Opportunities in Web3: A Special Report Published In Partnership With Consensys

/JOSEPH LUBIN

OPPORTUNITIES IN WEB3

DIVE INTO THE WORLD OF WEB3

Where groundbreaking technologies create boundless opportunities

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Meet the visionary leader behind Ethereum and Consensys

EDITOR’S NOTE

Erika Masako Welch Chief Content Officer, Special Reports Entrepreneur & Lucidity Insights erika@lucidityinsights.com

Welcome to our insightful report, “Opportunities in Web3,” a thorough exploration of the emerging decentralized digital landscape that has the potential to reshape our future. In this report, we present a comprehensive analysis of the innovative technologies, novel applications, and opportunities within the world of Web3.

Web3 represents a paradigm shift in the way we interact with the internet, empowering individuals and communities through decentralization, blockchain technology, and token economies. Our team has carefully researched and curated content that sheds light on the evolving ecosystem, discussing the impact of Web3 on various industries such as finance, gaming, art, and governance.

In this report, we examine the vast opportunities and challenges that arise from this new frontier,

offering you an insightful perspective on the future of the Internet as we know it. Our aim is to empower you with essential knowledge to help you navigate the intricacies of the decentralized landscape with confidence and enthusiasm.

As you immerse yourself in the world of Web3 with us, we hope to unveil a diverse range of possibilities and viewpoints that will inspire you to explore the potential of this emerging trend. We invite you to form your own opinions and make informed decisions about the role of Web3 in shaping the digital world.

Thank you for embarking on this exciting intellectual journey with us. We trust that you will find this report not only informative but also engaging and inspiring as you discover the opportunities that lie within Web3.

FOREWORD

Our society is constructed on the foundations of various centralized entities, including governments, corporations, and a wide variety of religious and community groups. Topdown command and control as an organizing principle have enabled us to make tremendous gains as a society globally. It has helped us to build a great civilization. Unfortunately, our great civilization does not serve 99% of us as well as it can. But fortunately, our societal development has brought us to the point technologically where we’re enabled to build a society – a more decentralized society – that serves nearly everyone well.

In 2008, Satoshi Nakamoto built something profound that has the power to transform life on our planet. A mechanism that enables us to build far better alternatives to the legacy systems. Alternative structures for economic, social, and political systems that could exist on a foundation that could not be improperly manipulated. It is a new kind of global ledger, the blockchain, and through this invention a revolutionary new higher-powered form of trust has emerged: decentralized trust.

Over the years, the internet has undergone a remarkable

evolution, shaping the lives of individuals and society as a whole. It all began with the pre-web protocols, the internet protocols developed in the '80s. Building upon those foundations, Web 1.0 emerged, offering static text and images interconnected through hyperlinks.

Then came Web 2.0, where we find ourselves today, introducing interactivity, e-commerce, mobile connectivity, and social media. While Web 1.0 represented an extraordinary breakthrough, the advent of Web 2.0 was the one that truly transformed society on a global scale. Yet, in many ways, the business model of Web 2.0 so far has been a hangover from the dominant business model of the 20th Century: manufacture products for sale and advertise to create (often artificial) demand.

Web3, or the decentralized web, is what we are merging into. It serves as a key component of a new paradigm shift that humanity is currently undergoing, moving from the age of silos to the age of collaboration, where opportunities are more widely distributed and accessible. Web3-based systems are forging new ways of interacting, innovative business models, and entirely new industries.

The Web3 paradigm shift starkly contrasts the business models of the last millennia, where corporations operated in adversarial relationships with their customers, extracting as much as possible in exchange for as little as possible. In the face of these exploitative practices, we have observed over the years how the power that currently resides within centralized corporations is becoming distributed through the diverse creativity of the growing Web3 ecosystem via progressive decentralization.

Web3 empowers communities with economic, social, and political agency while enabling individuals to exercise self-sovereignty. In Web3, we are not just passive consumers (or worse, products monetized by social media companies); we are active builders. Regardless of

the specific activities individuals are engaged in —whether it’s creating NFTs, building collections of them, developing dApps, participating in Decentralized Autonomous Organizations (DAOs), shaping policies, or designing protocols— we all contribute as builders to the next generation of the web. Builders are not only developers, researchers, and entrepreneurs…but artists, writers, musicians, educators… Each brings a unique perspective to form the collective essence and ultimately, wisdom, at the core of this paradigm shift to the more decentralized future.

By harnessing the transformative power of Web3, we can collectively build the world we want to live in, firmly rooted in this new trust foundation. The builder spark is alive in each and every one of us. It is existential: I build, therefore I am.

Joseph Lubin Founder & CEO of Consensys

THE BASICS OF WEB3

Web3 is hailed as ‘the future of the internet’ and the next big thing in technology. You’ve likely already heard your friends in tech and crypto discussing it, but grasping the true potential and implications of Web3's power of decentralization bring some complexities that require careful navigation in its development. If you're among those still seeking a deeper understanding, this chapter is for you. Here, we explore its origin story and why Web3 is considered to be a revolutionary game-changer as it shifts power back to the people.

WHAT IS WEB3?

Web3 is all about decentralization, aiming to bring more democratization and transparency to the digital universe. Imagine a world without overbearing tech overlords or shady data collection practices. Sounds pretty good, right? The secret sauce is decentralized technologies like blockchain, which aims to systematically diffuse power from any single entity or authority. Instead, blockchain lets information be stored across a network of computers, eliminating the need for intermediaries and giving users greater control over their data and online interactions.

Picture Web3 as the great, new frontier in the internet landscape, where pioneers tap into their quest for freedom and autonomy, empowered by cutting-edge technology and some serious coding chops. Welcome to the next digital revolution!

Do you ever feel a bit uneasy about the control that tech giants seem to have over your personal data and the online world? Then, say hello to Web3 – the groovy alternative, often dubbed “the future of the internet.”

Web3 and its Origins

Web3 is an innovative concept representing the next evolutionary stage of the internet. Its foundations are deeply rooted in the early thoughts of Tim Berners-Lee, the founder of the World Wide Web. He first introduced the core concepts of decentralization, openness, and greater user utility in the 1990s:

Bottom-up design Decentralization

He advocated for code to be developed in full view of everyone, encouraging maximum participation and experimentation. 1

Berners-Lee envisioned a web without a central authority, free from a single point of failure or control, and resistant to indiscriminate censorship and surveillance. 2

While Berners-Lee’s ideas laid the groundwork, the concept of Web3 truly emerged as a distinct idea separate from Web 3.0 (the semantic web). In 2006, journalist John Markoff coined the term “Web 3.0”3, envisioning a future where machine learning and artificial intelligence would shape a more intelligent internet. However, it was Gavin Wood, the founder of Polkadot, who popularized the term “Web3” and helped to shape its vision for a more decentralized web, taking the concept to new heights.

Wood described Web3 as a decentralized internet where users control their own data and applications built on open, interoperable, and secure infrastructure. His company, Polkadot, is designed to connect different blockchains together into a single network, creating a decentralized web. The current definition of Web3 incorporates concepts of decentralization, blockchain technologies, and token-based economics while continuing to evolve4.

In conclusion, understanding Web3’s origin requires recognizing its roots in Tim Berners-Lee’s early ideas and its divergence from Web 3.0. Web3’s evolution has centered around decentralization, openness, and user utility, emphasizing blockchain technologies and token-based economics. This unique approach sets it apart from Web 3.0 and paves the way for a more decentralized, user-centric digital world.

Tim Berners-Lee

Founder World Wide Web Consortium

5

5 1 2 3 4

There are a few unique features about the future of the internet that makes it distinctively different from the internet and the tech ecosystems that we currently operate in:

1. Decentralization:

Web3 is built on decentralized technologies such as blockchain, which enable the creation of decentralized applications, commonly referred to as dApps, that are not controlled by any single entity or authority.

2. Interoperability:

Web3 is designed to be more interoperable, meaning that different dApps and blockchain platforms can communicate and interact with each other seamlessly. Universal wallets such as Metamask (self-custodial wallet), cross-chain communication, interoperability layers, and standardization are just some of the tools being deployed in the Web3 ecosystem to ensure there won’t be any “Should I go with Apple Store vs. Google Play Store?” or “Playstation vs. Xbox?” questions in the Web3 space.

3. Token economics:

Many Web3 projects use token economics to incentivize users to contribute to the network and help govern its operations. This can help to create a more democratic and decentralized ecosystem by giving users a say in how the network is run.

4. Data Privacy & Security:

Web3 aims to increase data privacy and security by giving users greater control over their personal data and enabling them to share it securely with others on the network. This can help to prevent data breaches, identity theft, and other forms of cybercrime.

5. Open-source software:

11 / ENTREPRENEUR.COM / 2023 A SPECIAL REPORT / OPPORTUNITIES IN WEB3

A History of the Web: Understanding the Evolution from Web 1.0 to Web3

Are you ready to take a trip down memory lane? We’re talking about the time when the only thing you could do on the web was play solitaire or chat with strangers in text-based chat rooms. Yep, we’re talking about Web 1.0, the era of dial-up and Tamagotchis. But hold on to your pagers because we’re now entering the era of Web3 and we have come a long way since those AOL days.

User-generated

Rich media, interactive interfaces

Dynamic, user-generated content, social networking

Two-way communication

Social media, wikis, blogs, collaborative tools

Decentralization & AI-driven interactions

Immersive interfaces, AR/VR, natural language

Personalized content, semantic web, decentralized content

Multi-way communication, AI-powered content, real-time collaboration

Blockchain-based collaboration, DAOs, dApps

Decentralized identity, zero-knowledge proofs, blockchain-based trust systems Source:

Increased data privacy regulations (e.g., GDPR)

Already the fastest rate of adoption of any technology in human history

The adoption of blockchain, crypto, and Web3 is best represented by comparing the growth rate between the number of internet users and the number of identityverified crypto asset users. Looking at the logarithmic scale5, crypto adoption has seen the fastest adoption rate of any technology in human history and is well on its way to reaching one billion users in the next 2 to 4 years, depending on the adoption rate.

TECHNOLOGY ADOPTION CURVE - LOG SCALE

Web3 is already upon us

Don’t be fooled by its youth - Web3 is already shaking things up! Say goodbye to centralized apps and hello to decentralized ones. The future is bright, and it is already happening!

Storage

Browser

Search Engine

Social Network

Messaging

Music Streaming

Video Streaming

Digital Payments

Advertising

Source: Lucidity Insights Research

Dimension Web 2.0 Solution

Sample of Web3 Solutions

Oxchat

Defining moments in Web3 history

Though the term “Web3” was popularized in 2014, almost a decade ago, by Dr. Gavin Wood, co-founder of Ethereum and creator of the Polkadot platform, to describe the vision of a decentralized internet enabled by blockchain technology, it is still in its infancy. Here is a brief historical timeline of key milestones in the development of Web3.

2008

Bitcoin Whitepaper

Satoshi Nakamoto introduces Bitcoin, first cryptocurrency.

2009

Bitcoin Network Launch

Bitcoin's decentralized network goes live.

2013

Ethereum Whitepaper

Vitalik Buterin proposes Ethereum, a blockchain platform for dApps.

2014

Popularization of the term "Web3"

Dr. Gavin Wood popularizes "Web3" to describe decentralized internet vision.

