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Web3 adoption: hype or reality?

web3-adoption-hype-or-reality
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Web3 adoption: hype or reality?

Web3 has been gaining momentum. However, with general understanding remaining low, the burning question becomes—is the adoption of web3 a reality or merely hype?

The internet has become ubiquitous in people’s everyday lives, molding their reading choices, shopping preferences, entertainment options, and communication methods. 

A Sandvine global internet report from earlier in the year revealed that the average person spends as much as eight hours on online apps.

However, there has been growing unease about the access and control of people’s intimate information. Large tech firms have increasingly come under the cosh for their handling and potential misuse of personal data and their substantial influence over the internet due to their market supremacy.

Per the Sandvine report, nearly half (48%) of the total internet traffic was directed through titans like Microsoft, Alphabet (Google), Meta (formerly Facebook), Amazon, and Apple, a group commonly referred to by the acronym MAMAA.

For this reason, there has been a conscious push to reclaim power from big tech, giving birth to the idea of web3. This is the latest evolution of the internet, which, if its proponents are to be believed, is poised to democratize online spaces.

Web3 traces its origins back to 2014 when Ethereum (ETH) co-founder Gavin Wood first coined it. The idea builds upon previous iterations of the internet, namely Web 1.0 and Web 2.0. Web 1.0 offered users static, read-only webpages, while Web 2.0 ushered in more interactivity. 

While web3 has been a topic of discussion for several years, it gathered significant momentum in 2021, fueled by the rise of blockchain technologies, the expansion of non-fungible token (NFT) markets, and the influx of venture capital investments.

Current state of web3 adoption

Recently, Consensys released a report on the state of web3 adoption, which looked at use cases, popular mechanics, results, and barriers to entry. 

According to the report, while cryptocurrency has made its mark worldwide, with a notable percentage of the global population acknowledging their familiarity with it, the understanding of web3 remains startlingly low, with only 8% of respondents to the study expressing a solid grasp of the concept.

Interestingly, despite the limited knowledge, web3’s fundamental principles still resonate with many. Half of the respondents on the Consensys survey believe these principles enrich the internet’s value, while 67% firmly believe in the right to own what they create online.

Privacy concerns were also a dominant issue, with 83% of respondents prioritizing data privacy. Furthermore, 70% believed they should receive a portion of the profits from their data, and a similar percentage desired enhanced control over their online identities.

Another study carried out by Coinbase revealed that most people’s awareness of web3 use cases revolved around crypto payments for goods and services.

According to the data, 30.8% of participants had used at least one web3 service in the past, with usage being more widespread in emerging markets. 

Further, 45.8% of respondents from emerging markets had used at least one web3 service, compared to 22% in developed markets. The disparity might stem from the versatility of digital currencies, especially in contexts where access to stable traditional currencies is restricted.

Interestingly, per the Coinbase study, high awareness of web3 services did not guarantee high adoption. Despite being third and fifth on the awareness scale, trading on centralized exchanges (CEXs) and blockchain gaming were the most used services. Conversely, staking for returns, a lesser-known service, secured the third spot on the adoption chart.

CEXs remain the preferred choice in developed markets, offering a familiar touchpoint for those accustomed to traditional financial systems.

The data also revealed that web3 gaming has seen a surge in popularity in emerging markets, given the minimal initial investment and potential for crypto rewards. For instance, crypto gaming and metaverse participation in Thailand are prevalent, whereas, in France, no web3 use case exceeded a 4% adoption rate.

The Coinbase study showed about 40% of crypto users engaged with multiple web3 services in the last year, reflecting the interconnected nature of these platforms. 

Services cluster into three categories: payments, trading, and other web3 services, reflecting their interdependence. For example, gaming and NFTs correlate highly because many gaming tools are stored as NFTs on the blockchain. 

Similarly, staking for returns requires interaction with a centralized or decentralized exchange, explaining the high correlation between these service categories.   

The current state of web3 adoption indicates a dynamic, evolving landscape, differing significantly across markets and use cases. 

However, as awareness and understanding of crypto services continue to grow, the adoption patterns may shift, further molding the future of the web3 world. For instance, 46% of respondents in the Coinbase survey plan to adopt at least one form of web3 services in the future. 

Indeed, companies like ivendPay, which have been integrating cryptocurrencies into banking terminals across Europe, have shed light on the changing consumer behavior toward using cryptocurrencies for purchases. 

Speaking to crypto.news, ivendPay chief business development officer (CBDO), Eugene Tkachevsky, revealed that the company initially catered mostly to crypto enthusiasts. However, they have noticed an expansion in their consumer base that now shows more interest in using crypto as a payment method.

