At present, blockchain, society, and government remain uneasy bedfellows. Those that use blockchain-based applications are partly drawn to them due to their distrust of big centralized powers, while those in government have (sometimes legitimate) grievances about the illegality and tax evasion that comes with the loss of control that these apps represent.
In the middle is the concept of society, which is where we see tension. Governments are ostensibly there to provide for all those based within their jurisdictions through their own systems, while civic-minded developers and users envisage alternate ways to organize people, achieved through mass blockchain adoption.
As a blockchain builder, it is obvious that I believe in the power of technology to bring something new and beneficial to humanity; however, the sector’s continued growth is somewhat dependent on a relationship with government. Unlike what some people think, this doesn’t have to be a capitulation of everything blockchain stands for — we can take these important elements of security, individual ownership of data, and increased democratic input into projects while curbing the illegal elements that governments take issue with.
In this scenario, a partnership between blockchain and government for the good of society should bring more opportunity, transparency, usability, equality, and freedom. We would then see greater trust, leading to more investment, the growth of the sector, and a real Web3 future that no longer needs to trade on hypothetical use cases and optimism.
While this is a big topic, I will attempt to focus on a few key elements, such as:
- The state of blockchain worldwide and crypto right now (September 2022).
- The factors stopping people from blockchain adoption and how this is being turned around through popular projects.
- How blockchain and government can work together.
- Why NEAR is the top infrastructure for bringing together blockchain, society, and government, helping to reach the tipping point for mass blockchain adoption.
Blockchain and crypto: Where are we now?
When the crypto market went into a downturn, the media was quick to do a post-mortem, with the subtext being that the entire sector may not recover. While it’s true that some projects and cryptocurrencies won’t survive this crypto winter, we still see a lot of development and optimism.
Below I will give a quick summary of the movement of money throughout blockchain and crypto, as funding and interest help us to see which areas are likely to develop quicker, shaping the nearest iteration of Web3.
So, where do we currently stand? For this, it’s best to look at the numbers. They tell us that with blockchain and crypto inextricably linked, the bear market is having a direct influence on funding for blockchain projects.
Here are some key figures from CB Insights’s State of Blockchain Q2 2022 Research Report:
- Blockchain experienced the first quarter-over-quarter drop in two years, with a 29% drop in global blockchain funding.
- Unicorn births halved — 8 versus 16 in Q1.
- The average funding deal size is 86% of what it was in 2021.
Despite these negatives, the report also points to quite a few things we can be positive about. As mentioned in my team’s INC4 blog, What a bear market means for crypto and blockchain development, a market downturn doesn’t mean development stops or even necessarily slows. Projects that show long-term value still have a great chance to draw investor capital, bringing about a realignment of funds.
- Compared to 2021, 2022 so far has seen a much greater share of funding for Web3 projects — an average of 62.5% versus 37% last year.
- $100M+ mega-round funding deals are on pace to surpass 2021’s total.
- Europe saw funding gains from Q1 to Q2.
There is no doom and gloom, but rather just a realigning of priorities amid a tough economic landscape, while projects — especially those in Web3 — continue to develop with an eye on the long-term game. Looking at blockchain adoption statistics, global executives seem to agree, with 78% of them claiming that enterprise blockchain adoption will be very important to their respective industries in the future, according to research from Deloitte.
Crypto has seen major turbulence over the last few months, with speculative investors being punished. This has come from internal market factors as well as external ones, as crypto becomes more correlated with traditional markets.
The downtrend has come from events such as:
- The Terra collapse.
- Rising inflation.
- Russia’s war on Ukraine.
- Changes in US regulatory policy.
Another major factor that has seen the crypto markets tumble faster than traditional markets is the amount of debt used to buy cryptocurrencies, leading to a cascade of automatically liquidated positions as prices fall.
With September as a bear market month, a crypto recovery seems unlikely in the very short term, although events such as the ETH merge are drawing in investment.
What factors are hindering widespread adoption?
