2021 was a significant year for non-fungible cryptocurrency (NFT), which was awarded the Word of the Year award, and the trend of decentralized finance (DeFi) in mainstream media and crypto firms made headlines thanks to a number of corporate announcements. No doubt this is in part due to the impact of COVID-19 on the economy as many are looking for new ways to diversify their finances and move to work from home, giving people free time to explore new interests. Many chose to do coding.
As talks begin to shift from Bitcoin (BTC) to other major crypto projects such as upgrading the Ethereum network and central bank digital currencies, or CBDCs, news coverage suggests that mass adoption of cryptocurrencies is already underway. However, there is one project that can really bring cryptography into everyone’s daily life: Web3.
What is Web3?
With a focus on community, Web3 represents the future of the Internet, with users operating in a decentralized manner rather than relying on large private companies or central government agencies.
To many, this appears to be the next logical step for the Internet, as the concept is built in part on the shortcomings of Web 1.0 and 2.0, such as the concentration of power in central modules and privacy issues.
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We have already seen examples of this in the areas of cryptocurrency and DeFi, such as the MakerDAO project, which aims to create an objective, community-driven global financial system. As DeFi grows in popularity in 2021, more projects and protocols enter the market, and everyone struggles to bring the benefits of DeFi to as many people as possible. Likewise, protocols such as Nereus have been developed to address issues of fair management and user experience, both of which reflect current Web 2.0 issues.
While the Web3 and DeFi protocols may seem to be separate projects (as they are), these protocols lay the foundation for Web3 adoption and adoption. We’re still a long way from turning Web3 into reality, but the DeFi protocols entering the market not only offer a glimpse of what the Internet’s next iteration might be, but also provide opportunities for feedback and customization to ensure that Web3 truly wins everything to the best of it. Does this mean that cryptocurrency will truly become mainstream?
Yes, without a doubt. As of January 2021, there were approximately 4.66 billion active internet users worldwide, and if Web3 becomes the standard, every one of those users will end up using blockchain technology and crypto on a daily basis, even if they don’t know it. However, the main problem is what Web3 might look like. And as a general project, this means that there is not always a single direction for the next phase of the Internet. Consequently, some have argued that widespread adoption would be difficult due to the technical gatekeeper and the lack of clear guidance.
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Can mass adoption happen without Web3?
While the use of cryptocurrencies has grown since the pandemic, the growth in the number of new wallet holders has begun to slow. This indicates that something is hindering the next step in mass adoption. While it is likely due to the expectation of Web3 adoption, government regulation could be another factor driving cryptocurrency adoption.
In the past, cryptocurrencies were not considered affordable to the mass market due to the perceived complexity and volatility. Opinions are starting to change as more and more affordable crypto products enter the market, such as stack coins, crypto-enabled debit cards, or DeFi products.
Despite the many benefits that encryption and DeFi offer, some people remain skeptical of it due to the lack of regulatory oversight, which is understandable. Will cryptocurrency become mainstream if governments start making rules?
Based on the evidence we’ve seen, the answer is probably yes. Undoubtedly, cryptocurrencies have already become “mainstream” in highly regulated countries, such as Singapore, or in countries whose governments actively support cryptocurrencies, such as El Salvador and more recently Tonga. It remains only on the sidelines in countries that are still developing frameworks and defining their attitude towards cryptocurrencies.
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While government regulation and the initiation of Web3 could bring crypto into the mainstream, both could shape the future of crypto and DeFi and determine where it goes next.