2015

Ethereum Network Launch

Ethereum platform goes live, enabling smart contracts and dApps.

2017

ICO Boom

Initial Coin O erings (ICOs) explode, raising billions for crypto projects.

2022

Metaverse and Web3 Adoption

The metaverse expands, integrating Web3 and decentralized technologies.

2021-2022

Layer 2 Scaling Solutions

Layer 2 solutions emerge to improve blockchain scalability and reduce fees.

2021

NFT Boom

Non-fungible tokens (NFTs) surge in popularity, transforming digital art and collectibles.

2020

DeFi Summer

DeFi projects gain popularity, total value locked (TVL) increases.

2018-2019

DeFi Emergence

Decentralized Finance (DeFi) gains traction, redefining financial services.

Source: Lucidity Insights Research

The Dawn of Web3: Joseph Lubin’s Visionary Journey

From robotics and artificial intelligence to the financial services industry, Joseph Lubin’s multifaceted background paved the way for his transformation into a leading figure of the Web3 revolution. Lubin, a founding member of Ethereum and founder of Consensys, has always possessed a forwardthinking mindset, which he applied early on in identifying systemic flaws in our global financial institutions. Today, he stands as a torchbearer guiding us into the era of Web3, decentralized systems, and beyond.

Over a decade ago, Lubin observed unsettling patterns within our financial systems including unprecedented levels of debt in the system that suggested a looming global crisis. As he delved into

these concerns, he became aware of the Strauss and Howe generational theory. This theory describes 80-100 year cycles composed of four generations. It paints a picture of cycles of growth and expansion, which eventually meet their downfall due to societal developments that outgrow the once-novel visions. This pattern leads to a societal reset, calling for a fresh vision and a new system - a pattern that seems to echo our present reality.

When Lubin encountered Bitcoin in 2011, he saw the dawn of this new era. Satoshi Nakamoto’s revolutionary white paper introduced a technological innovation, a decentralized database that could fundamentally alter the foundations of trust and authority upon

which our society is built. By ensuring that everyone sees the true history of transactions and making it virtually impossible to overturn this history, Bitcoin invented a new higher-powered form of trust: decentralized trust. It shifted the societal trust paradigm from top-down – with authorities working through intermediaries to control all aspects of society – to bottom-up, where everyone can inspect what happened and when with respect to transactions in the economy, and the only intermediary required is the open global decentralized database. A few years later, Lubin found himself at the forefront of the Ethereum project. Its white paper, penned by Vitalik Buterin, promised a platform where any software developer could contribute to

SPOTLIGHT | JOSEPH LUBIN, ETHEREUM CO-FOUNDER & CONSENSYS FOUNDER

Joseph Lubin Founder & CEO of Consensys

the new economy, removing the need for esoteric specialists. Recognizing this potential, Lubin devoted himself to nurturing Ethereum – the first decentralized blockchain that allowed for smart contracts – and its ecosystem. This then gave way to the birthing of Consensys, a hub for fostering faster adoption of Ethereum, by incubating projects and exploring the vast potential of the ecosystem.

Today, the fruits of Lubin’s work are apparent across diverse corners of the globe. In countries like Zimbabwe, Venezuela, and Argentina, where the monetary systems have been unstable for decades, blockchain technologies offer essential solutions such as value preservation and remittances. However, in Western liberal democracies, the implications run deeper, creating novel ways of looking at industries and offering them the means to evolve rather than just disrupt. Consider the entertainment industry, where artists can directly connect with their fans through non-fungible tokens (NFTs) and decentralized organizations. Here, Web3 technologies promise a future where the majority of the value created isn’t pocketed by industry intermediaries, but by the creators themselves. Similar opportunities are unfolding in the advertising sector, as the traditional web cookie used to track and exploit browsers are slowly being “decommissioned” by regulators, companies and users who value privacy, and will be replaced by NFTs and decentralized identities, putting the control back in users’ hands.

According to Lubin, Web3 brings major foundational game-changer such as decentralized finance (DeFi). Although DeFis currently the playground of

crypto and finance enthusiasts, Lubin envisions a future where the entire finance world is stampeding into this space once regulatory hurdles are overcome. In decentralised finance, the potential for instantaneous, programmable, and high liquidity systems promises unprecedented opportunities. Eventually, much of global finance will be built using decentralized finance technology simply because DeFi will bring muchneeded improvements like increased transparency around the formation and enforcement of the rules under which systems operate, and the virtual elimination of counterparty risk when one's counterparty is a smart contract or a protocol rather than a person or company. These are just two of many directions that the world of finance can explore as it begins to understand the profound benefits of this paradigmshifting disruptive technology.

Inspiring the Builder Within Towards a Decentralized Future.

In today’s rapidly evolving and increasingly dangerous world, a profound existential choice faces humanity. On one hand, we could journey down a path of tyrannical control, where governments manipulate everything, endeavoring to prevent the misuse of cheap and exponentially destructive technology. This path, successful or not, is rife with pitfalls. The other way, a far more hopeful path, embraces progressive decentralization as its organizing principle. Here, we can envision a future based on decentralized organizations and protocols, where transparency is a given, and negative externalities are identified and incorporated into a

more holistic system so they can be properly accounted for and ameliorated. In natural ecosystems, every waste product serves as the feedstock for some other organism or system. This is how we must design the systems we build and steward going forward, whether they be agricultural, water management, social media/advertising or AI. This vision for the future requires rapid dissemination and robust action to create the next system of the world, and education plays a central role, believes Lubin. Initiatives like Consensys Academy and MetaMask Learn are at the forefront of this movement, striving to mentor the next generation and provide compelling, extensible tutorials. “We’re starting to view our software developers and endusers as two Web 2.0 vintage bookends bounding a growing population of Web3 builders,” Lubin said, explaining the increasing democratization of technology-enabled participation. In this Web3 world, individuals have much more control and influence over the systems that guide their lives because they will be first-class members of those communities, not just customers and no longer the product of the service provider.

SPOTLIGHT | JOSEPH LUBIN, ETHEREUM CO-FOUNDER & CONSENSYS FOUNDER

Here, the power that currently resides solely with corporations like Meta Platforms (Facebook, Instagram, WhatsApp), TikTok or Twitter, becomes decentralized, providing end-users and developers more agency and enabling them to become active builders of, and participants in communities and ecosystems that affect and improve their lives. The Web3 builder class will eventually grow to encompass the entire global population as Web3 tools enable direct participation in online communities. As we all rise to the calling to be more active in the systems and communities on which our lives and quality of life depend, we will soon be able to call on our personal AI allies who enable all of us to level up fast, understand any issue that affects us, and participate in the governance and decision making that tangibly improves our lives.

Properly decentralizing social networks doesn't mean you add NFTs to them or add DAO-based decentralized governance, or cut moderators in on the profits they generate as a labor of love. These are significant steps towards a decentralised model. In this setup, rather than being reliant on a handful of social network accounts that are controlled and can be revoked by Web 2.0 companies, everyone will establish their own decentralised IDs. These IDs will be used alongside Verifiable Credentials, in line with W3C standards, as well as NFTs and badges. Collectively, these elements will form the backbone for building and maintaining the identity and reputation of individuals, intelligent entities, organisations, and even things.

The next generation of social networking will put the user at the center of – and in control of their social graph. They will construct and maintain multiple social graphs for different purposes. They will own their identities and publish their own profiles tailored to different contexts. They will subscribe to other entities' social graphs and publish content to their own graphs, inviting people to subscribe to them if they are interested. They will own her graphs and select tools from different providers to operate on the content of her graphs or on the graph structures themselves – perhaps to increase readership or monetization or political influence. They may link their graphs with other graphs in order to share certain content if the owners of those graphs choose to work together to share the relevant content with their subscriber base. They

will be in control of their identities and social graphs and there will be many social network tool companies that add value to their feeds while the user remains fully in control.

Our social graphs in the Web3 era will be a profound extension and expression of our identities, interests and ultimately our reputations. They will be a fundamental construct representing who we are. In the Web3 era, we will be the owners and controllers of the core elements of our lives, not manipulated and addicted users, not just consumers and not exploited products of Web 2.0 and traditional economy megacorps that have become producers of as many negative externalities as valuable products and services. The Web 2.0 era served us well and evolved us as a species in important ways. But we desperately need the communityfocused and user-centric ethos of Web3 to heal deep schisms and establish healthier collective paths forward. Or Web3 children will look back on the constructs of Web 2.0 society in disbelief and horror that we all outsourced many core aspects of our identities and reputations to soulless, profitmaximizing companies that nearly broke the world.

Aligned with this vision, Consensys unveils its evolved brand, aiming to "inspire and empower the builder within each of us." A call to action that encourages individuals to embrace their role in constructing a more decentralized future.

Lubin’s journey represents the vanguard of the Web3 revolution, shaping a world where trust is decentralized, builders regain control from the intermediaries that fed off their work for centuries, and the creativity and power of finance become directly accessible to all. His leadership and vision, coupled with the rapidly developing ecosystem, serve as a beacon of optimism and a reminder that we’re just at the beginning of this exciting journey into the era of Web3. It is a vision of a future that is both exciting and inspiring, a world where the power is in our hands to shape our destiny. A world where we are not just passive consumers, but active builders. As we move forward, it’s certain that the reverberations of Lubin’s pioneering work will continue to shape the course of our digital future. The question is, are you inspired to discover and unleash the builder within you, and to contribute to a more decentralized world?

TOP 10 TRENDS

SHAPING THE WEB3 ECOSYSTEM IN 2023

If you are wondering what trends are shaping the Web3 ecosystem, look no further. This chapter is for you. Come and explore these top trends as we dive into the gaming revolution, NFTs shifting from speculation to utility, and the revival of decentralized exchanges among so much more.

Top 10 Trends Covered:

1. Bringing the real gamers to Web3

2. From speculation to utility NFTs

3. The revival of Decentralized Exchanges

4. Increased tokenization of real-world assets: When TradFi meets DeFi

5. The rise of decentralized autonomous organizations (DAOs)

6. Node-as-a-Service: A Game-Changer for Blockchain Infrastructure and Web3 Development

7. Addressing blockchain networks’ scalability issues

8. The impact of Artificial Intelligence on blockchain

9. Blockchain’s Path to a Greener, More Sustainable Future

10. Web3 Job Boom: Industry Demand Surges Yet Faces Talent Shortage

THE TOP 10 TRENDS

SHAPING THE WEB3 ECOSYSTEM IN 2023

(In no particular order)

01 Bringing Gamers to Web3

The emergence of AAA games is believed to be a crucial factor in driving mainstream adoption, which starts by convincing real gamers. Most of the blockchain games implemented to date were with a play-to-earn (P2E) model that made waves in 2021 and 2022. However, this model also shed light on an unsustainable model, putting emphasis on making profits while ignoring the fun part. This made many gamers highly skeptical of Web3 games to date, viewing them as potential scams or attempts to prioritize profit over gameplay.

A 2022 report by the Blockchain Game Alliance (BGA) showed that poor gameplay and complex onboarding were the main challenges hindering mass adoption. One of the reasons for this is the very immature technology making it complex to develop games in a Web3 environment. Gaming infrastructure Web3 projects and gaming studios are working to address these challenges to enable the creation of AAA games with immersive gameplay, engaging storylines, and enticing rewards systems to attract a broader audience to the Web3 gaming space. Brace yourself for some potentially exciting games in 2023!

