# Web 3 and Blockchain: Charting the Path to Mass Adoption By [DeFi Vaults](https://paragraph.com/@deficryptovaults-2) · 2023-02-02 --- Blockchain technology and Web 3 have been generating a lot of buzz, with the Global Web 3.0 Market Size [Expected to Reach USD 81.5 Billion in 2030](https://www.prnewswire.com/news-releases/global-web-3-0-market-size-to-reach-usd-81-5-billion-in-2030--emergen-research-301559192.html). Despite the excitement and optimistic projections, the path to mass adoption of Web 3 and blockchain technology is still largely uncharted, leaving people wondering. We’ve seen blockchains gain usage for everything from games and institutional databases to NFTs and crypto, but the question remains: what will contribute at large to the goal of mass adoption of Web3? In this article, we’ll delve into the key factors driving mass adoption of Web 3 and blockchain technology, while exploring the associated challenges and opportunities. What is Web3? ------------- Web3 is essentially an iteration of the internet—The Web— that offers upgraded features and use cases like digital asset ownership and digital identities via blockchain technology — including cryptocurrencies and other primitives like NFTs. If you recall, Web1 allowed for information to be accessed worldwide, and Web2 allowed users to interact with the available information, establish online identities, and create user-led content. Web3 is meant to minimize trust from centralized entities and verify all interactions— transactions— via blockchain technology. You can think of Blockchains as the technology that enables a Web3 experience. What is Blockchain Technology? ------------------------------ There are a couple of different types of blockchains including Layer 1s (L1s), Layer 2s (L2s), and sidechains, and they all strive to maintain decentralization, scalability, and security through differing consensus mechanisms and upgrades to their software. But no matter the “blockchain solution,” they all offer different levels of the same technological features, including: * **_Security:_** Blockchains use encryption and cryptography to secure user data and transactions, reducing the risk of hacking and cyber-attacks. * **_Programmability:_** Blockchains allow developers to build decentralized applications (dApps) that are resistant to censorship and can automate complex processes, such as supply chain management. * **_low-cost:_** Blockchains like Fantom avg. sub $0.1 transaction fees * **_High-speeds:_** Top L2 blockchain solutions like Arbitrum have the ability to process 4,500 transactions per second (TPS) * **_Interoperability:_** Web3 enables different applications and services to communicate and share data with each other, regardless of their underlying technology or platform. Web2 Companies and TradFi institutions are tapping into Web3 by combining different primitives —technological creations— made possible by blockchain technology to bring unique experiences to their customers and enhance their business. But there are four other important features of blockchain technology which Web2 establishments commonly ignore: * **_Open Access:_** Blockchains are designed to be open platforms that are accessible to everyone. Crypto Wallets do not have KYC requirements. * **_Trust:_** Web3 is based on a trust-minimizing consensus mechanism that ensures that transactions are verified and validated by the network, rather than by a central authority. * **_Decentralization:_** Web3 eliminates the need for central intermediaries, such as tech giants and governments, which gives users greater control over their data and online activities. * **_Privacy:_** Web3 allows users to maintain their privacy by giving them control over their data, without the need to share it with centralized intermediaries. web2 companies do not necessarily seek to align themselves with these values as many of them have strict regulatory guidelines and are required to have Know-Your-Customer (KYC) rules which push some investors to use Web3 dApps directly —transacting on-chain— as much as possible, to maintain self-custody and privacy of their assets. Main Drivers of Adoption ------------------------ The beautiful thing about blockchain technology is that it has a lot of use cases and presents many opportunities for users to interact with it on multiple layers. Some users interact with blockchains directly and swap cryptocurrencies on-chain using decentralized exchanges (DEXs), while