If 2022 has taught us anything, it’s that Web3 is here and is accelerating at a fast pace. Byproducts of Web3, such as crypto, NFTs and the metaverse all experienced differing successes, but all gained a lot more notoriety.
Payment Expert spoke to Web3 Labs CEO & Founder, Conor Svensson, on the year that Web3 experienced and what lies ahead for the next phase of technology and the internet.
Payment Expert: It’s been a whirlwind year for crypto, how does the market get back on track and retain stability in 2023?
Conor Svensson: 2022 saw some high-profile failures of crypto projects, specifically the collapse of the Terra Luna stablecoin UST, hedge fund 3 Arrows Capital and more recently, the FTX exchange.
Unfortunately a significant number of crypto investors were burnt by these events, and it’s going to take some time for these people to move back into crypto.
This isn’t necessarily a bad thing for the underlying blockchain and web3 technologies. With adoption of them that was being driven primarily by price speculation, there was an unhealthy degree of mania that we saw within the industry, with projects growing significantly purely off the back of hype associated with their tokens as opposed to there being sound business fundamentals.
Whilst many tokens were originally designed to provide utility for blockchain and web3 networks, the price speculation aspect served as a distraction, as so many got caught up in the hype.
It’s likely that the next couple of years will see crypto prices compressed, without the wild swings we have seen during the past few years. This is a good thing, as it enables teams and builders in the space to double down on building useful products with the technology, as in the current market, it’s only going to be those projects that create real utility for their users to thrive.
It’s likely that during this period the next generation of products and services using web3 technologies will be built out, and these will provide greater innovation and utility then what has gone before.
PE: Crypto regulation talks are ramping up in some of the major countries such as the UK. How likely is it that could we see a defined crypto asset bill in one of these major countries next year and how will this impact the overall market?
CS: At this point I don’t see the overall market being significantly impacted by new regulations in the UK. The UK regulators are no doubt keen to protect consumers against scams and unsafe exchanges, but I don’t see it fundamentally changing the landscape from where we are right now.
I do believe that in the US, off the back of the FTX implosion, we may see some stringent regulations enacted that could create challenges for individuals to access some of the native DeFi protocols. This may mirror the restrictions that are in place for accredited investors where individuals with a net worth in the millions are only able to access certain products and services.
This wouldn’t be a good thing for DeFi but I do believe that in the wake of events of FTX, some heavy-handed regulation may come in that impacts the uncensorable part of the DeFi ecosystem.
PE: The metaverse has also grown in size and popularity but is still largely new. What are some of the deterrents for companies to enter the metaverse, but what are also the benefits?
CS: Mark Zuckerberg himself said how he considers Meta’s metaverse play a 10 year bet. There are still many challenges to build a global scale metaverse — access to fast internet connectivity, providing low latency responsive VR hardware with more powerful rendering capabilities are just a handful of the real challenges that exist right now. This doesn’t even include a web3 component in the mix.
Hence, from a corporate perspective, companies need to be willing to make a long-term investment in the metaverse, as it’s unlikely to pay dividends in the next year or two.
When the metaverse comes to fruition, it has the potential to be more disruptive to humanity than the internet itself, assuming we are talking about a metaverse that the majority of the world’s online population can access. The revenue opportunities for businesses that position themselves well could be monumental.
This tradeoff of ‘risk versus reward’ is the biggest challenge right now, and given all of the moving parts and technical uncertainty, organisations need to keep this front of mind when taking any bets with it.
PE: Can you talk about some of the benefits of the Web3 Labs Sirato Blockchain Explorer and why companies should use this system?
CS: Sirato provides businesses with the eyes and ears for blockchain technology. A blockchain on its own is simply a network of nodes sharing bytes between one another. In order to make sense of any of the activity taking place on the blockchain, be that movements of tokens such as stablecoins or NFTs, activities between smart contracts and details of the transactions themselves, you need Sirato to provide this information to users.
The consumers of this data are varied, it can include product and business users who want to measure user engagement of products running on blockchains, or ops staff. Even as far as developers who want to appreciate the activity taking place in close to real-time as it unfolds.
Sirato also provides straightforward integration with other internal applications including business intelligence reporting platforms and other internal systems via its API. This allows the blockchain component of business applications to link with traditional businesses systems and processes which is critical for any enterprise working with the technology.
PE: What are some of the biggest benefits you have heard from clients of blockchain technology?
CS: Web3 Labs’ primary focus is in providing decentralised financial infrastructure solutions. With the team having spent decades working within the financial services (FS) industry we are playing to our strengths, but also there is significant awareness within FS about the real ways in which blockchain and Distributed Ledger Technology (DLT) can enable much of our modern financial markets infrastructure to evolve.
For instance, many of the roles of traditional financial markets infrastructure (FMI) companies can move onto a blockchain or DLT. In this scenario, a decentralised ledger can provide the role of a central counterparty (CCP), trade repository (TR), security settlement system (SSS), payment system, with a blockchain wallet replacing the central securities depository (CSD).
With the existing regulations that we have in place, we couldn’t simply move all of these activities onto a blockchain managed by a single entity. However, there’s wide recognition within the industry of what is capable with this technology.
The fact that the majority of the world’s central banks and the Bank for International Settlements are undertaking many initiatives focused on wholesale FMI demonstrates just how much industry awareness there is of the potential here.
Practically speaking this has the potential to massively streamline FMI over the coming years, and this in areas such as retail and wholesale CBDCs, post-trade processing, asset tokenisation many clients are already sold on the opportunity, but simply need to figure out the best way forward, as regulation needs to be careful considered by existing market participants.
PE: Is Proof of Stake the next step for blockchain evolution and do you believe more cryptocurrencies will follow Ethereum’s lead in this transition next year?
CS: The most significant blockchains not using proof of stake are the Bitcoin and Dogecoin networks. There is no desire within the Bitcoin community to migrate their energy intensive proof of work consensus mechanism.
Dogecoin apparently is going to be migrating to proof of stake at some point in the near future. All of the other major blockchains are already using proof of stake, this is in part because proof of stake emerged after proof of work as a consensus mechanism. Hence, with more recently created networks they were able to start with the far more energy efficient proof of stake consensus.