As we observe the continuous evolution of the internet, Web3, a new internet generation, begins to shape almost every sector, from technology to banking to healthcare, entertainment, e-commerce, retail, etc. The list goes on as it's predicted that the tipping point of adoption for Web3 will soon be reached.
Contrary to Web1 (a read/write-only internet) and Web2 (read/write/execute a version of the internet), Web3 offers a decentralised, more private, and safe, intelligent machine environment. Tech giants such as Google, Facebook, Amazon, Microsoft, etc., are no longer the sole source that administers user interaction or stores information. Web3 can be freely shared and stored in multiple locations with the help of blockchain technology (called distributed computing). Censorship, sharing of personal data, active targeting, and third-party control will be a thing of the past. Web3 will solve that issue by permitting anyone to make, utilise, and alter the web with an open-source computer program. The concept of owning and managing own content, having total control of it, hiding personal data, and being able to monetise on it is coming to light.
With the help of blockchain technology, data such as medical records, money, ownership rights, etc., are stored digitally with minors who audit and build on previously saved information. With Web3, there is no need for intermediaries (individuals or organisations) who had complete control of the data in the previous web versions. Security is accomplished through encryption so no one can access data except the intended party. Another pioneering piece of Web3 is AI (artificial intelligence) and ML (machine learning algorithm). Many of us already experience this revolutionary phenomenon in our daily lives through voice-powered virtual assistants, online fraud detection, or social media ad targeting. But with the development of Web3, AI and ML will take on a new role. Computers will understand user needs better and faster, i.e., as the number of NFTs and dApps increases, it may become more challenging to match the content to the client's needs or control illegal content.
As interest peaks and more people yearn to understand where the development of Web3 is headed, we ask industry leaders for their predictions and opinions on the potential impact they expect to see in 2023.
Reasons for Web3 growth
To dive deeper into how the adoption of Web3 will impact the world, it is crucial to understand the core reasons why this adoption is inevitable. As mentioned before, Web3 is about giving individuals a private and safe environment, even though the path there may seem daunting at times. A future where the big monopolistic tech companies aren't the leading players is more intriguing.
“With Web3 this shift is about moving from a world about data access to a world about data ownership. Instead of a government or institution holding the keys to our data, people will increasingly hold their own keys and control their own personal data. They will take their social profiles with them, they will be their own banks, they will own their own work.” - Mike Kirillov, CEO hito.xyz.
Web3 is not only about the internet and data ownership. It is also about inclusivity. Web3 blurs the lines between virtual and physical social interaction. This is happening with the help of the GameFi industry and NFTs. Statistics show that investors have injected $2.5 billion into the nascent Web3 gaming industry in 2022. Duke Vu, CEO & Founder of Fungies.io, explained exactly how it works:
“When you play traditional mobile or PC games, items acquired in-game can only be traded with your fellow players. In NFT or Web3 gaming, those items can be stored on Blockchain and traded not only by the players but also by anyone who has a crypto wallet. The NFT traders don’t even have to play the game to be able to buy or sell in-game items minted as NTfs. This is a huge paradigm shift and one that allows true ownership of items that you have grinded so hard for.“
The big tech players don't typically invest in something they don't see a future for. The chart below, made by 101 Blockchains, shows what Web3 development some big players are investing in.
Source: https://101blockchains.com/top-tech-firms-investing-in-web-3-0/
Blockchain is the fundamental technology for Web3. The overall usage of blockchain technology peaked in 2020-2021, allowing thousands of new projects to arise in both the financial and entertainment industries. And experts say it is only the beginning since the global blockchain market is estimated to be worth $1,431.54 billion by 2030, growing at a CAGR of around 85.9% from 2022-2030. By the end of 2022, global spending on blockchain solutions will reach about $11.7 billion.
“Web3 is still making enormous advances and is expected to revamp numerous industries. It will grow at a fast pace in 2023, and due to huge funds involved, the attackers will keep on exploiting the loopholes in Web3 projects,” - says Akash T. Business Development Specialist at QuillAudits.
Major funding has been dedicated to the development of Web3 and in turn there has been an increase in new talent within the industry. The inflow of experienced personnel greatly benefits these fast growing companies as well: “Companies want to see longer tenures. It demonstrates that a candidate has worked on or nurtured a product or service over a longer period of time, suggesting they have seen the full development and impact of whatever it is they are working on, or have worked on”, - says Xavier, Founder of Edwin Hunter.
