Why Governments May End Up Driving Web3’s Adoption

Industry experts predict that 2024 will be a good year for the Web3 industry, with a high potential for faster global adoption.

At the end of 2023, Verida and inDAO partnered with the Uzbekistan government’s Digital Economy Research Centre (DRC) to bring Web3 one step closer to the country’s citizens, educating them on self-sovereign identity technology, blockchain, and the Web3 sector itself.

It’s one example of a country embracing the next frontier, and we look at whether broader government adoption can drive faster Web3 global adoption.

Public Interest in Web3 on the Rise

A report released by KuCoin in January 2024 found that the month saw a notable resurgence in Web3 investments, with an increase of 22% in seed rounds and strategic financing of Web3 projects with funding exceeding $10 million.

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Chris Were, the CEO of Verida Network, told Techopedia:

“A substantial global population currently possesses digital assets (above 30% in many countries), indicating a significant public interest in the realm of free digital assets and the burgeoning technology of Web3.”

What many people do not understand, however, is that Web3 spans far beyond the confines of cryptocurrencies such as Bitcoin (BTC) and Ethereum (ETH), encompassing a diverse array of decentralized technologies such as IoT devices and data storage, as well as the digitalization of tangible assets like real estate, bonds, and treasury bonds.

Were added that at the current stage, the Web3 industry finds itself right about where the .com boom was with Web2 in the early 2000s.

“During that period, the internet was heralded as a groundbreaking concept, yet the lack of developed applications resulted in basic websites, and web browser technology was in its infancy, featuring only images and text.

 

“Similarly, in the current state of Web3 technology, while the potential is widely recognized, the user experience is still in the process of catching up, akin to the early stages of the internet’s evolution.”

Meanwhile, the cryptocurrency industry has been struggling with global adoption.

ARIA’s co-founder Anastasia Ulianova told Techopedia that with global governments, such as El Salvador and Argentina, showing an increased interest in the decentralized finance (DeFi) industry, more tech-savvy leaders could take on decision-making roles in G20 nations, which by extension could lead to the further adoption of Web3 and cryptocurrencies as a whole.

“In the private sphere, all eyes are on the major traditional players such as Blackrock, J.P.Morgan, and Société Générale as these shift towards embracing cryptocurrencies and adoption Web3.

 

“Their compliance with regulations is fostering a more organized and legitimate market, prompting regulators to advance and set clearer guidelines.”

Lack of Education is the Biggest Challenge for Web3 Adoption

With Web3 still being a relatively young industry, lack of education, market instability, and enforced actions could all act as some of the biggest challenges for Web3 adoption.

Graeme Moore, the head of tokenization at Polymesh, explained:

“Trust is another major factor. When Web3 is seen as a brand new, scary technology, many people would not trust their money (or time or energy) to it. Over time, more and more people will see that Web3 can be a safe place to store funds, and a worthwhile place to spend their time and energy.”

Moreover, another critical challenge that could be hindering broader Web3 adoption is its complexity.

Moving past trading and speculation, ARIA’s Ulianova noted that wallet transfers, DeFi, and blockchain bridges remain too complex for non-crypto natives, making it hard for just anyone to enter the playing field of Web3.

“This mirrors the early computer era in the 80s, where systems like DOS were used by a few, and widespread adoption only came with user-friendly interfaces like Microsoft Window.”

In general, experts comment that several Web3 applications are not yet as user-friendly as their Web2 counterparts, which is possibly one of the most commonly understood barriers to Web3 adoption.

In addition, the United States stands out as key when enforcing rules and regulations within the Web3 industry, which in turn holds businesses back from “diving into this space and making progress”, Verida’s Were noted.

Web3 Adoption: Massive Opportunity for Reshaping Digital Ownership and Control

One of Web3’s biggest superpowers is how the technology places users and data ownership at its core, allowing them to decide who has access to their personal data and information and how much they are willing to share.

In the current day and age of digitalization, governments and major corporations hold vast amounts of personalized data in centralized databases, which could lead to an increased risk of privacy breaches, surveillance, and misuse, eroding individual autonomy and fostering potential abuse of power.

Verida’s Were said:

“If individuals take control of their data stored in a user-centric way, it could lead to increased security, huge efficiency gains and a revamped technological landscape. Governments, by exploring these possibilities, can contribute to the evolution and security enhancement of our current technological systems.”

He added that Verida’s partnership with the Digital Economy Research Centre is an example of governments embracing risk-taking and innovation as governing bodies step into uncharted territories for the future development of both technology and financial systems.

Needless to say, other governments worldwide have also started to develop new frameworks that aim to provide clarity for the digital assets industry, especially in Asia. These include South Korea’s institutionalization of cryptocurrency and legalization of security token offerings (STOs) and Singapore’s Payment Services Act.

ARIA’s Ulianova added that favorable regulations could further lead to clear guidelines, which will, in turn, encourage traditional industries to step into the Web3 space.

“This top-down approach can facilitate widespread adoption through conventional service providers, leading to a more comprehensive global uptake of Web3.

 

“In addition, governments can play a key role in helping foster an environment promoting a symbiotic relationship between traditional and decentralized finance, in such paving the way for greater trust in the space”

Growth Starts with New Technologies

The world as we know it today would not have come to be if it were not for the Industrial Revolution, and the same concept stands with Web3 adoption.

Web3’s borderless nature underscores the importance of global collaboration, Ulianova explained. The current state of Web3 is challenged by several regulatory standards, which vary across countries, making projects that are compliant in Europe face challenges in the US or be prohibited entirely in China, thus making international cooperation vital for the seamless growth of Web3 technologies.

Moreover, wider Web3 adoption would also mean better efficiency.

Verida’s Were explained:

“Governments deal with complex systems that need to communicate with each other. They exchange data about individuals, companies, and entities, creating a web of connections that is both; complicated and costly to maintain.

 

“However, Web3 technologies offer an alternative. By giving people control over their identity, reputation, and data, governments could simplify these processes. Instead of numerous systems talking to each other, they would only need to connect with one system—interacting directly with citizens to request specific information securely and efficiently.”

Overall, governments wield immense power, which means that wider Web3 adoption by governing bodies will only naturally lead to faster global Web3 adoption.

“Imagine the power of telling 100 million people to start using a digital wallet tomorrow or insisting that all students in a country need web3 wallets for their digital qualifications.

 

“The push for digital identity in Europe is a prime example of how government initiatives can drive widespread acceptance. The next big wave is likely to be central bank digital currencies, motivating citizens to embrace digital wallets and standardized digital assets for their respective countries.

 

“This shift will not only drive adoption but also unlock a plethora of associated products and services built on blockchain technology.”

ARIA’s Ulianova added that wider Web3 adoption may also be driven by competitive dynamics where countries will not want to miss out on a good opportunity to make more money.

“As countries observe their neighbors embracing crypto, it will likely create a domino effect, spurring others to advance in the realm of Web3.”

The Bottom Line

Overall, 2024 seems like a promising year for the Web3 industry, driven by rising public interest and future government involvement in its development.

Web3 offers a transformative shift, outing data control in users’ hands and offering more growth opportunities. However, broader Web3 adoption continues to hang on overcoming challenges and improving user-friendliness.

As governments continue to navigate their digital frontier, competition and the fear of missing out could potentially propel a widespread shift towards Web3 technologies in the years to come.