02 From Speculation to Utility NFTs

In early 2021, the world witnessed a surge in interest surrounding non-fungible tokens (NFTs), fueled by high-profile digital art and collectible sales. The sale of Beeple’s NFT artwork for a staggering $69.3 million at Christie’s auction house marked a pivotal moment, bringing crypto and NFTs into mainstream culture. The trading volume of NFTs experienced remarkable growth, skyrocketing from $200 million in 2020 to an astounding $13.9 billion in the first quarter of 2022. For that value to be sustainable, it is essential for the NFT market to offer more than mere hype and a fear of missing out, leading this initial phase of NFTs, dominated by profit and speculation, to evolve towards utility.

As we move forward, the practical applications of tokens are gaining prominence over their financial appeal. These so-called “utility NFTs” have the potential to be utilized across numerous industries. Many thought leaders in the Web3 and crypto space including Joseph Lubin, Co-Founder of Ethereum and Founder of Consensys has said that blockchain technology, and especially NFTs, provide a paradigm shift where a new trust foundation for the planet is being built, allowing businesses to be disintermediated. Any industry that values trust can benefit from that new trust infrastructure, moving away from a world of subjective trust where we used to rely on intermediaries to provide trust in different situations in different industries to a world of automated trusted and guaranteed execution.

Although the initial hype around NFTs may have cooled also driven by the start of the bear market that saw a 67.3% drawdown of total NFT trading volume from the all-year high of $5.79 billion in January 2022, it is evident that the technology and its use cases are maturing. Utility NFTs demonstrate their potential to reshape industries, indicating that we are witnessing the early stages of a significant shift.

TOTAL NFT TRADING VOLUME (MILLION USD)

Source: RWA.xyz

03 The Revival of Decentralized Exchanges

The revival of decentralized exchanges (DEXs) has been an exciting development in the world of DeFi and blockchain technology. In 2022, several centralized exchanges (CEXs) like FTX shut down, leaving users apprehensive about transparency and control as many CEXs have failed to secure their customers’ funds adequately. This has led to a resurgence of interest in DEXs, as they offer a more secure and transparent alternative to CEXs.

DEXs, which are the decentralized application (dApp) alternative to trading platforms where users can trade cryptocurrencies peer-to-peer without a need for an intermediary. DEXs are a vital component of DeFi, and they provide greater security, privacy, and control over funds for users. Unfortunately, compared to CEXs, DEXs still lack the scalability, ease of use, and overall “user support” to attract a mainstream user base leading to liquidity challenges despite users being more and more drawn to the appeal of the autonomy and the permissionless nature of DEXs. Addressing liquidity, scalability, and providing regulatory clarity could also lead institutional investors to consider DEXs, which is currently still not the case. As DEXs and supporting projects work on improving the trading experience and liquidity, such as staking projects, we can expect more and more users to shift to more decentralized, secure, and transparent platforms such as PancakeSwap, Uniswap and dYdX.

Increased Tokenization of Real-World Assets: When TradFi meets DeFi

Although crypto is an emerging asset class, it currently operates independently from other traditional markets that have a total addressable market in the trillions. With the advancement of the token-based economy, there is growing interest in utilizing existing blockchain and DeFi technology to improve the supply chain visibility of real-world assets (RWAs) and provide businesses with easier access to credit. Currently, the RWA market is still in its early stages, with a gross value locked, including the amount borrowed, of only $193 million 6 .

Real-world assets are tangible assets, such as real estate, art, and commodities and their tokenization allows them to be converted into digital tokens that can be traded on the blockchain, making it easier to:

• Increase liquidity and transfer of ownership, which has historically been a challenge for traditional asset classes such as real estate and art. Tokenization can help to lower transaction costs and increase ease of property ownership and management. This can enable greater access to these asset classes for a wider range of investors, including those who may not have previously been able to invest due to high entry costs and lack of liquidity.

• Gain greater transparency, which can be achieved through the blockchain’s immutable transaction ledger. Tokenizing realworld assets on the blockchain makes ownership and management more transparent and easier to track, lowering the risk of fraud and increasing investor trust.

The market potential for RWAs has garnered significant attention, evidenced by the implementation of pilot programs by both traditional financial institutions and crypto-based projects. A survey by Celent in 2022 revealed that 91%7 of institutional investors expressed interest in investing in tokenized assets. This trend has the potential to unlock a vast array of investment opportunities for individuals and institutions alike, which we are starting to witness today and for the years to come.

05 The Rise of Decentralized Autonomous Organizations (DAOs)

In recent years, Decentralized Autonomous Organizations (DAOs) have been making waves in the crypto world. These innovative organizations are built on blockchain technology, using smart contracts to facilitate decisionmaking, governance, and financial transactions, and are continuing to gain momentum.

At its core, a DAO is a decentralized organization that operates autonomously through code, rather than relying on traditional management structures. This new approach to organizational governance has led to a surge in the number of DAOs, covering a wide array of purposes and industries. The growth in DAOs has been nothing short of remarkable. Data from DeepDAO8 indicated that the total assets under management (AUM) for the top 100 DAOs back in 2021 had already reached $7 billion. Fast forward to April 2023, and the top 10 DAOs alone now boast a combined AUM of nearly $20 billion. This striking increase demonstrates the rapid expansion and adoption of decentralized autonomous organizations. Even multibillion corporations have started looking into DAOs and how to implement components of it into their own operations.

The Different Types of Dao’s

There are numerous types of DAOs, each addressing various needs and areas of focus, from protocol DAOs to Grant and Investment DAOs. Although categorizing them can be challenging, and some may overlap, the general consensus highlights the following key types:

1. Protocol DAOs: These DAOs employ tokens as a voting measure to determine modifications in technology protocols. Notable examples are MakerDAO and Uniswap DAO.

2. Collector DAOs: Art collectors join forces in these groups, pooling resources to acquire ownership of NFTs or tangible art. PleasrDAO serves as prime example.

3. Investment DAOs: Operating similarly to venture funds, these DAOs invest in companies to generate profits and/or influence decision-making. MetaCartel Ventures is a prime example of venture investment collective.

4. Grant DAOs: These DAOs aim to consolidate and allocate funds to innovative projects that benefit the decentralized community. Aave Protocol, which uses grants to expand its ecosystem, is a fitting example.

5. Service DAOs: Connect skilled individuals globally to collaboratively work on projects, providing specialized services to clients and rewarding contributors with fees and governance tokens. Raid Guild or LexDAO are examples.

6. Media DAOs: Independent content creators utilize Media DAOs to bypass advertisers, fostering a more direct relationship and aligning incentives with their audience, such as Global Coin Research.

7. Social DAOs: Intend to unite like-minded people in online communities, coordinated around a token fostering digital democracy through social networking and communication such as Friends With Benefits.

Although it’s difficult to pinpoint the specific types of DAOs that will gain the most traction, projections indicate that protocol DAOs are likely to remain at the forefront, owing to the persistent demand for enhancements in underlying protocols. Social DAOs are on the rise as people increasingly recognize the power of decentralized communities in driving change and fostering innovation. Finally, service DAOs are also expected to gain traction, given the growing demand for specialized skills and services in the blockchain space.

NOTABLE DAO’S

MakerDAO is a decentralized credit platform on the Ethereum blockchain that enables users to create and manage the stablecoin DAI. The platform uses smart contracts to maintain the DAI’s value and allows users to lock up collateral to generate new DAI, ensuring stability and trust in the ecosystem.

Uniswap DAO is the decentralized governance organization behind the popular decentralized exchange, Uniswap. It enables token holders to participate in decision-making processes concerning protocol upgrades, development, and other important aspects of the platform.

PleasrDAO is an experimental art collector DAO that acquires and manages digital and physical art pieces. It seeks to foster a thriving ecosystem for artists and collectors alike by curating unique and valuable art. The DAO is known for purchasing high-profile NFTs, such as Edward Snowden’s NFT, and is committed to supporting artists and promoting digital art culture.

MetaCartel Ventures is an investment DAO that focuses on funding early-stage projects in the Ethereum ecosystem. It operates as a decentralized venture capital fund, pooling resources and expertise from its members to identify and invest in promising projects, with the aim of accelerating the growth of the decentralized technology space.

Aave Protocol is a decentralized finance (DeFi) platform that enables users to lend and borrow cryptocurrencies. The associated grant DAO focuses on allocating funds to innovative projects that benefit the decentralized community. By providing financial support, Aave Protocol fosters the growth and expansion of its ecosystem.

Raid Guild is a service DAO that brings together skilled individuals from around the world to collaboratively work on decentralized projects. This collective of developers, designers, and strategists provides specialized services to clients, helping bring their visions to life. Contributors are rewarded with fees and governance tokens, fostering a sense of shared ownership and commitment to the Guild’s success.

LexDAO is a service DAO that focuses on the intersection of law and blockchain technology. It comprises legal professionals, developers, and researchers who collaborate on smart contract drafting, dispute resolution, and legal engineering. LexDAO aims to bridge the gap between traditional legal systems and the emerging decentralized landscape, creating innovative solutions that cater to the unique requirements of Web3 projects. By rewarding its members with fees and governance tokens, LexDAO ensures that its community remains engaged and invested in the organization’s growth.

Global Coin Research is a media DAO that serves as a platform for independent content creators in the cryptocurrency and blockchain space. By bypassing advertisers, it fosters a more direct relationship between creators and their audience, aligning incentives and promoting high-quality content.

Friends With Benefits is a social DAO that unites like-minded people in online communities, coordinated around a token that fosters digital democracy through social networking and communication. It aims to create a supportive environment where members can connect, collaborate, and share resources, leveraging the power of decentralized technology to reshape social interactions.

Node-as-a-Service: A Game-Changer for Blockchain Infrastructure and Web3 Development

As blockchain technology evolves and the demand for Web3 applications surges, Node-as-a-Service (NaaS) has emerged as an important trend, set to support the way developers build and maintain decentralized applications. Nodes, the backbone of any blockchain network, ensure seamless communication and tracking of network activity. Blockchain node providers, such as Infura and Alchemy, facilitate access to these nodes through APIs, without the need to invest in expensive hardware and infrastructure.

Node providers not only save developers time and money but also relieve them of the responsibility of maintaining and updating their infrastructure. They offer a unique approach to empowering Web3 developers with a network of nodes by following consensus algorithms of different blockchain networks. As a result, developers can avoid energy-intensive applications, reliability risks, and the burden of financial costs.

The growing importance of Node-as-a-Service can be compared to the role of cloud computing in the web2 era. Just as Amazon Web Services (AWS) allowed web2 applications to run on third-party infrastructure, NaaS providers enable Web3 developers to do the same on the blockchain. This shift in infrastructure management is significantly lowering the barriers to entry and accelerating innovation in the blockchain ecosystem. By offering chain support, reliability guarantees, enhanced APIs, and variable pricing tiers, blockchain node providers are poised to become indispensable tools for developers in the blockchain ecosystem.

