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The Crossroads of Cryptocurrency: Web3 Could Be the Key to Cryptocurrency's Entry into the Mainstream Market

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The Crossroads of Cryptocurrency: Web3 Could Be the Key to Cryptocurrency

Decentralized vs. Centralized: Web3 may be just around the corner, but centralized cryptocurrency regulation is also accelerating.

Original Title and Link: Web3 might be crypto’s key to the mainstream market
Original Author: Pavel Matveev

2021 has been an important year for cryptocurrencies, with NFTs selected as the word of the year, decentralized finance DeFi catching mainstream media attention, and companies in the cryptocurrency space making headlines everywhere. Undoubtedly, part of this is due to the impact of COVID-19 on the economy, leading many to seek financial diversification through new avenues, and remote work has given people leisure time to explore new interests. Many have chosen cryptocurrencies as a result.

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As attention shifts from Bitcoin BTC to larger cryptocurrency topics such as Ethereum upgrades and Central Bank Digital Currencies CBDCs, widespread news coverage indicates that the mainstreaming of crypto is well underway. However, there is one key factor that can accelerate the progress of cryptocurrencies and truly integrate them into everyone's daily lives, and that is Web3.

What is Web3?

Web3 is a future internet architecture that emphasizes community and decentralized operation, independent of large private companies or government institutions.

For many, this seems like a logical next step for the internet, as it addresses some of the shortcomings of Web 1.0 and 2.0, such as power being overly centralized within institutions and privacy issues.

We have already seen projects in the cryptocurrency and DeFi space, like MakerDAO, that have created a global financial system operated by the community and based on fairness. With the rise of DeFi in 2021, more projects and protocols are striving to bring the benefits of DeFi to a wider audience. Protocols like Nereus are focusing on achieving fair governance and improving user experience, both reflecting existing issues with Web 2.0.

While Web3 and DeFi may seem like two separate aspects, they are indeed interconnected, as these DeFi protocols are laying the groundwork for Web3 and its adoption. While it may still be a journey before we see Web3 become a reality, the DeFi protocols already in the market not only provide a testing ground for what the next internet iteration might look like but also ensure that Web3 truly serves everyone to the best of its ability. So, does this mean that cryptocurrency will become truly mainstream?

Undoubtedly, yes. As of January 2021, there are approximately 4.66 billion active internet users globally. If Web3 becomes a fundamental presence, blockchain and cryptocurrency will become a part of daily life, even if users are unaware that they are using them. However, the main question remains: What will Web3 actually look like? If driven by the community, this means that the next stage of the internet will not have a single development direction, leading some to believe that Web3 may face challenges in widespread adoption due to technical issues and a lack of clear direction.

Without Web3, Can Cryptocurrency Become Mainstream?

Despite the increasing use of cryptocurrency since the outbreak of the pandemic, the growth in the number of new wallet holders has started to slow down, indicating that there are factors slowing down the next step for cryptocurrency to be widely adopted on a large scale. Waiting for the realization of Web3 may be one reason, while government regulations may be another factor driving cryptocurrency into the mainstream.

Prior to this, due to the complexity of cryptocurrencies and considerations of volatility, the mass market did not easily access cryptocurrencies. However, as more products enter the market, such as stablecoins, crypto-friendly financial cards, or DeFi, making it easier for the public to access cryptocurrencies, people's perspectives are gradually changing.

Although cryptocurrencies and DeFi can offer many benefits, some still remain skeptical due to the lack of government regulation. This is an understandable stance, but if governments begin to establish relevant guidelines, will cryptocurrencies become mainstream?

From the evidence we have seen, the answer is a definite and resounding yes. This can be seen in countries like Singapore with comprehensive regulation or countries like El Salvador and recently Tonga, where governments strongly support cryptocurrencies, while those in the process of developing frameworks and determining their stance on cryptocurrencies are still observing.

Next Steps

Government regulation and Web3 both have the potential to bring cryptocurrencies into the mainstream, shaping the future of cryptocurrencies and DeFi and determining the next steps of development.

The focus of Web3 is decentralization, not relying on large corporations, transferring control of data from centralized institutions back to users, and utilizing AI power to allow everyone to use the internet in any direction.

The current internet architecture is criticized for excessive surveillance and exploitative advertising. For those who praise the anonymity and privacy of cryptocurrencies, the implementation of Web3 architecture will integrate these concepts more into daily life. This is also what many claim was the original goal of Bitcoin - allowing users to freely use it without being controlled by centralized institutions.

Conversely, if more governments decide to establish frameworks and regulations for cryptocurrencies, this may further centralize them. Several countries have recently announced plans regarding CBDCs, which are clearly cryptocurrencies controlled by centralized governments.

For instance, the UK seems to have advanced its plans by creating a new unit for cryptocurrencies and digital assets to ensure that the UK can foster innovation in the cryptocurrency space while establishing regulation, making it easier for more people to access the high transaction speeds and low costs of cryptocurrencies, reducing volatility, and other benefits. However, this also blurs the autonomy and decentralization of cryptocurrencies.

The cryptocurrency space is currently at a crossroads, and the competition between Web3 and central regulation will shape the future of this industry.