Tkachevksy credited this change to their instant crypto-to-fiat conversion system which enables merchants to reach a wider, technology-driven audience ready to spend their crypto assets, effectively attracting new customers and presenting more opportunities for consumers to utilize their cryptocurrency.

Factors influencing web3 adoption

People’s fascination with web3 stems from growing concerns over data privacy and the desire for power democratization. There’s also a greater appreciation of decentralized systems, which promise fair power distribution.

However, the transition from Web 2.0 to web3 is a significant shift that requires understanding and adapting to new concepts, technologies, and ways of interaction. 

Several factors have influenced web3 adoption, including utility, ease of use, compatibility, reliability, cost, regulation, and marketing and promotion.

Utility: For web3 to grow, it must provide a noticeable benefit for users. For example, crypto drew people because of the promise of making money; however, this motive is fading as speculation decreases. 

Like the dot-com bubble, web3’s value would not last without solid use cases and improvements beyond the existing systems. Therefore, the technology must identify new ways to add value, create markets, and enhance digital ownership and peer-to-peer exchanges.

Ease of use: Buying crypto from a centralized exchange like Binance may be simple; however, understanding the intricacies of blockchain technology, including the different chains, layers, and consensus mechanisms, is more challenging. 

For web3 adoption to continue, ease of use is crucial. It’s essential to strike a balance between usability and depth of understanding.

Compatibility: Web3 must be compatible with existing technologies to allow easy integration into pre-existing processes. 

Accessibility and integration with other technologies without significant hurdles are also vital. Builders of web3 systems should ensure they are compatible with wallets and IoT devices and make the transition between fiat and crypto more efficient.

Reliability: Web3 technology must be robust, have minimal downtime, and be secure against hacks and scams. While protocol-level security seems adequate, the technologies built on top need significant improvements.

Affordability: This also plays a significant role in web3 adoption. Proponents claim web3 is not only openly accessible but has few entry barriers since it’s built on top of legacy systems.

They also claim it has the potential to bring down costs and fees for services and ensure cost efficiency outperforms existing mechanisms.

Regulation and marketing: Effective marketing and regulation can popularize web3 and clear any regulatory obstacles in its adoption. However, the marketing strategy should focus on the technology’s potential and use cases rather than price fluctuations and market cycles. 

As for regulation, collaboration with regulatory bodies is necessary for web3’s widespread adoption, especially on the money crypto side.

Future prospects of web3

Web3 is reshaping the landscape of the digital era, with features like NFTs and decentralized finance (defi) leading the way. While NFTs are primarily famous as quirky JPEGs, they are finding new uses, paving the way for unique digital asset ownership in several fields, including social media, gaming, and metaverses.

Similarly, defi is revolutionizing the financial sector, with its potential to provide services to more than 1.7 billion unbanked people worldwide. 

Meanwhile, web3 gaming stands to be boosted by play-to-earn models and blockchain incorporation. Statistics show about 20% of NFT sales and 49% of crypto activity came from games.

Further to that, decentralized autonomous organizations (DAOs) are showing promise in revolutionizing management systems. DAOs operate autonomously through smart contracts, and some proponents of the system have suggested they have the potential to go beyond cryptocurrencies to replace traditional banking and judicial systems.

Looking further ahead, there are expectations that web3 infrastructure will improve due to competing blockchains, that developers will increasingly adopt NFTs, and that significant publishers will incorporate web3 into their games.

Additionally, industry watchers believe new web3 users will save tokens in defi protocols as an alternative to traditional banking, while DAOs are likely to see more experimentation.

The observable shift in consumer behavior suggests a growing acceptance of web3 technologies, according to ivendPay CBDO Eugene Tkachevsky.

“With the rise of web3, we’re seeing blockchain slowly becoming a part of our daily lives. This process is being sped up as governments are getting involved and working on rules for regulation. This shows that web3 and blockchain aren’t just passing trends; they’re becoming integral parts of our future, impacting everything from gaming and NFTs to local finance and international payments.”

Eugene Tkachevsky, CBDO ivendPay

While some critics suggest the excitement about web3 is technologically motivated rather than user-driven, Tkachevsky offered a contrasting perspective. 

He believes users are at the heart of everything. Without them and their faith, technologies like the internet, NFC payments, or Bitcoin (BTC) would not exist as we know them. 

He also noted the significant rise of non-tech-savvy individuals joining the industry, suggesting that the power of web3 should not be underestimated, even as observers remain cautious about its future.