Addressing Scalability of Blockchain Networks with Rollups

As more dApps and DeFi protocols are deployed on Layer-2 chains to take advantage of their scalability, the use of Ethereum’s L2 ecosystem steadily increases, creating scalability challenges. The industry is, therefore, witnessing a race to find innovative scaling solutions and has seen tremendous advancement in L2 rollups. L2 rollups, comprising zero-knowledge (ZK) rollups and optimistic rollups, offer a more efficient and secure approach to managing blockchain transactions:

• ZK-rollups use cryptographic proofs to bundle multiple transactions into a single proof and submit it to the Ethereum mainnet (Layer-1) without revealing the transaction details. While ZK-rollups are effective for simple transactions and basic operations, they lack the ability to accommodate complex smart contracts, which are essential for the development and growth of dApps and DeFi protocols. zkEVMs are being designed and launched to extend the benefits of zero-knowledge proofs to a more comprehensive range of applications, offering an L2 environment that supports complex smart contracts while retaining compatibility with Ethereum’s infrastructure. Many projects compete to introduce their zkEVM offerings, such as Polygon and Consensys with Linea.

• Meanwhile, optimistic rollups, adopted by platforms like Optimism and Arbitrum, process transactions and smart contracts off-chain in a separate environment while maintaining the security provided by the main Ethereum chain (Layer-1 or L1). Optimistic Rollups assume that transactions are valid by default and only require verification if they are challenged, hence the term “optimistic.” Periodically, a summary of the off-chain state is submitted to the main chain, which keeps the network secure and verifiable.

As the Ethereum L1 is evolving into a settlement layer, with an increasing number of transactions leveraging L2 solutions for heightened scalability, we are yet to witness the best scaling solution.

Fraud

Delay

Better ease of programmingwithout need for validity computation and e ective data compression.

Lower transaction cost as optimistic rollup do not post the proof of transactioon and publish limited data.

No need for trusted setup.

Verifiers must maintain live tracking of actual rollup state and the reference state in state root.

Lock of wide-range EVM support with few EVM-compatible zk rollups.

Zero-knowledge Proofs or ZKPs serve as transaction validity proof.

No delays in transaction finality as ZK rollups feature validity proof.

Complicated cryptographic proofs can be di icult to design and implement with ZK rollups.

Higher cost due to the need for verifying proofs alongside expensive high-end hardware for creating ZK proofs.

Needs a trusted setup for working.

No need for monitoring the layer 2 chain for fraud detection.

Emphasizes crypto-economic incentives to users for ensuring rollup security. Cryptographic proofs can guarantee security.

Source: 101blockchains.com

The Impact of AI on Blockchain

Artificial Intelligence has been a focus of the Web3 community since the early days of blockchain technology. Yet, it is only recently that certain AI-decentralized projects have come to the forefront following the buzz generated by ChatGPT. AI is expected to help tackle the industry’s pressing issues related to security, scalability, and user-friendliness. As AI continues to evolve, the blockchain sector is on the verge of tremendous breakthroughs in areas such as security, where AI can help detect fraudulent financial transactions, or in efficiency, where it can help optimize calculations to reduce miner load, which would result in less network latency for faster transactions. The Graph or Fetch.ai are examples of decentralized projects leveraging AI to better the blockchain.

The Graph (GRT) is an innovative decentralized protocol designed to revolutionize the way data is indexed and accessed in blockchain networks. Utilizing advanced AI algorithms, The Graph optimizes the indexing process by efficiently organizing on-chain information and providing developers with a seamless API for querying blockchain data. By harnessing AI’s capabilities, The Graph offers an unprecedented level of accuracy and scalability, paving the way for a more robust and accessible decentralized data infrastructure.

Fetch.ai is a groundbreaking artificial intelligence (AI) and blockchainbased platform focused on enabling a decentralized digital economy. By harnessing the power of AI, Fetch. ai utilizes Autonomous Economic Agents (AEAs) that autonomously perform tasks, negotiate, and make decisions, driving the next generation of smart applications. These AEAs interact within the Fetch.ai ecosystem to optimize processes, create value, and provide users with efficient, personalized solutions, ushering in a new era of intelligent digital services.

Blockchain’s Path to a Greener, More Sustainable Future

The rapid growth of blockchain technology has been closely associated with environmental concerns, particularly regarding its energy intensiveness and carbon footprint. In response to this impact and the growing potential for governments’ regulatory actions that could negatively impact innovation, stakeholders in the blockchain space have been striving to address these issues and pave the way for sustainable progress.

One of the earlier manifestations was the Crypto Climate Accord created in 2021. Inspired by the Paris Agreement, this accord seeks to decarbonize the sector by 2040, focusing on increased renewable energy usage and energy efficiency. One remarkable achievement in this regard is the successful completion of Ethereum’s Merge. Ethereum, the second-largest cryptocurrency by market cap, has transitioned from the highly energy-intensive Proofof-Work (PoW) consensus algorithm to the more efficient Proof-of-Stake (PoS), thereby reportedly eliminating 99.99% of its carbon footprint. This historic move has set a benchmark for other cryptocurrencies, demonstrating that a greener blockchain is possible.

At COP27 in November 2022, Web3 companies convened by Consensys and Allinfra, and civil society leaders, along with the UNFCCC Climate Innovation Hub, announced the launch of the Ethereum Climate Platform (ECP). The ECP’s mission aims to redress Ethereum’s carbon footprint since its launch in 2015 and to fund and incentivize projects that mitigate greenhouse gas emissions and deliver lasting environmental and social impact. The Platform will invest in science-based climate projects, leveraging Web3 technologies, infrastructure, and funding mechanisms to achieve tangible results.

While the sustainability journey for blockchain continues, it’s important to recognize the technology’s potential also to help combat climate change. For instance, blockchain can be used to track carbon credits, ensuring accurate recording of emissions reductions. As technology evolves, the push for a greener, more sustainable blockchain is gaining momentum, promising a brighter future for both the environment and the blockchain ecosystem.

10 The Web3 Job Boom: Industry Demand Surges Yet Faces Talent Shortage

According to The Block Research, in 2022, the Web3 industry could have employed between 120,363 and 282,516 people, up 3 times since 20199. Over a similar period, an Indeed employment report revealed a surge in market demand for Web3 professionals with job postings growing 15 times between April 2019 and April 202210, strongly outpacing the pace of employment. This led to market experts saying that the industry is facing a shortage of talent globally.

While demand for tech talent such as blockchain engineers and developers remain the most sought-after talents, there are also many non-tech jobs that are in demand, especially

on the marketing side. And in today’s fast-paced digital world, boosting your blockchain skills has never been easier. With resources like Metamask Learn, Consensys Academy, and popular platforms such as Udemy and Coursera, there a multitude of free resources to help you on your way to becoming a blockchain expert. In true Web3 fashion, Metacrafter.io embraces the spirit of Web3 by offering a decentralized learning experience. Their goal is to upskill one million Web 2.0 developers through the gamified, decentralized Proof Of Learn initiative, to help address the current developer shortage.11

Job Description : Develops Decentralized applications an Smart Contract.

Job Description : Certifies network before launch

ockchain

Job Description : Reviewing legal aspects of ICO Documentation and meeting certain legal regulation before launch.

Job Description : Design, implement and support blockchain focused website and User Interface.

Job Description : Researching and Planning network security measures.

Job Description : Responsible for designing Blockchain Solutions.

Job Description : Responsible for organizing and managing multiple blockchain projects.

101 Blockchain

Job Description : Apply data mining techniques in statistical analysis.

Job Description : Negotiating and representing the company.

Job Description : Overseeing and developing marketing campaigns.

Job Description : Research and analyze Blockchain data.

Job Description : Completing relevant assigned tasks such as coding, markeitng, etc.

Job Description : Identity and screen potential blockchain project candidates.

WEB3 CASE STUDIES: UNLEASHING THE POWER OF WEB3 ACROSS INDUSTRIES

As we transition from the top 10 trends shaping Web3, it’s time to venture into real-world case studies that demonstrate the sweeping impact of blockchain, NFTs and tokenization across industries. We’ll further explore three trends that embody the true potential of Web3’s transformative power, and is already making impacts in 2023. This chapter promises to provide a glimpse into the decentralized future that awaits us all.

Boomtown on the Blockchain: Where Old-School Finances Meet the Wild West of Web3

Picture this: a world where traditional real-world assets - think property, art, precious metals, and even bonds - are diced up, digitized, and unleashed into the freewheeling universe of decentralized finance (DeFi). In this not-so-distant world, everyday folks could invest in high-end art or real estate, all with a few taps on their phone. Welcome to the exciting frontier of real-world asset (RWA) tokenization!

The recent crypto bear market hasn’t dampened this spirit; it’s actually fueled the push to bring RWAs onto the blockchain. Big names like Goldman Sachs have joined in on the fun, launching their own digital asset platform (GS DAP) to give old-school assets a blockchain facelift. MakerDAO and Aave, among other DeFi protocols, are also adapting their platforms to

accommodate RWAs. This convergence of traditional finance and blockchain technology marks a transformative moment for DeFi.

What on Earth are Real-World Assets?

Before we dive in, let's clear up some jargon. RWAs are everyday assets, ones you could touch and feel if you wanted, that have been tokenized and integrated into DeFi. Tokenization is like creating a digital twin for your asset on the blockchain, and this digital twin, represented as a token, can participate in DeFi in ways that the original asset never could.

What's cool about RWAs is that they can be just about anything with tangible value. Art, property, carbon credits even those fusty old bonds can

be minted into digital tokens and put to work in DeFi. It's like having a universal passport for your assets, granting them access to all sorts of opportunities they couldn't touch before.

Why should I care about RWA?

RWAs could be the catalyst that takes Web3 into the mainstream. Boston Consulting Group's research is betting big, predicting a whopping $16 trillion industry around tokenizing illiquid assets by 203012. That's trillion, with a T! The marriage between DeFi and RWA tokenization makes traditional assets more liquid and easier to trade. It's like an open house invitation to anyone with an internet connection, opening up many opportunities from new yields in DeFi and exciting credit offerings.

Tangible Assets

Real Estate

Gold / Silver / Metals

Collectibles

Show Me the Money: RWA in action

While the world of RWAs is expanding, a few key areas are already making waves.

Take the private credit market, for example. We're seeing tons of new, diverse RWAs in private credit, with over $4.3 billion across 1650 loans spread across sectors like carbon projects and real estate13. Protocols like Centrifuge, Goldfinch, and Credix are breaking down barriers, enabling borrowers without traditional financial access to use real-world assets as collateral for a loan in stablecoins. The mission-driven company Cauris is a shining example here, already loaning out nearly $30 million to help supercharge Fintechs in Africa13

In the public credit market, the regulatory hoops make things a bit slower, but we've got a rising star in Ondo Finance. After a successful $20 million Series A funding round in 2022, co-led by Founders Fund and Pantera Capital14, they've launched three RWA funds tracking US treasuries, corporate bonds, and more. Their US treasuriesbacked fund (OUSG) has already locked in $104.3 million14. OUSG invests entirely in Blackrock's iShares Short Treasury Bond ETF (SHV). Ondo,

through its Flux Protocol, also allows OUSG holders to lend and borrow stablecoins against it.