The previous few years also significantly impacted Web3 and blockchain technology adoption. Massive border lockdowns during Covid made it evident to many investors that cryptocurrency allows money to be transferred quickly and efficiently. Alex Guts, the CEO of Banxe also says: “Covid significantly boosted the demand for cryptocurrency and attracted many retail investors, businesses, and institutions, making cryptocurrencies one of the most hyped investments during that period.Nevertheless, the terrible war in Ukraine showed us how crypto could be not only a kind of investment but a flexible, fast, and efficient money transfer method. Hundred thousands of dollars have been donated to Ukrainian people with the help of cryptocurrency. And that proves one of crypto's actual utilities - faster and cheaper money transfers than traditional bank transfers.” He also added that even though he is not expecting an increase in mass crypto adoption, bull runs, or $100k per BTC, there is a high possibility of seeing more environment-friendly blockchain projects, NFT, and Metaverse releases with real-life use cases, and crypto-fintech startups.
However, certain blockers do not allow the industry to grow as rapidly as promised. One of the hurdles that Web3 needs to overcome is the regulatory framework. Even now, where the majority of the web is monopolised among Big Tech, users' data is protected by regulatory authorities. In Web3, the security question is prominent. There are constant debates between those who support a fully decentralised Web3 and those who back the presence of one responsible regulatory organ. Many critics still need to feel that Web3 is safe and private enough. There is a vision that Web3 projects need to lay the foundation for suitable security, change the narrative around privacy being only for criminals, and remind users that scams are not unique to Web3.
The real-world utility and benefit of Web3 is often questioned - how can the general public enjoy the full advantage that Web3 has to offer? The saying "what comes easy won't last. What lasts won't come easy" comes to mind at this particular junction. Later, we will share different opinions of industry leaders on how Web3 can be utilised in the real world.
The year 2022 was a shining star for the development of the Web3 industry. However, because of the cryptocurrency market crash, the development growth rate may slightly decline, which can be expected. Any new technology that significantly impacts human lifestyle has gone through a similar cycle. This is called "The Gartner Hype Cycle."
The Gartner Hype CycleGARTNER
All digital trends drastically affect how people shape markets. This happened with Web 1.0 and Web 2.0, and now it is happening with Web 3.0. Web3, as we know it, is most likely located in the beginning stage, somewhere between the peak and the falling slope.
What are the main growth sectors for Web3 in 2023?
To answer this question let’s have a look at the data by McKinsey & Company. Web3 is built primarily on three technologies: blockchain, smart contracts, and digital assets.
The Banxe team reached out to Web3 industry leaders to ask for their opinion on the development of Web3. According to them, there are vital sectors where major growth is expected in 2023. By evaluating the above information, it's apparent where significant funding will flow.
But first, let's revisit each application that is built in Web3.
Cryptocurrency is a virtual currency. Usually, it is not supervised by any central authority, such as a central bank or government, and blockchain technology is the base for any cryptocurrency. Currencies like Bitcoin and Ethereum spread awareness about cryptocurrencies to the masses and are likely to be a significant facet of Web3.
NFTs are digital assets built on blockchains. They represent real-life assets like art, images, games, music, and more in digital space.
Decentralised apps (dApps) eliminate the need for central oversight and a central server by running on decentralised blockchains. It provides users control over their data with open-source data access.
DAOs, or decentralised autonomous organisations, allow entities to operate without central management. Instead, token owners play an active role in the organisation's decision-making, management, and operation.
Like any contract, a smart contract establishes an agreement's terms. The terms are set and executed as code running on a blockchain.
So what are the primary growth sectors for Web3 in 2023?
Metaverse
Metaverse is a virtual space where humans interact with each other. In other words, it is a space where people can participate in a shared virtual universe. You can think of it as a Sims game, which was viral from 2010-2015.
“One big trend I believe will become more global next year is the gamification of everyday activities on metaverse platforms for real world Utility. For instance, instead of going on an e-commerce site to buy an item. I could play a game to win it, or a gamified version of the store in 3D and with my avatar, buy the item and have it delivered to me.”- Delz Erinle, Founder of Astraverse. This example shows that the gap between Web2 and Web3 is narrowing. This approach seems more like some episodes from the Netflix show - Black Mirror. However, it is already the reality. Starbucks, one of the most recognizable coffee chains in the world, has already joined the Metaverse. Starbucks Odyssey allows reward members to collect NFTs and to even compete in interactive activities with no crypto wallet.
