Will Web3 Thrive On Despite The Great Bear?
The past few months has seen the cryptocurrency market face tremendous pressures brought about by the tightening of the Federal Reserve’s monetary policy coupled with the collapse of large institutions such as Three Arrows Capital due to excessive leverage and poor risk control.
Such debilitating events have resulted in 2022 being named the year that lays claim to the most destructive bear market in the history of digital assets.
According to statistics offered by Ryan Selkis, founder of crypto research entity Messari, over-the-counter transaction prices of many Web3 unicorn projects are encountering relatively large shrinkage compared to previous rounds of financing valuation, and many of these projects include unicorns such as OpenSea, FTX, and ConsenSys. Data provided by Messari states that the valuation of more than ten Web3 unicorns has shrunk by about 50%, with the highest shrinkage standing as high as 90%.
But do such negative statistics necessarily indicate that progress and development in the Web3 ecosystem has come to a standstill? Was Web3 overhyped to begin with? Has the boom ended before the era could truly begin?
The answer is a firm ‘no’. On the contrary, many examples in history exist to exemplify how innovation and subsequent success have emerged from less than ideal operating environments.
“Downturns help the industry mature, and have become important phrases where some of the most exciting innovation takes place,” said Andrew Durgee, Head of Republic Crypto, in an interview with blockchain media CryptoSlate.
The Ethereum blockchain, which emerged during the 2014 bear market, is by no means the only successful project to have been born during a crisis. Prolific blockchains such as Polygon and Algorand similarly gained traction following the 2017 crypto crash.
“I expect to look back at 2022 with a similar perspective, and I look forward to seeing what impactful projects emerge from this newest cycle,” Durgee said.
🔹The inevitable Web2 to Web3 transition
The recent slump in many crypto assets has once again exposed the risks of token-driven financialization, and also clarified the need for Web3 applications to find use cases capable of solving problems in the real world economy. Web2’s enterprise success was marked by such tenets, and it is widely believed that Web3 will have to follow in Web2’s footsteps in order to achieve a similar outcome.
The crypto bull run that occurred from 2020 to 2021 led many to believe that Web2 applications would eventually be replaced by their Web3 counterparts. However, the current bearish market sentiments have led to an increased focus on Web2 and how applications such as PayPal, YouTube and TikTok continue to play significant roles in netizens’ daily lives.
The migration from Web2 to Web3 signals a vital opportunity for crypto-native projects, as Web2 businesses and investors seek out Web3 partners who are well-versed in blockchain infrastructure, complex token economics and dynamic communities run by DAOs. This symbiotic partnership has led to movements on many fronts due in part to various events that have occured in the blockchain space — since 2021, some crypto communities have had to migrate to Southeast Asia due to crypto trading bans in their own countries. Many traditional financial talents have also shifted to the Web3 finance space in their bid to boost development and explore new horizons.
The Web2 to Web3 migration is a significant trend that is here to stay. The current bear market will deem this migration even more impactful, giving the Web3 movement the capital and expertise it needs for its next breakthrough as it approaches mass adoption.
🔹Centralized exchanges’ key Web3 role
As pioneers in the crypto industry, centralized crypto exchanges will play a pivotal role in this crucial migration. Recent years have seen many cryptocurrency exchanges deploy Web3 concepts such as creating unified identity authentication systems, developing decentralized operation networks, and enhancing data confirmation and authorization systems.
Take world-leading crypto asset exchange Huobi Global as an example. The exchange has made significant headway in building Decentralized Identifiers (DID) systems, a widely-used identification system for Web3 residents. DIDs can correspond with multiple identities and require the onboarding of more applications, including social networking, games, and more to support the accumulation of data on-chain. To date, nearly 700,000 Huobi Global users have obtained DIDs.
As the basic infrastructure of the Web3 world, blockchain technology continues to face myriad challenges — the demand for the application layer is growing too quickly, and technical difficulties have been exhibited and have yet to be fully mitigated. With nine years of experience in the blockchain industry, Huobi has invested in OptimismPBC, zkSync, and other high-quality Layer 2 projects, and has demonstrated willingness to take on the role of an active partner in high-potential project teams in order to solve these pressing technical issues.
NFT, with its characteristics of digital scarcity, uniqueness, and verifiability, provides confirmation of digital ownership for and plays a key role in the Web3 era. Huobi Global has built a cohesive NFT platform and community, enabling more creative developers, artists, and users to participate in and mutually enjoy the benefits offered by the industry. In addition to NFT assets, Huobi Global has listed more than 500 high-quality crypto assets hailing from a variety of Web3 segments, including NFT, DeFi, GameFi, and SocialFi, to enrich the future of the World Wide Web.
The concept and technology of Web3 is still in its infancy, with inadequate participation on multiple fronts. Leading companies and 3A-level game manufacturers from the Web2 period are still testing the Web3 waters, and the future often appears murky at best.
It would do good to remember that after a storm, a rainbow awaits. Web3 projects that will emerge victorious from such treacherous times will be resilient products that will bring benefits to both users and the industry. The day will come when Web3 applications achieve mass adoption and cement their positions in netizens’ daily lives. Till then, investors who believe in the good Web3 will bring will continue to put their money where their mouths are, as we look forward to better times ahead.