Intangible Assets

Equisites

Government / Corporate Bonds

Carbon Credits

In the world of DeFi, MakerDAO is leading the RWA charge. It runs on Ethereum, acting like a high-tech, sci-fi vault. You put assets into this vault, and in return, you borrow DAI, MakerDAO's own stablecoin. These vaults, run by smart contracts, are like automated bankers keeping a watchful eye on your Ethereum-based collateral until your borrowed DAI is repaid. If the collateral value takes a hit, they've got your back, auctioning your assets to square off your loan, zero trust issues involved. In 2020, MakerDAO threw a curveball by accepting RWA as collateral. Today, these RWA vaults hold a whopping $680 million, bolstering the issuance of DAI and helping with maintaining the peg value to $115. Despite a market downturn, MakerDAO's RWA vaults have been a revenue powerhouse, pulling in a yearly $23 million15. They're doing the heavy lifting, making up 56.7% of MakerDAO's total income, while shouldering only around 13% of the platform's debt15. Not just small players, but heavyweights like Monetalis, Huntingdon Valley Bank, and Société Générale are in on the action, with most RWA collateral being US treasury bonds managed by Monetalis. MakerDAO's focus on RWA is successfully merging the physical

and digital finance worlds, offering borrowers diverse collateral options while enhancing the platform's stability and profitability.

Real estate is also getting in on the RWA action, with RealT already tokenizing over $52 million16 in real estate since its launch. This tokenization is like creating bite-sized shares of property that anyone can buy, sell, or trade. RealT token holders are also able to use their tokens to borrow stablecoins such as DAI via a 3rd party partner.

And let’s not forget about our green buddies, carbon credits. Toucan, a trailblazer in this space, has tokenized over 20 million carbon credits from more than 50 climate projects. This means they've retired more than 50,000 tons of carbon credits, accounting for an impressive $4 billion in carbon trading volume. Their efforts are making the global carbon market more efficient, transparent, and scalable, opening up new possibilities for environmental sustainability17.

The renewable energy market isn't missing out either. Powerledger, an Australian company, is leveraging blockchain for energy tracking, trading, and making energy markets more efficient. Powerledger has experienced significant growth in the past few years,

SPOTLIGHT | TOKENIZATION OF RWA

attracting more utilities, renewable energy generators, energy retailers, and large corporate organizations with renewable energy targets into its marketplace. They've set some lofty goals: 100 million smart meters on their platform in five years and hope to reach 1 billion users down the line, creating markets that remove any obstacles in

ACTIVE LOANS VALUE BY SECTOR"

achieving 24/7 carbon-free energy.

Finally, major financial institutions are also getting in on the RWA action, looking to boost their efficiency and reach a wider market. JPMorgan, for instance, executed the first live trade using tokenized yen and Singapore dollars on the Polygon blockchain18.

WisdomTree launched nine digital funds on Stellar or Ethereum blockchains19. Hong Kong's central bank offered a $100 million tokenized green bond20 while, Credit Agricole CIB and SEB are jointly launching so|bond, a platform for digital bonds built on blockchain technology21

Source: RWA.xyz

Blocktower

HV Bank

OFH - SocGen MIP65

Secured loans for commercial real estate development

Financing purchase or construction of residental assets

Collateralized freight shipment invoices

Tokenizing and securing short term global trade receivables

Yield and lending for tokenized cash flowing assets

Whole loans, asset backed fasilities, and structured credit products

Commercial loans for domestic businesses

On-chain bond

Of course, no pioneering journey is without its obstacles. As with all new projects and technologies, especially as disruptive as blockchain, it is worth mentioning several challenges that are hindering the adoption of RWA by both DeFi and TradeFi such as the current regulatory framework designed for systems with financial intermediaries, making it difficult to apply to DeFi's or the decentralization nature of DeFi, which presents numerous challenges around governance, with implications for consumer protection, oversight, and enforcement.

Yet, these challenges don't eclipse the promise of RWAs on chains. They're proving to be a pivotal bridge between traditional finance and DeFi. They're driving the expansion of DeFi, bringing bonds, real estate, carbon credits, and more onto the blockchain for the first time. Projects like MakerDAO, Centrifuge, and Ondo Finance are leading this charge, showing us how RWAs can shape a more interconnected financial world. DeFi is not in its own little corner anymore; it's shaking hands with the real world, signaling the enormous influence and potential of blockchain in our dynamic financial landscape. Exciting times ahead, folks.

issued by Societe Generate Bank

OF

Source: International Monetary Fund, Binance Research

6s Capital

New silver ConsolFreight Harbor Trade Credit Fortunafi

MARGINAL COSTS

DIFFERENT FINANCIAL SYSTEMS

Utility NFTs: The Rising Digital Revolution Transforming Industries

As we surf the tidal wave of digital innovation, Utility Non-Fungible Tokens (NFTs) are gaining traction in the world of blockchain. Unlike their speculative predecessors, these digital assets on the blockchain aim to provide unique functionalities and real-world applications. They’re not merely a passing fad but a significant force reshaping industries from entertainment and art to fashion, real estate, and gaming.

Ever heard of the Bored Ape Yacht Club (BAYC)? If you’re scratching your head, think of it as the equivalent of a megarare, super cool Pokémon card, but on the internet, and instead of a cute little creature, it’s an ape with attitude! There are 10,000 of these unique, funky apes out there, living their best digital

lives on the Ethereum blockchain. The brains behind these apes are the elusive Yuga Labs, who launched BAYC in 2021 and shook the NFT world like a snowglobe. Soon enough, everyone wanted in on the action. We’re talking everyone from basketball legend Stephen Curry to music maestros Eminem and Snoop Dogg, to talk show host Jimmy Fallon. Owning a Bored Ape became the cool kid badge of the internet - a digital collectible with some serious value. So, what makes a Bored Ape more than just a funky profile pic? It’s a killer combo of exclusivity, utility, and a sense of belonging. Each Bored Ape is like a snowflake - unique in its own right with different features and attributes. But owning one doesn’t just make you the proud parent of a digital ape. It’s like a golden ticket to

the Willy Wonka’s factory of the NFT world. You get exclusive access to a private Discord group, where you can rub virtual shoulders with fellow Bored Ape enthusiasts. You even get a say in ApeCoin DAO governance decisions and an invite to the hottest metaverse parties.

Yet, BAYC is just one of many examples of how utility NFTs are transforming industries. Let’s talk tunes, folks! The music scene is getting a fresh coat of paint, all thanks to utility NFTs. In the good ol’ days, the industry was riddled with shady contracts and crumbsized royalties. But today? The game’s changing and it’s music to our ears. Imagine your favorite artists, from Kings of Leon to Rihanna, not only dropping beats but also offering you a

slice of their success pie. That’s right - with utility NFTs, artists can bring their fans closer than ever before, by releasing their music as NFTs. And it’s not just about listening to their latest album - it’s about owning a stake in it! As fans, we get to groove to the music and enjoy the sweet feeling of having a stake in our favorite artists’ success. Utility NFTs are also able of bringing more fairness and transparency to the world of music. Ever heard about musicians struggling with unfair contracts or losing out on royalties? Well, with utility NFTs, the script has the potential to flip. In 2016, Imogen Heap’s experiment demonstrated to the music industry that a fairer and more efficient industry was possible by showing the “transparency and real-world benefits of smart contracts with automated royalty payments to all stakeholders.”22 Now, creating and buying these musical NFTs requires some techy magic, and that’s where platforms like Royal and AnotherBlock step in. These guys are like the backstage crew of the music industry, facilitating the creation of tokenized music rights for artists. This means fans and investors can buy real royalty rights and earn some moolah when those tracks are streamed on platforms like Spotify and Apple Music. Musicians worldwide can harness the power of NFTs to reclaim their rights, offering fans new ways to engage with them and their work.

The world of cinema isn’t far behind. Films like Coinrunners are utilizing NFTs for crowdfunding and boosting fan engagement. Coinrunners, a workin-progress movie employs NFTs to fund its production. But it doesn’t stop there. Owning a Coinrunners NFT not only supports the film but also rewards investors with exclusive benefits. These

include the opportunity to be part of the movie, a share in the film’s royalties, and access to unique, hand-drawn, tokenized images crafted by renowned Hollywood storyboard artist Max Forward.

Lisa N. Edwards, the creative force behind Coinrunners, articulates the transformative power of NFTs in the film industry. In her words, “There’s a new paradigm emerging where creators can own and monetize their content directly. Movie NFTs with royalties like COINRUNNERS are at the forefront of this shift, giving filmmakers and studios a new way to engage with audiences and generate revenue streams that are more direct, transparent, and sustainable than traditional funding models. Essentially this puts the power back with the people, to fund what they want to watch. Audience

Driven Films are the way of the future.” Coinrunners exemplifies how utility NFTs can foster deeper connections between creators and fans, reimagining the film industry’s funding models, and promoting a more direct, transparent, and sustainable approach to movie making and consuming.

Now, imagine you’re a musician or an event organizer. What are two things that might give you a serious headache? One, those pesky ticket scalpers who snatch up tickets and then sell them for an arm and a leg. Two, figuring out how to give your fans an experience they’ll never forget. Enter YellowHeart. This Web3 trailblazer is kicking oldschool ticketing to the curb with a secure, decentralized approach that leaves no room for scalpers or fraud. But they’re not just about selling tickets. YellowHeart is helping artists

SPOTLIGHT | NFTS

and organizers connect with their fans like never before. They’re turning concert-goers into die-hard fans and helping artists tap into that sweet, sweet revenue from ticket resale and collectibles. Established platforms like Ticketmaster are also launching NFT services to provide artists and event organizers with an additional revenue stream and fan engagement through the sale of digital collectibles, merchandise, and experiences.

In the world of gaming, utility NFTs are revolutionizing the way we experience virtual adventures. These special items, like unique weapons and characters, have real-world value, allowing gamers to earn and trade them for actual money. It’s like turning your gaming achievements into a valuable treasure trove! Game developers are now creating NFTs that represent unique ingame assets. Imagine owning a mythical sword or an ultra-rare character that not only enhances your gaming experience but also has real-world value.

You might ask, “where can I buy or trade these incredible digital assets?” Well, allow me to introduce you to OpenSea. OpenSea, which kicked off in 2017, is like the Amazon of the digital world. It’s the biggest digital marketplace out there for NFTs and crypto collectibles. The numbers speak for themselves: OpenSea boasts more than 2.8 million unique users who’ve made at least one transaction and a staggering $34 billion in transactions to date23. This user-friendly platform has made a name for itself by providing a seamless experience for buying, selling, and exploring an extraordinary array of unique digital assets.

On the gaming side, one of the best examples leveraging NFTs is Alien

Worlds. It has a community of over 2.5 million users who are on an intergalactic quest across seven planets. These adventurers use NFTs to mine Trilium, the game’s native cryptocurrency. Alien Worlds is a play-to-earn game where gamers can amass Trilium through various activities, such as mining, battling, questing, or even collecting rent from your digital land. Gamers can convert their in-game Trilium into realworld cash! In short, utility NFTs are completely revolutionizing the gaming world, making our virtual exploits not just more exciting and personalized, but also potentially profitable.

But utility NFTs aren’t just limited to the gaming and the media and entertainment industries. They have the potential to be used across a range of industries, from art and fashion to real estate.