Another real-world utility of Metaverse is the simple streaming options. The pandemic has brought a new way of life for many. Humans are communicative creatures, which is why, while on lockdown, the culture of streaming events rapidly developed. Even now, as the preventive measures have been removed in most countries, the streaming culture continues to thrive. Artists such as Marshmallow, Travis Scott, Justin Bieber, and many others have joined the Metaverse trends and held concerts for thousands of people in virtual reality.
“The metaverse has the tools to significantly enhance the live streaming experience for everything from a professional conference to a concert. While individual events have drawn super high numbers already, we see live streaming in the metaverse becoming more mainstream even amongst non crypto users. We at RLTY believe the Metaverse is about closing the geographical, cultural and financial barriers which separate people. “ - Zack SABBAN, Co-Founder at RLTY.
Speaking of Metaverse expansion, it is noteworthy to remember DAOs - decentralised autonomous organisations. DAOs are a mandatory part of Web3 as there are no central authorities; the managing power is distributed across token holders who collectively cast votes.“Decentralized Autonomous Organizations (DAOs) will explode in popularity in 2023 due to massive progress in software tools, legal frameworks, and community momentum. DAOs are the future of organizations, just like crypto is the future of money. DAOs represent a new & improved infrastructure for running everything from high school chess clubs to corporations to local to international governments. Some DAOs will represent an evolutionary change over prior models for human organization. In contrast, other DAOs will be more revolutionary in supplanting tradfi and web2 models used for organizing people & resources in the past.” - Adam Miller, CEO & Founder of MIDAO, Host of the Just DAO It! In 2022 DAO’s capitalization was more than $78,4 million USD according to Coinmarketcap values. And it is predicted that DAOs will have $1 trillion in AUM within the next 10 years.
As Metaverse is predicted to add $5 trillion to the value of the global economy by 2030, Metaverse-as-a-Service (MaaS) becomes more prominent. This enterprise solution will encourage businesses to enter the Metaverse with their virtual worlds for various use cases such as healthcare, finance, entertainment, learning, etc. Instead of setting up their high-cost in-house servers and purchasing lifetime licences, companies can use a subscription-based model. “Web 3 market in 2023 will move into a different gear given the macro backdrop and what is happening broadly in markets. We at The Kernel are very excited about the emergence of Metaverse-as-a-Service and the development of true providers of exclusive experiences and content as the metaverse moves from a land tile speculation market to a place where people go to create, watch, listen and learn", - Mark Toberman, CEO, The Kernel LLC
Digital Art - NFT
Another sector worth mentioning is art. Artists are impacting by connecting their physical works with impossible-to-pirate digital versions as non-fungible assets. This offers creators more control, worldwide access, and more potential for their art to be noticed. NFTs also allow major galleries to tokenize the rights of artwork to collect additional funding for their exhibitions. Later, NFT owners may trade those rights in digital space while the real piece of art remains unaffected, continuing to bring in new revenue for the initial art owner. Usually, the "original" digital art creator receives a small percentage of all future sales.
“I think the NFT market and the Metaverse will be huge and has several use-cases, such as art, collectables (e.g. football cards, stamps, comic books), gaming (e.g. game characters, artefacts and lands), music, digital identity and more. Collectables (>$400B), gaming (>$180B) and music (>$20B are some of the numbers reached in trading volume in 2021. NFT sales volume was around $25 billion in 2021, and there is still so much room for growth.” - Jovi Overo, Managing Director: BaaS at Unlimint.
Even though now we can observe a slight slowdown in the development of digital space as it is closely tied to the cryptocurrency market, experts believe there will be many more successful cycles in the future. A crypto winter allows creators and developers to prepare for the next bull run and materialise their best ideas. “In my opinion, 2023 will be the year where all trends for the next bull market will be defined by projects built during the current crypto winter.NFTs will grow from just PFPs to a tool used by brands to engage their community and provide different membership benefits. We will also see a lot of projects popping up in the web3 social media space such as Lens protocol and others. “ - Stan Trenev, Founder of 0xFusion For traders and NFT flippers 2023 is believed to be a great year as well. “2023 is the year of the explosion of NFT's. Some very big brands are entering the market and try new things. Adidas and Nike are already here and build their own ecosystem with cool projects around clothes, art and metaverses.” , saysRémy Bigot, Web3 and NFT specialist.
