Web3 needs blockchain and tokenomics to succeed

Even after being hit by negative headlines, regulatory crackdowns and doubts about its viability – blockchain remains key to web3 applications, development and mainstream adoption.

There is a lot of debate and conversation surrounding potential use cases and applications for blockchain technology, and this debate has seemed to reach a fever pitch lately. With crackdowns and bans on everything from staking-as-a-service to stablecoins, and fines being levied on non-fungible token (NFT) supporters and creators, the following questions seem reasonable to ask. If so many of the well-known applications of blockchain are facing so many headwinds and problems, is there anything left for the blockchain community to focus on?

The answer is a resounding yes.

One of the few bipartisan issues that exists at this point is that no political party or group is entirely happy with the current state of the internet or social media. Politicians and advocacy groups on both sides of the aisle continually confirm that the internet is far too restrictive, censorship is on the rise, and that the tone of virtual discourse has deteriorated significantly. This is not to mention the global implications of a restricted or censored version of the internet; billions of people are currently unable to access even some objective information.

Web3 has been put forward as at least a partial solution to ills currently facing e-commerce, social media and the internet more generally, but at the heart of the idea, this proposal reveals a paradox. How can web3 applications scale, generate returns to attract further investment and deliver the quality of services users have become accustomed to on web2 applications? Blockchain and tokenomics provide at least a partial answer; let’s take a look at some of these factors.

Distributed processing. At the core of web3 is the concept that web applications, tools and portals should be more decentralized than current providers allow. Concerns about privacy, allegations of monopolistic practices and concerns about stagnation vis-à-vis international competitors are well-known criticisms of the current browsing and online landscape. Decentralizing aspects of existing functions is a core driving force behind web3; blockchain exemplifies the most well understood, researched and developed decentralized ledger technology to date.

Based on this, the emergence of decentralized applications (dApps) that allow blockchains to interact with other blockchains and other technology tools continues. Complementing the rise of smart contracts that previously allowed interoperability, dApps can be programmed to handle supply chain management issues, financial transactions and social media interactions. Smart contracts and dApps are still in the early stages of mass adoption, but that hasn’t slowed the development of web3; it is a reality.

Web3 is here. With the continued dominance of a handful of web and browser organizations, it would be easy to think that web3 is more of a concept than a reality, but that’s a wrong view of the web landscape. An often-cited example of web3 tools currently on the market includes Brave Browser, which uses a native token to incentivize and reward behavior, but there are several more worth noting. These include Quintura (a search engine), Gnoss (essentially a digital identity company), which could easily be applied to future metaverse applications, and Obsidian Secure Messenger, which is a blockchain-based messenger application, among many others.

An example perhaps more familiar to investors is Napster, one of the original music sharing platforms, which recently launched into the web3 world with an acquisition of a music-focused NFT marketplace. Building on the idea of ​​decentralization, it makes sense that a peer-to-peer music sharing platform would invest in web3 development. Yet another is the latest news that MastercardMA, via a web3 application (Immersive), will accept payments via USDCUSDC starting soon.

Tokenomics. Tokenomics is a simple idea, which originally referred to how the supply of a given token was managed; issuance, burn rates, redemptions, lock-in periods, etc. As web3 continues to evolve, along with other decentralized applications such as decentralized autonomous organizations (DAOs), the importance of creating a tokenized system to align the interests of investors, users, and developers will only become more important going forward.

One of the most important points in the recent regulation of coins and tokens of all kinds is that – eventually – there will be more clarity around how certain coin and token activities will be regulated going forward. Governance, security and value capture tokens all have unique roles to play in a variety of projects, but have thus far operated in a regulatory gray area.

Short-term pain aside, the reality is that web3 applications will run on a combination of blockchain and tokenomics, and the sooner regulatory clarity can be presented, the healthier the marketplace will be.

Blockchain and crypto may have suffered several blows over the past few years, but the potential for future applications is just beginning.

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