It’s time to redefine what has come to be known as the metaverse — a reimagined Internet, integrating both established and new technologies (think mixed reality) — to Web3. Although the possibilities seem to be abundant, the perception of the “digital reality” of the metaverse is too far in the horizon and is not widely relevant.
Rather than focusing on the metaverse, then, companies need to consider real-life use cases for Web3 – including decentralization, blockchain and token-based economies – including crypto tokens and non-fungible (NFT), to gauge its. true value, sustainability and future. Web3 has given us an incredible tool – the ability to create a “digital value economy”, whereby something can have value in itself online, without a trusted intermediary.
That said, we all have a fear of the unknown, as is often the case with new technological developments. Against the backdrop of last year’s FTX crash, feelings of distrust have permeated Web3-based blockchain, crypto and NFT projects. The realm of decentralized finance (DeFi) takes the crown due to uncertainty, with desperate calls from industry players to regulate the ecosystem. This is understandable – the industry has become more and more impactful recently, with intrigue in the space reminiscent of the early days of Facebook and Twitter.
However, there is a strong feeling from those in the industry that regulatory measures should be approached with caution and balance, ensuring that any regulation protects users without stifling innovation in the Web3-crypto sphere, which still has a wide purpose of evolution.
Let’s take NFT as an example: NFT are digital tokens of virtual and real assets that live on a blockchain. Different from cryptocurrency tokens; characterized by its inherent uniqueness – where a smart contract is encoded in the token – it cannot be edited or altered. As a result, these “unique” assets represent digital scarcity in a way that no one can manipulate.
In turn, the commercial potential of NFTs extends far beyond selling pictures of bored monkeys on the Internet. NFTs can transform the financial ecosystem, creating a safer, more efficient and fairer economy.
Challenge misconceptions
In the wake of FTX’s demise, trust in the wider Web3 ecosystem has certainly taken a nosedive. The crisis has reverberated in the crypto and financial spheres, but industry players and critics must refrain from painting all Web3 projects and digital assets with the same discrediting brush.
The core of Web3 is to use blockchains and crypto tokens as tools for governance, organized decision-making and financial incentives. FTX, however, was a centralized financial exchange. Their operations haven’t even scratched the surface of the types of crypto-backed businesses that Web3 architects have nurtured — including the likes of NFTs.
As we saw during the explosion of the dotcom bubble, the cynics were quick to throw the whole internet, and the current winter of crypto recalls this period. The general macroclimate has changed dramatically as the industry moves through this evolutionary stage, which was always inevitable as the market consolidates.
Web3 has spun numerous projects in its web, but this is not to say that the projects cannot fly the nest. NFT industry leaders have been quick to distance NFT from the crypto sector, as assets do not exist in a vacuum.
NFT in action
It is encouraging that, despite the crypto crisis of 2022, there is still $1.1tn worth of digital assets in circulation, with 300 million people holding crypto assets. A common misconception is that NFTs are valuable only for art and games, but their merit extends far beyond that.
Thanks to the uniqueness and immutability of NFTs, companies can use them to digitally store and secure all kinds of data through the tokenization of documents. The certification can be issued on a blockchain like NFT and traced directly to the owner. Further use cases cover a range of initiatives from raising capital, digitizing assets, monetizing intellectual property and verifying the authenticity of physical assets on the Internet. Recently, it was reported that almost 90 percent of companies have adopted blockchain technology. With this, the potential of NFT in the enterprise is finally realized.
Another key benefit of NFTs is their ability to redefine the way brands interact with customers. Examples include the likes of Adidas, Gucci and The Hundreds using tokens to reward superfans. Enhancing customer engagement and unique experiences is key to ensuring customer loyalty. NFT loyalty programs can be used by companies to leverage blockchain technology to offer consumers more diverse rewards (recent examples include the Starbucks Odyssey), improving their ranking in loyalty programs.
With this, consumers can recognize the value of their gifted asset reward, which can be traded on the NFT markets. Consumers then have the opportunity to grow their loyalty status and continue to associate with the brand. Brands themselves also have the opportunity to profit by charging a commission from each business transaction.
The road ahead
As NFTs exist on blockchain technology, these digital assets are incompatible with the current financial ecosystem and regulations. After the infamous crypto market scandals of last year; from FTX to the bankruptcy of Terra and its sister coin Luna last year, a raft of regulations on crypto-assets (MiCA) is due to be introduced in Europe to regulate the volatile market.
Addressing the problems facing digital markets is a step in the right direction to improve and safeguard investors’ access to the crypto market, and an important bridge to strengthen confidence in digital assets. The industry has long been waiting for an increased focus on challenging monopolies and altering the competition framework to encourage innovation.
Correct regulation that protects consumers in what is a complex and fast investment environment is essential, and hopefully it will begin to establish the necessary legislative foundations to address fraud and scams found in the markets.
This is the beginning of a new era, and with this safety net in place, we should begin to see the rise of NFT traders and the adoption of digital assets continue to accelerate in 2023, as the ‘companies begin to realize their potential.
Image credit: putilich/depositphotos.com
Alan Vey is the founder and CEO of Aventus.