For example, utility NFTs can be used to verify ownership of physical

assets, such as property deeds. The traditional process of verifying and validating real estate ownership can be incredibly cumbersome and timeconsuming due to the involvement of multiple intermediaries, such as banks, real estate agents, negotiators, and government officials. Moreover, these middlemen often charge substantial commissions, further burdening property owners. By implementing NFTs, real estate transactions and ownership transfers can be streamlined into a direct, two-party process, eliminating unnecessary intermediaries. This not only simplifies transactions but also enhances efficiency and reduces costs.

Utility NFTs can also be used in the world of art and fashion, where they can be used to provide exclusive access to content, like backstage passes or VIP experiences. In this way, utility NFTs are not just digital assets, but they also

act as a gateway to real-world experiences. Fashion brands have also started to use the power of blockchain to provide transparency, traceability, and accountability around supply chain. As an example, Genuine Way works with consumer brands to aggregate supply chain & ESG relevant data on several public blockchains, supporting them in vertically communicating these KPIs to consumers in an engaging way. The company provides an “all-in-one traceability solution for consumers, powered by complex data collected in the different phases of the supply chain and displayed in accordance with the latest EU Directives and national laws pertaining to supply-chain, processes, and production.” It is piloting the solution with the likes of “Tommy Hilfiger that leverages the data collected on their partner’s software (The ID Factory) to generate vertical product interfaces for its consumers.”24

Utility NFTs are bursting with potential, poised to revolutionize industries and reshape how we interact with

both digital and physical assets. While the road to widespread adoption may be bumpy, the excitement and curiosity surrounding these versatile tokens are undeniable. As we embrace the world of Web3, utility NFTs will likely play a significant role in the decentralization of ownership and democratization of access to goods, services, and experiences. So buckle up, dear reader—this is just the beginning of a wild and exciting ride into the future of NFTs!

Utility NFTs are bursting with potential, poised to revolutionize industries and reshape how we interact with both digital and physical assets. While the road to widespread adoption may be bumpy, the excitement and curiosity surrounding these versatile tokens are undeniable. As we embrace the world of Web3, utility NFTs will likely play a significant role in the decentralization of ownership and democratization of access to goods, services, and experiences. So buckle up, dear reader—this is just the beginning of a wild and exciting ride into the future of NFTs!

"Game On!" Enter the Wild, Wild Web3! Bringing real gamers to Web3

Heard of Web3 gaming? No? Well, let me take you on an adventure. Picture a world where you don't just play for fun, but earn real-world money while doing it. Sounds too good to be true, right? Well, not anymore! But let's not rush things. Let's start from the beginning.

Web3 gaming has faced, and is still facing, its share of roadblocks today. Play-to-earn games have carved a lucrative niche in the decentralized financed space in 2021 and 2022, making the headlines. Do you remember Axie Infinity (AXS)? One of the biggest successes back then was AXS, which reached a peak of 2.8 million monthly users in 2022, mainly driven by financial incentives. One year later, around 400 thousand are playing the game25. This decrease is partially explained by the crypto winter settling in and the Ronin

Network breach in March 2022, which instilled mistrust amongst its user base as withdrawals were stopped keeping them from exchanging to fiat. However, this model, most importantly, has shed light on an unsustainable model, emphasizing making profits while ignoring the fun part. This made many gamers highly skeptical of Web3 games to date, viewing them as potential scams or attempts to prioritize profit over gameplay. The message was clear. Bring back the fun!

So, where do we stand today? Well, we need to overcome a few roadblocks to help better Web3 games see the light. Think of it like leveling up in a video game. Picture the world of Web3 gaming as a sprawling, unexplored frontier. The infrastructure – all the behind-the-scenes techy stuff that

makes our games tick – was once the Wild West of this landscape. It was undeveloped and rough around the edges, leading to some rather lackluster gaming experiences. As a result, game studios began focusing more on the bottom line rather than crafting top-tier gameplay. Now, imagine a band of eager pioneers – new gaming studios ready to stake their claim in this untamed land. There was just one hiccup: they didn't quite know how to navigate the terrain. The finer details of Web3, from blockchain development to smart contract programming, were unfamiliar territory. Without this knowledge, crafting truly innovative gaming experiences was an uphill battle. Lastly, let's think about the tooling - or lack thereof. Remember the early days of the internet when it took forever to load a single webpage? It was kind of like that. The trusty toolkits developers were used to in the era of Web 2.0 were scarce. This slowed down progress and hampered innovation.

To crack mainstream adoption and, most importantly, sway real gamers, we need to address these roadblocks head-on, prioritize gameplay, and offer gamers an immersive user experience. But fear not, fellow gamers! We've got some power-ups coming our way. Investment in blockchain gaming has skyrocketed from $27.7 million in 2019 to a colossal $7.6 billion in 2022. And that's not all! An additional $739 million poured in just in the first quarter of 2023. Notably, 33.5% of these investments went into gaming infrastructure, while 27.3% were earmarked for game development, a clear indication that the industry is making a concerted effort to tackle the challenges outlined earlier26.

Some industry heroes are stepping up their game. In the adrenaline-fueled world of Web3 gaming, scalability is the secret sauce. If the underlying blockchain network is congested, the gaming experience would suffer, with delays and high costs deterring players. One prominent example is, Immutable, a Web3 gaming developer platform, partnering with Polygon Labs to boost Web3 gaming development by utilizing Polygon's zero-knowledge technology, simplifying the onboarding process for game studios and developers while promoting digital ownership for millions of users worldwide. Ever tried to put a square peg in a round hole? Without interoperability, that's what trying to use assets from one game in another feels like. Sure, full-blown interoperability (moving an asset from one game to another entirely) may seem as likely as

Game / Metaverse Guild or Incubator Infrastructure Investment Firm Media NFT

WHERE ARE THE BLOCKCHAIN GAME INVESTMENTS GOING? 2022

Source: DappRadar

SPOTLIGHT | GAMING & WEB3

finding a unicorn in your backyard. But fear not! Even if full-blown interoperability’s not on the table yet, there's other level of interoperability, and it's super important for improving the gaming experience. Projects such as Cosmos that focuses on cross-chain interoperability, allowing developers to create games that can communicate with other blockchains by providing a complete package of tools that simplifies blockchain development. However, to build these bridges, we need a robust workforce. Web3 gaming can seem like a new language to developers, and that's where Alchemy, the universal translator and toolkit, comes into play. It empowers developers, turning cryptic codes into engaging games. Lastly, a smooth user experience is the cherry on top. Web3 gaming doesn't have to feel like rocket science. Metamask SDK, Hyperplay, and ChainSafe Gaming SDK are here to guide you. They're like the friendly concierge, making your journey through the labyrinth of Web3 gaming not just accessible, but also a pleasure. For example, Metamask, the most popular selfcustodial wallet created by Consensys, surpassed 100 million users globally in 2022, creating a strong platform for improving user experience in gaming.

The best part? We're starting to see the fruits of these labors. 2023 is shaping up to be a thrilling year for Web3 gaming, with new titles like Bornless, Illuvium, and Undeads set to break the mold. Even big-name game studios like Ubisoft and Square Enix are getting in on the action.

Speaking of Square Enix, they've got something special cooking. Ever played Final Fantasy? Well, the geniuses behind that game are about to launch Symbiogenesis, their first-ever Web3 game. It's an adventure packed with 10,000 pieces of digital, collectible art. Talk about a treasure hunt!

Illuvium is the first AAA-rated game that merges DeFi with cinematic quality SFX and an immersive open-world RPG. Illuvium gives players complete ownership of their in-game assets and LAND NFTs. Its gameplay features compelling earning opportunities via PVE

quests that empower players to collect and upgrade their ownable in-game characters called Illuvitars. The game also features in-game wagering on matches taking place in its PVP battle arena. With a whopping 345,000 Twitter followers and nearly 200,000 Discord subs, they're on fire!

Blockchain gaming project Undeads aims to set a new standard in the GameFi sector by focusing on enhanced play-to-earn mechanics, well-designed game economy, and top-notch production values. Undeads brings a postapocalyptic setting to the blockchain, where players can choose to align with humans or zombies and engage in combat against both sides. The game features NFT characters and allows players to own, stake, and mint every zombie or human NFT, offering an immersive and entertaining experience.

Bornless is a thrilling mash-up of horror and FPS. It's free to play, so dive in and start blasting by teaming up with friends, because Bornless is all about that multiplayer mayhem, enhancing the social and collaborative aspects of the game. Looking forward, the addition of Virtual Reality (VR) is anticipated to significantly elevate the gaming experience in terms of horror and enjoyment. Finally, the game provides an earning mechanism where players can earn "incense" tokens by being part of a faction like Good Game Hunters or owning a season pass. These tokens can be exchanged for real-world money or utilized to upgrade in-game assets.

So what's next on the horizon? In 2023, the gaming industry is experiencing a significant shift with the rise of Web3 games. To achieve mainstream adoption, pain points are being addressed by projects such as Immutable and Alchemy and trends shaping the industry are being embraced. With increased interest from VCs, indie game studios, and traditional AAA game studios, 2023 is poised to see the launch of blockbuster Web3 titles. So grab your controllers, keyboards, or whatever you game with, because the future of gaming is here! Game on, folks!

GOVERNMENT ADOPTION OF BLOCKCHAIN AND WEB3

Have governments seized the opportunity and embraced the blockchain revolution? Where do governments stand? Is blockchain and Web3 an opportunity or threat? Here we take a look at different government approaches to these new technologies, and what is driving their positions. Explore the use cases, the challenges, and reallife examples implemented globally.

TRANSFORMING GOVERNANCE FOR THE DIGITAL ERA

Governments in several countries have been experimenting with the application of blockchain across a wide variety of functions and services over the past few years. Many governments have begun to see the potential of this novel technology to transform government operations and bring increased efficiency, transparency and security. Of course, there are also many governments who are wary of this new technology, or don’t have the capacity to understand how to begin to regulate its use as yet. Here we explore both realities.

There are multiple reasons that push governments to look at the blockchain technology as they seek to solve legacy pain points:

• Increased transparency: Blockchain technology enables secure and transparent record-keeping, which can help reduce corruption and improve trust in government operations.

• Enhanced security: The decentralized nature of blockchain and Web3 can strengthen the security of data storage and transactions, reducing the risk of cyberattacks.

• Cost reduction: It can automate many processes, reducing the need for manual intervention and resulting in significant cost savings.

• Improved efficiency: By streamlining processes and eliminating the need for intermediaries, blockchain and Web3 can increase the efficiency of government services.

• Enhanced citizen engagement: It can empower citizens by providing them with more control over their personal data and allowing them to participate more actively in governance processes.

While all governments can capitalize on this disruptive technology, it is especially interesting to highlight the significant opportunity for emerging markets to leapfrog legacy systems and drive inclusive growth. By implementing blockchain-based solutions, these countries can address long-standing issues, such as corruption, financial exclusion, and inefficient public services and thus spur innovation, create new economic opportunities, and foster a more equitable and sustainable future for their citizens.

Among the many potential applications of blockchain technology in the public sector, the following are a few applications that stand out as particularly promising:

Digital Identity Management: Blockchainbased digital identity management allows individuals to have greater control over their personal data while enabling governments to verify identities more efficiently. This approach can reduce identity theft and streamline the authentication process for government services.