other users make use of Web3 through Web2 integrations like saving an NFT collectible on Reddit, powered by the Polygon blockchain on the back end. Over the next few years, the next surge of Web3 users will stem from three main categories: * **Web2 company integrations** * **Governments, enterprises, and private institutions** * **NFT and decentralized finance (DeFi) users** Let's explore these sectors one by one: ### Web2 Integrations The current user experience for interacting with decentralized apps (dApps) is not as intuitive as web2 systems. To interact with dApps, users must create a crypto wallet and maintain the security of their assets, which presents a steep learning curve for many users. On the other hand, Web2 companies have existing userbases and unparalleled User experience from their years of experience and analytics. Web2 integrations with blockchain technology offer users a trusted brand, ease of use, and enhanced experiences on the front end while utilizing blockchain primitives on the back end that help to improve systems or supplement the already existing user experience. The next wave of users will be a part of the general public and may not want to maintain their private crypto keys. Instead, they’ll want to receive enhanced experiences from services and apps they already use. **Social Media: Reddit** [Reddit's](https://observer.com/2022/11/how-reddit-became-one-of-the-worlds-biggest-nft-marketplaces-in-just-four-months/) partnership with Polygon, which onboarded 4M+ users to Web3, is a prime example of a Web2 company effectively integrating with Web3. Avid Reddit users received special-edition collectibles granting users special comment treatment on posts. Other users were free to mint the free and paid collectibles through Reddit, allowing any Reddit user to customize an NFT and set it as their profile picture on Reddit or sell it on Open Sea. Reddit’s NFTs currently have 6M+ unique holders, with over half of them being from newly created wallets. ![Total Reddit NFT holders over time ](https://storage.googleapis.com/papyrus_images/33bfb23fc218433663cbe3d0866823e8715b01f68ba59174d77f84ae08618e5e.png) Total Reddit NFT holders over time Reddit has also tokenized its community points system. Reddit transformed its platform currency into a cryptocurrency that allows users to buy awards and reward other users with those awards. Award benefits include special access to premium subreddits, ad-free browsing, additional coin rewards, and credibility on the platform. This feature is a very intuitive implementation of blockchain technology as it allows users to interact with the world of Web3 without even knowing it. [https://opensea.io/assets/0xc8D3A3a83bdE5daD06d436694e3e22AC3E64d577/1466490](https://opensea.io/assets/0xc8D3A3a83bdE5daD06d436694e3e22AC3E64d577/1466490) **Gaming: Square Enix** Gaming companies like [Square Enix](https://www.hd.square-enix.com/eng/news/2023/html/a_new_years_letter_from_the_president_3.html), the company behind franchises like _Final Fantasy_ and _Kingdom Hearts_, are reshaping their businesses to focus on Web3 going into 2023. Square Enix got its start with Web3 in 2021 when it released an NFT collection for its Japan-only mobile game _Shin-San-Sei Million Arthur_ on the LINE blockchain, which sold out within a week. The demand for its NFTs, combined with the industry’s shift towards mobile gaming, pushed Square Enix to release a blockchain game on mobile as a proof of concept that allowed the use of the NFTs from the sold-out collection. ![](https://storage.googleapis.com/papyrus_images/6e3e24e136df803245f2275666a3da4af55fb112d40169676987927012c5de24.jpg) Square Enix preceded to take full advantage of 2022 as they led the Sandbox metaverses $2M seed round and launched another NFT project on the Polkadot network to commemorate _Final Fantasy VIIs_ [**25th anniversary**](https://nftnow.com/collectibles/final-fantasy-vii-nft-project-to-honor-the-games-25th-anniversary/)**.** Final Fantasy is one of the highest-selling video game franchises in history, averaging [**2.67 million sales per title release**](https://www.ign.com/articles/why-final-fantasy-is-the-biggest-rpg-series-of-all-time)**.