
As for the current “crypto winter”, it could actually be a positive impact on the industry in the long term. While many consider this period to be the harshest crypto winter in the history of the industry, builders and developers have yet to go into hibernation.
Instead, the industry is working to bring better products and services. Algorand has increased its performance by more five times through network upgrade in September. And Ethereum Consolidation — which saw the network transition to a more efficient proof-of-stake mechanism — happened without a hitch, increasing Ethereum’s sustainability credentials and paving the way. for greater scalability in 2023.
So while some projects have fallen this year and some have been dropped from the market, the industry has not come to a standstill. Valuable lessons have been learned this year and in turn will produce better, more reliable and more secure services as we move into 2023. When cryptocurrencies get serious , companies and mainstream audiences will also weigh in on adoption.
Martin Hiesboeck, Ph.D. is head of research at Uphold and a consultant on data analytics, blockchain and crypto, token, DeFi, web3, stablecoins and CBDC implementations.
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