Secure Voting Systems: Blockchain can be used to create secure, transparent, and tamper-proof e-voting systems that increase voter turnout and reduce voter fraud. These systems ensure that votes are accurately recorded and can be audited, fostering trust in the electoral process.

Supply Chain and Asset Management: By using blockchain to track goods and assets throughout their lifecycle, governments can increase supply chain transparency, combat counterfeit products, and ensure the integrity of critical assets, such as infrastructure and public resources.

Land Registry and Property Rights: Blockchain-based land registries can create an immutable, tamper-proof record of land ownership and transactions, reducing fraud and corruption while making it easier for citizens to prove property ownership and complete landrelated transactions.

Healthcare Data Management: Blockchain can be used to create secure, tamper-proof medical records that can be easily shared among healthcare providers while maintaining patient privacy. This can improve patient care, streamline medical research, and ensure the accuracy of medical data.

Central Bank Digital Currencies (CBDCs): CBDCs are digital forms of a nation’s currency, issued and controlled by a central bank. Implementing CBDCs using blockchain technology can provide faster, more efficient, and more secure payment systems, and increase financial inclusion, especially in developing countries.

Cross-Border Payments and Remittances: This technology can facilitate faster, cheaper, and more secure cross-border payments and remittances by reducing the need for intermediaries and enabling direct peer-to-peer transactions, providing a more accessible financial system for those without access to traditional banking services.

Taxation and Auditing: Blockchain-based systems can streamline taxation and auditing processes by creating transparent, tamper-proof records of financial transactions, enabling governments to collect taxes, detect fraud, and ensure compliance with financial regulations more efficiently.

Challenges to Blockchain Adoption

While blockchain technology has the potential to transform the delivery of government services to citizens, several challenges need to be addressed for successful implementation. Key challenges include regulatory hurdles, as governments must create clear guidelines to ensure security, transparency, and compliance with existing laws. Security and privacy concerns are also significant, as the decentralized nature of blockchain systems makes control more difficult and protecting citizen data is crucial.

Moreover, the rapidly evolving blockchain industry lacks standardization, making it challenging for governments to select the appropriate platform and ensure compatibility

between systems. Integrating blockchain technology with existing legacy systems may require extensive changes, posing an additional challenge for government agencies. Limited blockchain expertise is another issue, as the field is relatively new and finding qualified experts can be difficult.

Finally, lack of trust and understanding among government officials and the public makes it challenging to garner support for blockchain projects and ensure their effective use. Despite these obstacles, governments worldwide are beginning to explore the potential of blockchain technology, and it is expected that more will experiment with its applications in the coming years.

What have been some of the most prominent real-life use cases across government?

Country Blockchain & Web3 Adoption Use Cases

El Salvador made history by becoming the first country to adopt Bitcoin as legal tender in September 2021. The government has launched the Chivo Wallet app, enabling citizens to use Bitcoin for everyday transactions and receive a small amount of Bitcoin as an incentive.

The Venezuelan government has introduced its own state-backed digital currency, the Petro, to combat hyperinflation and circumvent international sanctions. While the Petro has faced skepticism and limited adoption, it represents a significant move towards government involvement in cryptocurrencies.

Estonia has been a pioneer in digital governance and e-residency. It pioneered blockchain technology by creating a blockchain-based land registry system for reduced fraud and increased transparency and developing an e-voting system used in various local and national elections.

The United Arab Emirates (UAE) is a leader in blockchain adoption, with one-third of all government applications running on blockchain in Dubai. The UAE central bank is also working on e-KYC and an innovation hub.

Canada, and two of its’ Provinces, British Columbia and Ontario, have implemented the Verifiable Organizations Network (VON), which utilizes self-sovereign blockchain identity technology to streamline government processes. The VON system provides digital IDs for 529,000 companies and 1.4 million credentials.

Brazil introduced a blockchain-based platform to monitor public spending, enabling citizens to track tax dollar usage and report suspicious activities. This increased transparency fosters greater trust in government financial management. It also implemented a blockchain-based platform called bCONNECT to improve the transparency and traceability of public procurement processes allowing various government agencies to securely share data and reduce instances of fraud.

The Indian state of Andhra Pradesh has implemented a blockchain-based land registry system to improve the e iciency and transparency of land registration processes. By reducing fraud and streamlining property transactions, the system enhances citizens' confidence in the real estate sector.

Indonesia Philippina

The Indonesian Ministry of Trade has partnered with several blockchain-based platforms, like HARA and Ricult, to improve the transparency and traceability of agricultural supply chains. These platforms help to track the journey of agricultural products from farmers to consumers, reducing fraud and ensuring food safety.

The Philippines Central Bank, Bangko Sentral ng Pilipinas (BSP), has granted licenses to several blockchain-based remittance service providers, such as Coins.ph and Rebit. These platforms enable faster and more a ordable cross-border transactions for Filipino citizens working abroad.

United states

The US Navy is testing a blockchain-based solution for supply chain management to enhance logistics and increase fleet preparedness. DARPA is also investigating the potential of blockchain technology for securing military communication channels. In the healthcare sector, the FDA employs blockchain to share real-time patient data during public health crises, while the CDC is examining the use of blockchain for monitoring public health outbreaks and tracking medical trends.

Source: Atlantic Council

Governments going Ga-Ga for Central Bank Digital Currencies (CBDCs)?

The emergence of CBDCs as a prominent use case of blockchain technology has garnered significant attention from governments worldwide. Many central banks are actively researching or piloting CBDC projects. CBDCs offer several potential benefits, such as facilitating faster and cheaper cross-border transactions, improving financial inclusion, and enabling more efficient monetary policy implementation. According to the Atlantic Council, there are 114 countries, representing over 95 percent of global GDP, that are exploring the implementation of CBDC today. This is in stark contrast to three years ago in May 2020, when only 35 countries were considering a CBDC”.

However, it is worth mentioning that not all CBDC projects are planning to use Distributed Ledger Technology (DLT) (i.e. blockchain technology). Out of the 114 countries looking into CBDCs, there are only 32 countries that are either in development, pilot or launched phase that are planning for using a blockchain.

COUNTRIES HOT FOR CBDC

Country CBDC’s in Action

Bahamas

The Sand Dollar, the world's first Central Bank Digital Currency (CBDC) to go beyond the pilot stage, was o icially launched in October 2020. With a 7.9% adoption rate, there are now 32,736 wallets in circulation, including 1,340 sovereign wallets. The Central Bank of the Bahamas aims to achieve full interoperability between wallet providers and integrate the digital currency with the commercial banking system. The motivations behind the project include enhancing financial inclusion, bolstering security against money laundering, and combating illicit economic activities.

Eastern Caribbean Countries Nigeria

The Eastern Caribbean Central Bank (ECCB) launched its digital currency, DCash, in March 2021, making it the first currency union central bank to issue digital cash. As of June 2022, all Eastern Caribbean Currency Union member states have adopted DCash. The digital currency can be used through the DCash App or participating financial institutions. After facing technical issues in early 2022, the system resumed service in March with enhanced security. The ECCB aims to improve financial inclusion, strengthen anti-money laundering measures, combat terrorism financing, and expand banking services across challenging terrains.

Nigeria launched Africa's first digital currency, the eNaira, in October 2021. The Central Bank of Nigeria adopted a phased approach to rollout, initially allowing only bank account holders access. As of October 2022, transactions valued at just under $18 million had taken place, with 919,000 customers onboarded and 700,000 transactions completed. The eNaira aims to increase financial inclusion from 64% to 95%, potentially adding $29 billion to Nigeria's GDP over the next decade. The development of eNaira entered its second phase in August 2022, targeting 8 million users.

Blockchain and Web3 hold the potential to revolutionize government operations and create more transparent, efficient, and secure systems. Governments worldwide are in various stages of blockchain technology and Web3 adoption. While some countries have already implemented successful pilot projects, others are in the research and development phase. It is crucial for governments to collaborate and learn from each other’s experiences to overcome the challenges associated with implementing these emerging technologies as they actively explore and implement these technologies in various sectors, such as land registry, digital identity, voting systems, supply chain management, and CBDCs.

While there are still challenges to be addressed, such as regulatory issues, security and privacy concerns, and integration with legacy systems, the potential benefits of these technologies are substantial. It is evident that governments around the world will continue to invest in research and development, and pilot projects to harness the power of blockchain and Web3. As more governments embrace these technologies, we can expect increased collaboration, knowledge sharing, and innovation in the public sector. Ultimately, the widespread adoption of blockchain and Web3 technologies could lead to a more transparent, accountable, and efficient government that better serves its citizens in the digital era.

NAVIGATING THE REGULATORY MAZE: CRYPTO’S ROAD TO LEGITIMACY

Will 2023 be the year that tames the crypto Wild West? As the cryptocurrency landscape rapidly evolves and risks intensify, regulators are scrambling to strike the perfect balance between fostering innovation and ensuring stability, security, and consumer protection. Discover how a patchwork of regulatory approaches across the globe, pivotal litigation, and the need to regulate crypto investments are shaping the industry’s future. Can governments create a framework that allows this revolutionary technology to flourish without sacrificing safety? Dive in and decide for yourself.

As the world of cryptocurrencies continues to evolve at a breakneck pace, it’s no wonder that governments and regulators have been scrambling to keep up. The turbulent world of cryptocurrencies has been thrown into further disarray following the collapse of one of its largest platforms, FTX in November 2022. The FTX collapse exposed the risks associated with crypto assets that lack fundamental safeguards. This collapse occurred amid a perilous period for the industry, where high inflation and tighter monetary policy affected crypto investors as well, causing the industry to enter another “crypto winter”. Bitcoin, the leading cryptocurrency, has declined by nearly two-thirds from its peak in late 2021, and a Bank for International Settlements analysis in November 2022 revealed that approximately three-quarters of investors have experienced losses.

The mounting pressures have led to the failure of stablecoins, crypto-focused hedge funds, and crypto exchanges, raising grave concerns over market integrity and user protection. As the connections between cryptocurrencies and the core

financial system continue to deepen, worries about potential systemic risks and financial stability loom on the horizon. These events have pushed 2023 to the forefront as a year where regulators will play a central role in shaping the industry’s future. Yet, striking a balance between regulating the investment side of crypto to ensure stability, security, and consumer protection while promoting innovation is crucial.

As of today, globally, we are facing a patchwork of regulations made up of diverse regulatory approaches across countries. Among the 80 countries analyzed, 57 have legalized cryptocurrencies, while around 14 have partial bans, and 9 have general bans. Interestingly, there is a weak correlation between cryptocurrency adoption rates and regulatory restrictiveness. For instance, 12 of the top 20 countries in cryptocurrency adoption have partial or general bans in place. Emerging-market economies tend to lag behind advanced economies in terms of regulatory development. In many cases, this is due to a lack of resources or expertise to address the complexities of the digital asset market. A significant portion

of the regulatory framework for cryptocurrencies is still evolving, with regulations and limitations differing based on their use in areas such as payments, investments, derivatives, and taxation. Most countries have established methods for taxing income or gains resulting from cryptocurrencies, though some have more detailed requirements than others.