** Later that year, Square Enix created the Priority Policy Program for Realizing a Digital Society, a plan which discusses how to cultivate an environment for promoting the Web 3.0 concept —effectively intertwining blockchain within its company ethos. Square Enix followed this up by starting a decentralized autonomous organization (DAO), dedicated to researching Web3 and blockchain technology. The gaming company kicked off this year with the [2023 presidential letter](https://www.hd.square-enix.com/eng/news/2023/html/a_new_years_letter_from_the_president_3.html), and discussed the company's plans including, the development of multiple blockchain games based on original IPs, a game & service publishing business centered on blockchain games, and more. Square Enix is committing a lot of attention to blockchain but they aren't the only gaming studio with Web3 aspirations, as Ubisoft has also announced plans to move into Web3. **Apparel: Nike** [Nike’s](https://decrypt.co/114494/nike-swoosh-web3-platform-polygon-nfts) conviction in blockchain technology has led the clothing company to dedicate two separate divisions to its Web3 efforts: RTFKT and .SWOOSH. RTFKT taps into Nike's existing Web3 users interested in the brand, especially those seeking to personalize their metaverse experience. RTFKT releases NFT wearable items that users can purchase and wear in metaverses like Decentraland. In contrast, .SWOOSH appeals to a more “mainstream crowd,” offering users NFTs that grant them special access to events, token-gated content, and the ability to vote on community proposals. At the center of the .SWOOSH ecosystem is Nike’s app, the platform where users interact with their NFTs. Creating an app allows Nike users the benefit of Web3 features via NFT ownership with a familiar Web2 user experience. Nike’s RTFKT NFT releases have cemented themselves in the Web3/NFT community, but its recent launch of, .SWOOSH will be the main component that onboards users to Web3. ### Governments, Institutions, and Enterprises Although Web2 companies will boost on-chain activity as they onboard billions of users, Governments and enterprises will be primarily responsible for the next Billions of dollars to enter Web3. **CBDCs** Governments are interested in blockchain technologies ability to verify and store data and facilitate digital payments. [Central bank digital currencies (CBDCs)](https://cbdctracker.org/) are stable digital currencies representing a country's fiat currency — like stablecoins. Unlike stablecoins, the issuance and total supply of coins is controlled by each country's government. CBDCs can benefit countries whose geography presents challenges in terms of access to physical banking. Additionally, CBDCs are a form of payment that can operate beyond existing mediums, offering more flexibility for everyone. Around 100 countries are exploring CBDCs at different levels, and the number is growing. In China, their digital currency, e-CNY, is on its way to flipping its fiat currency, with more than a hundred million users transacting with the CBDC. Jamaica's JAM-DEX CBDC, and The Bahamas' CBDC, the _Sand Dollar,_ have also been in circulation for more than a year. On the other hand, Countries slower to pull the trigger, like Sweden, are still developing proof of concepts, and countries like the United States haven’t left the research phase yet. ![2019 Central Bank Digital Currencies Status](https://storage.googleapis.com/papyrus_images/7fefde62f77e856e2c9dc75fc29b6d0799f935161b93e45b4350467b274254c2.png) 2019 Central Bank Digital Currencies Status ![2021 Central Bank Digital Currencies Status](https://storage.googleapis.com/papyrus_images/c893ed2c5323225aa780bf0663c19d32735659e741a064a7e9f545eaedf834e3.png) 2021 Central Bank Digital Currencies Status ![2023 Central Bank Digital Currencies Status](https://storage.googleapis.com/papyrus_images/05baf90650c8f01ff164841cf58eadbfc7796a76d0f8b1781ed0c0fd9b41fef7.png) 2023 Central Bank Digital Currencies Status CBDCs have to bare a design that can avoid sudden capital outflows that could undermine financial stability, and each country's financial system can solve it differently. We also saw in all three active CBDC projects—in the Bahamas, China, and the Eastern Caribbean Currency Union—that they placed limits on holdings of CBDCs, again, to prevent sudden outflows of bank deposits into CBDC. Though CBDCs are far from censorship-resistant or private —on the user level— they use blockchain technology which is inevitably Web3. As larger countries launch digital currencies, CBDCs will aid in onboarding billions of dollars to Web3. **Data infrastructure** [Deloitte](https://www2.deloitte.com/us/en/pages/about-deloitte/articles/press-releases/deloitte-ava-labs-blockchain-state-local-government-natural-disaster-recovery.html), an