Throughout the event, we had multiple chances to meet with prominent figures in the business and gain insight into the intersections between the traditional financial services sector and the rapidly growing realm of cryptocurrency.

To grasp where we are and where we are heading, let's first examine the technology and jargon used in this sector.


Technology
The foundation of blockchain technology, which is also known as cryptocurrency, is a decentralized network connected by a network of computers, or nodes. The rules or standards that specify how a blockchain operates are known as blockchain protocols.

Gavin Wood, a co-founder of Ethereum, first used the phrase "Web3" in 2014. In 2021, venture capital firms, major technological companies, and cryptocurrency enthusiasts began to show interest in the concept.

Ensuring a user-friendly interface and experience for decentralized applications is crucial to Web3 development. End users frequently communicate with Web3 apps rather than the blockchain directly.


"I can't wait for blockchains to be abstracted away to the point that no one knows they're using a blockchain; in the future, it would just be understood that if you say I'm building a financial tool you would build on blockchain," said Azeem Khan, COO and co-founder of the blockchain startup Morph.

"I think it's pretty crazy that people are trying to outdo each other over which database has the information." It's similar to a Web2 business claiming that its competitive edge is that it uses MySQL instead of Microsoft SQL.

Why is Web3 receiving so much attention?

WebAssembly is a low-level assembly-like programming language that can be used in web browsers. It offers languages like C/C++, C#, and Rust a compilation target so they can run on the web. This enables the web browser to access lower-level functions similar to those of a traditional operating system, allowing for greater integration and more complex applications to run natively in the browsers.

According to Kadan Stadelmann, CTO of the detachable blockchain platform Komodo Platform, this will allow web browsers to replace operating systems like Windows, Apple, and Linux as the primary means of communication in the future.

Fundamentally, Web3 uses NFTs, blockchains, and cryptocurrencies to give people back control. Web2 is read-write, Web3 will be read-write-own, and Web1 was read-only.

There are many of these robust native browser applications that are ideal for financial use cases. In particular, there is a clear use case for cryptocurrencies in both developed and emerging nations. In industrialized areas, people view cryptocurrencies as an investment asset, whereas in emerging markets, individuals use them to conserve wealth.

Income versus Innovation
While cryptocurrency may not be as relevant in rich nations because of established payment infrastructure, it has a significant impact on people's lives in underdeveloped nations where traditional payment infrastructure is missing.

Regarding the distinctions between developing and industrialized nations, Cecilia Hsueh, CEO and co-founder of Morph, stated: "In my experience, people in emerging countries care about revenue generation." Is it possible for me to earn money with this application? They then utilize it with pleasure. But innovation is important in wealthy nations. Being the first to use the thing is what they want. There is a significant mental shift.
 

Recently, the Ronin blockchain game Pixels became the first Web3 game to reach 100,000 daily active users (DAU). Pixels is a farming game. Jeffrey "Jihoz" Zirlin, co-founder of Sky Mavis, brought up Google Analytics data at the YGG Web3 Game Summit last month in Manila, Philippines. It revealed that over 82,000 visitors, or more than 25% of total traffic to the Pixels website, originated from the Philippines.

"The people in the emerging market of the Philippines are using Pixels as a way to make money; it is not about buying Bitcoin, storing it, and riding the boom market," states Constance W., a partner at startup firm Ryze Labs. Their main source of money is generated by the play-to-earn feature.
 

Danger
Anastasia Ulianova, co-founder and co-CEO of A.R.I.A. (Algorithmic Ratings & Investment Analysis), a crypto rating agency, examined the preferences of the developed market for investing and stated: "When I asked people how they choose their crypto investments, there are three answers that I usually get: Oh, this one is safe. This one I heard about in the press is similar to Bitcoin and has a large market capitalization. I'm going to capitalize on it since it's booming. Yes, my brother told me about this one. When I ask around, more than 90% of people go through this process; this is high-risk gambling rather than investing.
 

In the financial industry, a lot of discussion about blockchain technology and cryptocurrency use centers on the idea of decentralized finance, or DeFi as it is usually known. However, because of the lack of financial regulation and the impression of high risk, the widespread adoption of many of these DeFi applications is widely regarded as limited.
 

“Everyone used to use BitTorrent to download movies, TV shows, and songs, we never had our parents use it because the first thing they would get would be a virus because it was not structured, it was not regulated, and it was high risk,” said Nitin Agarwal, chief revenue officer at digital bank FV Bank, in reference to the current state of the industry. People stopped using BitTorrent when regulated media distribution services like Netflix, Spotify, and Amazon emerged because they were safer, faster, and better than BitTorrent.
 

Many people automatically think of regulation and consumer protection when discussing risk. This was widely recognized as the industry's biggest challenge by mainstream adoption.

What comes next?
The primary lesson I learned at the Token2049 conference held in the renowned Madinat Jumeirah in Dubai was that regulation is on the horizon, and everyone I spoke with at the event seemed to agree. They see this as the next big thing to help close the gap between the old banking services industry and the future financial services industry powered by Web 3.
 

"I believe that right now, if we compare crypto to the internet era, we are at the 56k modem, so we didn't even reach ISDN yet," said Christian Borel, head of MENA at Swiss cryptocurrency bank AMINA Bank. The blockchain has a lot more potential that we have yet to explore. And I'm positive that blockchain and artificial intelligence (AI) will have dominated some aspects of the banking industry in the not too distant future—maybe as soon as 2049.

As more institutional investors join the market, regulation is being accelerated. How soon can the government put these new rules into effect, and how will they affect this developing industry's sovereignty? Will it turn into the very obstacle they are attempting to overcome?