2023 will see no shortage of litigation as regulators crack down on illicit activities in the crypto space. The US Treasury Department sanctioned Tornado Cash, a decentralized Ethereum crypto-mixing service, in August 2022. Meanwhile, the SEC continues its case against XRP creator Ripple Labs for alleged unregistered securities sales. Bankruptcy courts will settle matters involving Three Arrows Capital, FTX, Voyager, and Celsius, likely setting legal precedents for the industry. To prevent the repetition of the Terra and FTX failures, the investment side of crypto which covers centralized exchanges

(CEX) and stablecoins, will most likely require rigorous oversight. Recurring regulatory audits and transparency measures will ensure that stablecoins remain fully collateralized and that CEXs maintain adequate capitalization. Moreover, addressing counterparty credit risks is vital to mitigating the domino effects witnessed in these past few months. As a result, stablecoins, which are usually backed by a fiat currency, have emerged as the next frontier of crypto regulation. In the EU, US, UK, and Thailand, stablecoin regulation is under consideration. Meanwhile, in Mexico, financial institutions are prohibited from issuing stablecoins. One key piece of legislation that has garnered attention is the European Union’s Markets in Crypto-Assets (MiCA) Regulation. This wide-ranging bill covers everything from money laundering and the environment to corporate reporting and consumer protection. If passed, it would require stablecoin issuers to hold enough reserves to prevent

BOOM AND BUST

BITCOIN’S VALUE SOARED, EXTENDING GAINS DURING THE PANDEMIC, BUT SINCE LATE 2021 HAS LOST NEARLY THREEQUARTERS OF ITS WORTH.

Source: CoinDesk Bitcoin Price Index

their collapse and mandate crypto miners to disclose their energy consumption. The legislation also calls for exchanges operating in the region to be monitored by a financial regulator from an EU member state.

In the US, the Biden administration’s recent report on stablecoins has proposed regulation for stablecoins and the possibility of a digital dollar. Rep. Patrick McHenry’s (R-N.C.) stablecoin bill, which would allow the Federal Reserve to license stablecoin issuers, has faced competing disputes over who should regulate stablecoin issuers. The wording of this bill could impact major US stablecoin issuers like Circle and Paxos.

With more than 60 countries in an advanced phase of exploration (development, pilot, or launch) for their Central Bank Digital Currency projects, it is evident that countries are exploring both CBDCs and updating cryptocurrency regulations simultaneously. The challenge of creating a comprehensive regulatory framework in such a new and disruptive area will likely take years to finalize, with the ambiguous nature of digital assets themselves and the lack of standardized definitions creating questions of overlap and jurisdiction.

As 2023 unfolds, regulators worldwide must strike a delicate balance between fostering innovation and ensuring the safety and stability of the digital asset ecosystem. A highly restrictive approach could hinder innovation and drive the industry towards friendlier jurisdictions, considering the intrinsically global and boundary-less character of the crypto space. Conversely, inadequate regulation might result in the recurrence of catastrophic incidents like the FTX and Terra collapses, eroding confidence in the sector and discouraging potential investors.

The race to regulate is now underway, and market participants eagerly seek a clearer regulatory framework that provides certainty. With a new crypto bull market potentially in the cards, regulatory clarity is essential to restoring investor confidence. This will likely involve the introduction of new rules, regulations, or at the very least, official guidance.

Countries will need to collaborate and learn from each other’s experiences, using tools such as regulatory sandboxes and industry associations to test and refine their approaches, helping both advanced and emerging economies.

While it is impossible to predict the exact direction that global cryptocurrency regulation will take in the coming years, what is clear is that regulators can no longer afford to sit on the sidelines. By taking proactive steps to understand and shape this rapidly evolving industry, governments have the opportunity to harness the potential of digital assets while safeguarding the interests of consumers, investors, and the broader financial system. Only time will tell if regulators rise to the challenge and create a framework that allows this revolutionary technology to flourish while mitigating its inherent risks.

“Among the 80 countries analyzed, 57 have legalized cryptocurrencies, while around 14 have partial bans, and 9 have general bans”

Lucidity Insights Research & Analysis

Countries with a General ban on Crypto

Algeria

Bangladesh

Bolivia

China

Egypt

Morocco

Nepal

Pakistan

Tanzania -

Countries with a Partial ban on Crypto

Dominican Republic

Ecuador

South Korea

Ghana

India

Thailand

Indonesia

Iran

Turkey

Mexico

Nigeria

Vietnam

Russia

Saudi Arabia

Countries where Crypto, Blockchain & Web3 is mostly Legal

Argentina

Australia

Austria

Bahamas

Bailiwick of Guernsey

Bailiwick of Jersey

Belgium

Bermuda

Belarus

Brazil

Bulgaria

Canada

Cayman Islands

Chile

Cambodia

Colombia

Czech Republic

Denmark

El Salvador

Estonia

Finland

France

Georgia

Germany

Greece

Greenland

Hong Kong

Hungary

Ireland

Isle of Man

Israel

Italy

Japan

Kenya

Latvia

Lithuania

Malaysia

New Zealand

Norway

Peru

Philippines

Poland

Portugal

Singapore

South Africa

Spain

Sweden

Switzerland

Taiwan

The Netherlands

Ukraine

Uzbekistan

United Arab Emirates

United Kingdom

United States

Uruguay

Venezuela

“The days of the crypto Wild West are numbered. As the industry matures and embraces a more defined regulatory environment, the future of cryptocurrencies and digital assets will be shaped by the delicate balance between promoting innovation and ensuring stability, security and consumer protection.”

Consensys Pioneers a New Era: The Rise of the Builder in the Age of Web3

Once upon a time in the city of blockchain startups, Consensys emerged as a beacon of hope. Since 2014, the company has stood tall and resolute, acting as a haven for pioneers of decentralized technologies. Today, the tech titan wears a new look, signifying not just a cosmetic upgrade, but a deep-seated transformation mirroring the exciting tech revolution in the world.

To better comprehend this metamorphosis, we first need to dive into Consensys’ Global Survey on Crypto and Web3. The results tell a compelling tale about a paradigm shift

on the internet; from passive "users" to active "builders". The survey’s most striking revelation? The majority of us feel we add value to the internet and should own what we create. Yet, only 38% believe we're adequately rewarded for our creative contributions. As Joe Lubin, Founder and CEO of Consensys, puts it, “the survey confirms the emergence of a decentralized trust paradigm that empowers users and communities."

This shift forms the backbone of Consensys' new brand ethos, rightly termed as "Shift Control." It echoes the transformation from the conventional

centralized infrastructures to decentralized networks or Web3. Think of it like this: the internet has grown from a toddler who needs direction (Web1), to a teenager sharing experiences (Web2), and is now entering adulthood, where it can contribute and build (Web3).

Consensys's rebranding aims to reflect the spirit of this digital adulthood. The company is morphing from a mere user of technology to a builder, aligning itself with the dynamism of the digital landscape and the seismic shift towards decentralization. They are building bridges to the future, where we all can

contribute to the global network, generating value not only for ourselves but also for our communities.

But the journey is not without its challenges. The tech industry is akin to a crowded marketplace where everyone is trying to shout louder than the rest. Staying afloat and standing out is no easy feat. But by carving a niche for itself as a champion for builders and community empowerment, Consensys has found a way to differentiate itself. The new logo, a shift from a two-dimensional design to a three-dimensional one, is a metaphor for this transformation and their commitment to this new direction.

The story doesn't end here though. As a testament to its belief in this decentralized future, Consensys is taking the conversation forward with a global virtual hackathon. It's a call to all builders out there to come together, innovate, and craft solutions for the future.

The era of the builder is here, and Consensys, with its new identity, is all set to usher us into this exciting new phase. So, let's join hands, or rather, keyboards, to shape a user-powered and community-centric internet. Let's build the future, one block at a time.

"The survey confirms the emergence of a decentralized trust paradigm that empowers users and communities. The era of the builder aligns with the web3 ethos where everyone can contribute. Consensys aims to be a trusted steward for builders and developers, supporting community empowerment and positive global impact."

Joseph Lubin Founder & CEO of Consensys

CONCLUSION

The promise of Web3 is undeniable: a more open, transparent, and equitable world in stark contrast to the Web2 landscape, where tech giants hold sway over consumers. Despite its nascent stage, crypto has experienced one of the fastest adoption rates in human history, not dissimilar to the rate of adoption of the internet. Like any disruptive technology, Web3 brings with it new opportunities, poised to revolutionize industries that rely on trust and intermediaries, such as finance, art, and music.

However, the blockchain industry and Web3 are still facing numerous challenges that impede growth and mainstream adoption. From scalability limitations to a lack of interoperability, from user experience concerns to privacy and security issues – these hurdles must be overcome to realize

the full potential of a seamlessly connected ecosystem of decentralized applications. Adding to these challenges is the constantly changing regulatory landscape, the impact of recent unfavorable news souring public perception, and the requirement of the persistent task of promoting education and driving mainstream adoption.

Despite these obstacles, the Web3 and blockchain ecosystems have remained resilient in the face of a crypto winter, characterized by prolonged negative sentiment, falling prices, and decreased market capitalization. Funding has continued to flow, supporting infrastructure and tooling projects essential in addressing the aforementioned technology challenges and in driving the development and deployment of dApps. The allure of dApps with strong value propositions,

akin to today’s world of apps, is a key driver of adoption, assuming the underlying technology continues to advance.

The finance industry stands as one of the most promising sectors to benefit from Web3. For individuals, tokenization democratizes access to investments like real estate, art, and commodities. Governments also gain from leveraging real-world assets (RWAs) – by, for example, issuing digital bonds, such as green bonds, to fund sustainability initiatives. This approach offers a more efficient and transparent way to raise capital, attracting a wider range of investors and promoting sustainable development. Financial institutions have also started capitalizing on RWA tokenization to streamline transactions, reduce costs, and access larger markets.

Non-fungible tokens (NFTs) hold immense potential, with versatile applications across numerous industries. Sentiment exists that NFTs will one day replace software, and that vision is slowly becoming more tangible as we shift from hype and speculation to unique benefits and strong value propositions. Utility NFTs grant individuals access to exclusive content, experiences, and investments, while gamers can monetize in-game achievements. Companies can harness NFTs to build brand loyalty, streamline operations, and offer innovative products. In the media and entertainment sector, musicians and filmmakers use NFTs for fairer revenue distribution and fan engagement. Manufacturers employ NFTs for supply chain transparency and traceability. Governments, too, are exploring the potential of utility NFTs

to enhance efficiency, transparency, and accountability across various sectors.

At this pivotal moment, individuals, companies, governments, and other stakeholders must navigate the complex interplay between opportunity and risk. Each group faces distinct challenges: companies must contend with financial loss and reputational damage; individuals must balance potential rewards against personal investment and privacy concerns; and governments must grapple with developing appropriate regulations and guidelines. Collaborative efforts, knowledgesharing, and regulatory sandboxes will be vital in shaping a global regulatory landscape that supports innovation and protects users.

Despite the unique interests of these groups, they all have a stake

in charting a course through the shifting sands of the digital revolution. As the tides of Web3 change surge forward, individuals, businesses, and governments must decide whether to watch from the shore, wade into the shallows, or dive deep into the unknown.

Success in this new era is uncertain, but one thing is clear: those who embrace the spirit of Web3 and adapt to the shifting landscape will be the architects of a brighter, more decentralized digital future. In this new age, the collective effort of individuals, organizations, and governing bodies will determine the ultimate impact and potential of Web3.

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