international professional services network, is using blockchain technology for its “Close As You Go” (CAYG) app, designed to improve state and local government's ability to recover from natural disasters and other emergencies Using the Avalanche blockchain, CAYG provides state and local officials with a transparent, fraud-resistant, and cost-efficient system that empowers both grantmakers and recipients. Blockchain technology allows CAYG a streamlined way of aggregating and validating the documentation necessary to demonstrate eligibility for funding. Avalanche’s immutability also helps to improve record-keeping which could mitigate audits. It's also worth noting that Deloitte uses AWS for its cloud solutions. AWS has recently announced a partnership to integrate AWS with the Avalanche blockchain and improve blockchain tooling for developers allowing for a “one-click experience” when launching “subnets”. **Institutions tokenizing RWAs** [Huntington Valley Bank(HVB)](https://financialit.net/news/banking/huntingdon-valley-bank-access-100m-defi-funding-through-makerdao), a Pennsylvania bank, has been approved to borrow $100M from Maker, a decentralized app (dApp). This move makes HVB the first US-based bank to integrate collateral into the DeFi ecosystem. With this deal, HVB makes use of its illiquid loan agreements from its customers by offering them as collateral to Maker Vault. Maker Vault inherits the loan interest, and in exchange, HVB gets to borrow against the value of its customer loans. MakerDAO has set aside a $100M vault for HVB to take loans in the stablecoin, DAI. To mitigate risk, all loans accepted as collateral are subject to a risk assessment which will determine the maximum loan-to-value ratios for HVB —not to exceed 50%. HVB is a trailblazer in Web3, and as more banks look to use their illiquid assets, institutions will help spread Web3 use—and decentralized finance (DeFi) as a by-product. ### Decentralized Finance (DeFi) Crypto investors and NFT traders are making transactions directly on-chain and bypassing intermediaries as we enter a [Self-custody Spring](https://static1.squarespace.com/static/63005a0edeceb945f6d8904b/t/63d107e7f4e51f40721043f1/1674643457848/Reflections+On+Contagion+%26+The+Rebirth+Of+Crypto+Infrastructure.pdf) —Coined by Edessa Capital. With centralized crypto entities like FTX and Celsius going underwater in recent yearsSelf-custody is becoming more important than ever. Users are beginning to realize they can no longer trust institutions —especially with their crypto. The shift towards self-custody, paired with the unparalleled innovation of the DeFi ecosystem —and its dApps— will onboard the more informed crypto investors as the other sectors of Web3 gain adoption. However, DeFi probably won't be at the forefront of mass adoption because it presents a steep learning curve for users unfamiliar with the technological implications of maintaining their cryptocurrencies. But users willing to take the time to understand will gain access to a financial marketplace with new-age investment strategies while maintaining peace of mind and security in maintaining their crypto. However, as seen with HVB and Maker, institutions like banks will also aid DeFi activity by onboarding real-world assets like loans. Stablecoins used for remittances are another use case to consider. CBDCs are still experimental, and once developed, they may not be integrable with other Web3 technologies. Stablecoins are ideal for certain people looking to maintain anonymity. Stablecoins present a perfect vehicle for people to transfer value cross-border and make instant payments. There are also Web3 native companies like Ava Labs seeking to improve the user experience with efforts like its [Core Wallet](https://medium.com/avalancheavax/ava-labs-launches-core-mobile-wallet-the-last-crypto-wallet-youll-ever-need-2596c9b66be9). The Core wallet offers users access to purchase and self-custody cryptocurrencies on the Avalanche blockchain, including native BTC, native ETH, and other assets. Final Thoughts -------------- "Boundless" is the word that most accurately describes blockchain technology. The underlying technology can transform the ways we do virtually everything. Most of the world will be operating in Web3 within the next decade. But like many of the worlds innovations, blockchain technology will remain misunderstood until it is effortlessly integrated