Barely a day goes by without a news story that mentions a big-name company either partnering with a crypto or blockchain company — or directly incorporating blockchain-based services into their operations. Whether it be Nike with its NFT apparel collection, Revolut incorporating crypto trading and transfer options, or LG launching an NFT marketplace for smart TV owners, we see blockchain adoption in business and enterprise of all types, who are making attempts to conquer the territory as it moves into the mainstream.
For those constantly reading blockchain and crypto news, it might seem like the sector is no longer niche; however, this is far from the case. Above, we have focused on larger-scale investments and big company initiatives; however, these will largely dry up if not followed by an uptake of ordinary users.
According to Statista, at the end of 2021, there were just shy of 300 million asset-verified crypto users. Asset-verified is important, as the number is surely higher, although still a small percentage of the overall world population.
So what are the blockchain adoption challenges?
Blockchain is hard
This is one of the big factors that scare people off using blockchain-based applications and cryptocurrencies, and it has some validity. Blockchain is hard, but so is the internet, and people still use that, so what is the difference?
Because this is an emerging sector, applications are not as smooth or easy for the user to navigate, meaning that people believe they should have more of a technical understanding in order to use the products.
Conclusion: Applications must be better designed for all users, smoothing the path to adoption.
Can crypto be trusted?
As with any other type of currency, crypto invites speculative investments; however, its loosely regulated nature and willingness of people to dive in hoping to catch a big return have created the perfected environment for scams to proliferate.
An entertaining website called Web3 is Going Great gives an entertaining rundown of all the latest scams and application/exchange exploits. With near-daily occurrences like this, it is understandable that people are wary of investing their money in cryptocurrencies.
Conclusions: Security should take greater priority, projects should try to chase the right type of audience, and legitimate projects should be more proactive in doing their due diligence when partnering with or promoting applications, crypto exchanges, and NFT collections that are there just to make a quick profit.
Making a connection to people’s lives
From the ideas above, we can clearly see that it is up to the sector to create not only secure products, but also ones that have some relevance in people’s day-to-day lives. The fact that a particular application is built on blockchain or uses cryptocurrency shouldn’t necessarily be the main drawcard, but an added bonus to an application that is easy to use and solves problems, just like those that are popular in the Web2 space. This is supported by recent research into the decentralized gaming industry, where 75% of players claim that they got into cryptocurrency because of GameFi. While the earn factor is still a drawcard, 81% of people claim that game development and enjoyment should be more of a priority than profit.
Blockchain and society
So, what can blockchain offer society? Ideally, applications that protect users’ data and offer functionality beyond what is currently delivered on the existing predominant infrastructure.
The good news is that while many think of blockchain products as a very narrow set of DeFi applications, the building and usage of social products is already well underway, often incorporating crypto-earning capabilities for those that use them.
The exercise and earn trend has become really popular over the last year, with a huge amount of apps that hope to improve on the current crop of Web2-based fitness applications. So why use those that are based on blockchain?
We can get clues from STEPN, one of the most popular apps in the Walk2Earn category. It aims to achieve greater engagement through gamification while giving users a chance to earn through crypto rewards. User-generated content is also an aspect, but unlike its Web2 counterparts, STEPN users own their assets completely.
P2E (Play to Earn)
As mentioned above, GameFi is a real conduit for more widespread Dapp and crypto adoption. Like with the fitness application, P2E in Web3 finds solutions to the problems that gamers come up against, such as the fact that they are not full custodians of their in-game assets.
While profits are declining, the fact that users can have fun playing, earn cryptocurrency, and use it within the wider DeFi ecosystem shows potential that goes far beyond what conventional gaming can offer. With more focus put into usability and the aforementioned fun factor, more players should join.
Social projects can be well-meaning but suffer from bureaucracy and inefficiency, which means that funds are not able to be used as well as they could be. What’s more, with big projects that are hard to coordinate and track, a lack of transparency can mean that processes can be broken without anyone noticing, and if they do, how it happened.
Projects on NEAR blockchain like Open Forest Protocol (OFP) — which helps to plan, coordinate, and monitor (re)forestation efforts — are helping to lead the way in embedding social projects as part of the Web3 landscape. The environmental subset of DeFi products has been termed ReFi, and is important for a few important reasons:
- It solves real problems affecting humanity.