The growing trend of digital art is visible in numbers. Investors are generous in fundings that flow into the sector. The yearly turnovers are exceeding tens of billions of dollars.
“NFT collectors sent $40 billion to the NFT marketplace in 2021, and the amount sent by collectors had already surpassed $37 billion as of May 1, 2022. NFTs play a key role in building a decentralized internet, the Web3. It goes beyond than just cartoon with apes I can tell you”, saysFalco Pangkey, Co-founder & CEO Xircus Web3 Protocol. Tech data proves the trend not to be a temporary hype, but rather a global move: “Look at the growth of web3 from developers’ perspective, the numbers are overwhelming. Ethers.Js and Web3.Js are two libraries critically important to develop Web3. In 2018 the developers installed 146,000 times either of the two libraries every week. The downloads have increased 10x in 2022 as per week installs are now over 1,536,548. 36% of all smart contracts deployed and verified were deployed in 2022. In September 2022 alone, over 17,000 smart contracts were submitted to EthScan, a gain of 160% YoY.”
Fintech
It is not a secret that the fintech industry had a boom in 2021-2022. Experts predict a promising future for the year 2023 as well. In 2023 it is expected to see the growth of financial institutions that accept cryptocurrency as a form of payment due to the continuous development of Web3. Major payment systems are announcing crypto-friendly services. For example, Mastercard recently announced it would like to build a bridge between crypto and fiat by working with the trading platform Paxos (used by PayPal) and partnering with central banks. Such cooperation is usually referred to as Web2.5. “Banks don’t really trust the current bridge to crypto. Web 2.5® is about building a better bridge between banks and crypto that provides simple and reliable access to banking services for crypto platforms,” - says Sophie GUI₿AUD, “Ultimately, Web 2.5® is designed to bring down borders that isolate the bank and crypto ecosystems. Too many crypto platforms are currently stuck at the border of Web 2, often marginalised by the banks, due to fears over KYC and AML processes. They need Web 2.5® players, such as banking-as-a-service (or fiat-as-a-service, as we call it at Fiat Republic), who can act as a trusted entity to ensure robust and transparent KYC and AML are adhered to.”
The Fintech sector will also influence AI technology. Over the previous five years, 'AI in banking' Google searches have seen significant growth of 104% globally. Studies from Juniper Research indicated that successful banking-related chatbot interactions will grow by 3,150% between 2019 and 2023, allowing financial institutions to dedicate 826 million hours to other tasks. Soon, while communicating with customer support, most easy-to-solve cases will be resolved by chatting with an AI rather than with an actual human. It is hard to say whether this change will be noticeable in 2023, but we will see it take full effect shortly.
Conclusion
Web3 technologies, which include NFTs, blockchain, smart contracts, cryptocurrencies, DAOs, the Metaverse, etc., will significantly benefit society. Some celebrities even call the Web3 "marketing buzzword" - Elon Musk and many projects are still getting million-dollar funding. There is only growth for any technology with some hype and some failures. Think of the companies that have now become a part of your life, such as Amazon, eBay, Slashdot, Craigslist, etc., that were doomed to failure initially.
Anthony DiMarsico, Co-founder and CEO of Banxe North America says“The world should gear up for a blockchain-powered future. Web3 will be the new norm, however, it will continue to develop and coexist along with Web2. Incorporating and making the two work cohesively will be the challenge of most existing companies”. As a rather new technology Web3 still has to find its way to show us how it can be utilised in the real-world, in order to become deeply rooted in the society. Similarly to how Web 2.0 was built upon the foundations of Web 1.0, it is likely to see Web 3.0 build upon the previous iterations of the internet. Web3 offers a new way that combines the best aspects of the previous eras.“For the first time, originality and ownership are possible in the digital world. This is a real breakthrough that we have not paid much attention to in recent months, focusing too much on speculation. I can see that already changing, and I'm glad to see so many interesting companies using Web3 to reinforce their value proposition.” - Paulina Bialek, CEO & Co-Founder of FrostyWhale, TEDx speaker.
With a growing number of people working on solutions to further develop Web3, it's only a matter of time before this technology reaches mass adoption.
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