into our everyday lives. Seamless user experience will remain a catalyst in user onboarding. But the UX must be balanced with a level of self-custody if companies seek to retain users that want to maintain their security and anonymity. Resources: ---------- [https://www.federalreserve.gov/publications/files/money-and-payments-20220120.pdf](https://www.federalreserve.gov/publications/files/money-and-payments-20220120.pdf) [https://www2.deloitte.com/us/en/pages/about-deloitte/articles/press-releases/deloitte-ava-labs-blockchain-state-local-government-natural-disaster-recovery.html](https://www2.deloitte.com/us/en/pages/about-deloitte/articles/press-releases/deloitte-ava-labs-blockchain-state-local-government-natural-disaster-recovery.html) [https://thedefiant.io/makerdao-dai-traditional-bank](https://thedefiant.io/makerdao-dai-traditional-bank) [![]({{DOMAIN}}/editor/youtube/play.png)](https://www.youtube.com/watch?v=z9B1TZnV-uo) [https://www.imf.org/en/News/Articles/2022/02/09/sp020922-the-future-of-money-gearing-up-for-central-bank-digital-currency#:~:text=Getting%20the%20design,on%20their%20mandates](https://www.imf.org/en/News/Articles/2022/02/09/sp020922-the-future-of-money-gearing-up-for-central-bank-digital-currency#:~:text=Getting%20the%20design,on%20their%20mandates) [https://home.treasury.gov/system/files/136/StableCoinReport\_Nov1\_508.pdf](https://home.treasury.gov/system/files/136/StableCoinReport_Nov1_508.pdf) [https://ripple.com/insights/cbdcs-transaction-efficiency-and-economic-growth/](https://ripple.com/insights/cbdcs-transaction-efficiency-and-economic-growth/) [https://www.forbesindia.com/article/crypto-made-easy/total-crypto-users-likely-to-reach-1-billion-by-2030-bcg-report/78443/1#:~:text=On%20July%2022%2C%20Boston%20Consulting,reaching%20one%20billion%20by%202030](https://www.forbesindia.com/article/crypto-made-easy/total-crypto-users-likely-to-reach-1-billion-by-2030-bcg-report/78443/1#:~:text=On%20July%2022%2C%20Boston%20Consulting,reaching%20one%20billion%20by%202030) [https://defillama.com/stablecoins](https://defillama.com/stablecoins) [https://www.swoosh.nike/](https://www.swoosh.nike/) [https://www.imf.org/en/Publications/fandd/issues/2022/09/Picture-this-The-ascent-of-CBDCs](https://www.imf.org/en/Publications/fandd/issues/2022/09/Picture-this-The-ascent-of-CBDCs) [https://www.prnewswire.com/news-releases/global-web-3-0-market-size-to-reach-usd-81-5-billion-in-2030--emergen-research-301559192.html](https://www.prnewswire.com/news-releases/global-web-3-0-market-size-to-reach-usd-81-5-billion-in-2030--emergen-research-301559192.html) [https://www.emergenresearch.com/industry-report/web-3-market](https://www.emergenresearch.com/industry-report/web-3-market) [https://cointelegraph.com/news/square-enix-partners-with-enjin-to-launch-final-fantasy-vii-collectibles](https://cointelegraph.com/news/square-enix-partners-with-enjin-to-launch-final-fantasy-vii-collectibles) [https://observer.com/2022/11/how-reddit-became-one-of-the-worlds-biggest-nft-marketplaces-in-just-four-months/](https://observer.com/2022/11/how-reddit-became-one-of-the-worlds-biggest-nft-marketplaces-in-just-four-months/) [https://decrypt.co/94251/square-enix-enters-the-sandbox-ethereum-metaverse-with-dungeon-siege](https://decrypt.co/94251/square-enix-enters-the-sandbox-ethereum-metaverse-with-dungeon-siege) [https://decrypt.co/117001/reddit-5-million-nft-avatars-polygon](https://decrypt.co/117001/reddit-5-million-nft-avatars-polygon) [https://medium.com/avalancheavax/ava-labs-launches-core-mobile-wallet-the-last-crypto-wallet-youll-ever-need-2596c9b66be9](https://medium.com/avalancheavax/ava-labs-launches-core-mobile-wallet-the-last-crypto-wallet-youll-ever-need-2596c9b66be9) [https://financialit.net/news/banking/huntingdon-valley-bank-access-100m-defi-funding-through-makerdao](https://financialit.net/news/banking/huntingdon-valley-bank-access-100m-defi-funding-through-makerdao) [https://www.swoosh.nike/](https://www.swoosh.nike/) [https://static1.squarespace.com/static/63005a0edeceb945f6d8904b/t/63d107e7f4e51f40721043f1/1674643457848/Reflections+On+Contagion+%26+The+Rebirth+Of+Crypto+Infrastructure.pdf](https://static1.squarespace.com/static/63005a0edeceb945f6d8904b/t/63d107e7f4e51f40721043f1/1674643457848/Reflections+On+Contagion+%26+The+Rebirth+Of+Crypto+Infrastructure.pdf) --- *Originally published on [DeFi Vaults](https://paragraph.com/@deficryptovaults-2/web-3-and-blockchain-charting-the-path-to-mass-adoption)*