- It extends functionality beyond what current systems allow, demonstrating the value of building on blockchain.
- It shows that blockchain-based doesn’t have to be associated with large carbon emissions.
- Cryptocurrencies might be used within the platform but are not the central reason for engagement with the product, demonstrating a maturation of the sector.
These are just three areas where we see blockchain and society intersect, giving us a reason to be hopeful about the development of blockchain products. The bigger challenge, however, is getting governments on board…
Blockchain and Government
Blockchain adoption in capital markets is one thing, but from a regulatory standpoint, government is often positioned as the enemy of blockchain technology. However, if used properly, blockchain can help solve some of the problems that plague decision-making bodies all over the world, namely:
- Inefficient bureaucratic processes.
- Corrupt or opaque decision-making.
- The difficulty and expenses involved in running smaller-scale voting, such as for state or regional proposals.
While the El Salvador Bitcoin experiment is looking far from a resounding success, it still has merit in showing us where the parameters of implementation can be shifted to create a better partnership. One clear way that I see this is through DAOs.
DAOs (Decentralized Autonomous Organizations)
We have identified the costs and effort in running smaller-scale voting as one big problem that governments face. At the same time, things like council proposals suffer from a lack of engagement, with few people showing up to vote.
Issues of gerrymandering and voter suppression aside, it should be the job of governments to consult as widely as possible and make it as easy as possible for citizens to vote. With a large tech sector and a big investment in digital transformation, Ukraine has provided a model through the Diia application, which started out with the ambitious goal of making 100% of public services available online. It has been a big success and allows verified citizens to vote on proposals such as the removal of Soviet symbols from monuments.
Blockchain DAOs could take this further, where private information is able to be verified without a centralized authority holding the information, and the results of voting are completely transparent due to being recorded on blockchain.
To sum up, government and blockchain joining forces could result in better government processes and investment in infrastructure and projects that help to further Web3 and make the sector more trustworthy. In addition, although controversial, blockchain regulation worldwide could help to bring in new users who can explore DeFi products and other Dapps with greater ease and peace of mind.
The inevitable question about how much of its decentralized nature blockchain needs to forfeit in order to be accepted and/or used by the government is important but requires a separate blog post on its own. For this reason, it has been left out of this discussion.
NEAR as the infrastructure to bridge blockchain to society and government
Carbon-neutral, Ethereum-compatible, scalable, and with an active developer and user community, it is no surprise that NEAR is such a fast-growing blockchain.
My company, INC4, started working with NEAR as one of the Guilds — specialist developer teams from around the world that help others with Dapp creation on the NEAR blockchain — and we are consistently impressed by the technical capabilities, the way that users engage with the products, and the fact that NEAR is committed to becoming central to a robust Web3 environment. To that end, there is a focus on getting new participants involved in Dapps through user-friendly products and education.
Crucially, there is a recognition that the long-term sustainability of an ecosystem is built on understanding and a strong community, leaving behind the culture of churning through new inexperienced users who may invest in the next trend but leave with a negative experience.
The sheer range of projects also brings more reasons for ordinary people to get involved in Web3, overcoming their fear of blockchain being something only tech people are into. You can search the list of projects built on NEAR and find:
- A biomedical network,
- A decentralized content creation platform,
- Digital horse racing,
- An AI music project,
- An education and jobs collective,
- And, of course, the more traditional metaverse, wallet, and crypto protocols.
Having recently released our leveraged yield farming project, PembRock Finance on NEAR, we saw the advantages that the blockchain brings from the startup side of things, and made a successful launch in part due to the great NEAR Team and enthusiastic community.
For all these reasons, I firmly believe NEAR is the blockchain that can do what was up until recently difficult to imagine — going beyond mere blockchain adoption by industry and building a trustworthy bridge between blockchain, society, and government.
I will be at NEARCON in Lisbon from 7–11 September. Feel free to drop by and say hello, or schedule a meeting with me by messaging me on Telegram: