Three signs that Web3 is already beating traditional finance. And three problems that stand in the way

The darkest night before the Dawn – in my opinion, this formula is perfect to describe the current state of the decentralized finance industry. Despite the ongoing crypto winter, I see clear signs that we are on the verge of massive adoption of the financial opportunities offered by Web3. These beliefs are supported by reputable market research findings. However, for the Web3 revolution to finally prevail, several problems that stand in the way of mass adoption must be overcome. Here I’d like to justify my views on these wins and obstacles.

Sign one: The gig economy is booming

A study by Thunes ($900 BLN valuation company specified in cross-border payments)shows that by the end of 2023, the global gig economy will reach $455 bln. This sector brings together workers and employers who cooperate on the basis of temporary contracts.

The gig economy was boosted by the COVID pandemic, during which many people got used to working from home and then traveling as digital nomads. People have learned self-discipline, and they don’t want to waste time on transportation to the office and depend on only one employer.

In addition, the wave of migration has intensified. We, Ukrainians, felt it like no one else – more than 8 million people left the country since the beginning of the full-scale Russian invasion. For migrants, it is much more convenient to work under contract as self-employed rather than have a permanent employment permit. By the way, this has long been implemented in Ukraine in the form of a sole proprietorship, and now the whole world is moving in this direction.

In the meantime, gig workers are among the early adopters of new technologies, where cryptocurrencies are one of them. Our startup GeekPay provides a platform that allows quick and convenient transfers in stablecoins between participants in the gig economy. Our turnover is growing by 30% per month, and we see firsthand how fast the industry is developing.

According to Gartner, 20% of all large businesses will migrate to digital currencies by 2024. Currently, a large international company spends extreme budgets on transaction costs out of every $10 million it pays to its contractors. For transfers from bank to bank, international payments, and so on. Digital currencies and DiFi, in general, can significantly optimise these costs and also optimise efforts.

At the same time, businesses are still very cautious about altcoins and prefer stablecoins that are pegged to the dollar and are more predictable. 99% of all digital currency gig contracts are made in stablecoins.

Sign two: the vulnerability of traditional finance

Almost no one argues about the flaws of the traditional financial system: long, expensive, and inconvenient. But it is reliable, they say. This has always been the main argument of Web3 opponents. They contrasted the volatility and instability of cryptocurrencies and crypto projects with the stability of the dollar, the euro, and banks that have existed for decades or even centuries. And they seem to have less scam, and there is no infantilism among the founders and top managers.

But let’s take a look at the events of 2022 and 2023. SVB was one of the best banks in the US with an extremely high rating. They held $342 billion of client money. But it collapsed very quickly and loudly. The CEO of the bank sold shares for 3.6M the week before the collapse. So much for no scam and a client-first approach.

But hey, it’s the eccentric Silicon Valley, where newfangled businesses blow up from time to time, leading to crises and problems for banks. Old stalwart Europe is a different matter, isn’t it? Meanwhile, last year, Credit Suisse, a Swiss bank with $1.7 trillion in assets, collapsed! So much for the famous eternal reliability of Swiss banks.

Is the Web3 world immune from such problems? Not at all, and last year’s stories with FTX and Terra prove it. However, the main argument of the supporters of traditional finance no longer works: banks collapse almost as fast and often as crypto projects. At the same time, sluggishness, high transaction costs, and inflexibility remain with banks in the future. Their anti-fragility is highly questionable.

Sign three: governments and the world’s largest investors are betting on digital currencies

The ongoing bear market creates the illusion that the mass adoption of cryptocurrencies is still far away. But let’s look at the facts. In 2022, Tether (the issuer of the USDT stablecoin) processed $18.2 trillion worth of transactions, outpacing the largest traditional payment systems. For example, Mastercard processed $14.1 trillion worth of transactions during the same period, and Visa processed $7.7 trillion.

A large part of the American e-commerce industry already accepts payments in cryptocurrencies directly on their websites. For example, you can buy cosmetics or yoga clothes for crypto on Aloyoga.com, farfetch.com etc, shopify.com. During the checkout process, a significant number of online stores and builders will include cryptocurrencies in the list of payment methods offered. Let’s not forget that you can already buy cryptocurrencies through the popular Revolut and Stripe services.

Digital currencies are also gaining more and more trust among governments. This year, many countries are launching their own CBDC projects, centralized digital currencies. By the end of the year 2023, it is expected that transactions in digital euros and digital pounds will be launched. Each country will strive to have its own digital currency. I am sure that by the end of 2023, we will see a big surge.

And the icing on the cake was, last month, investment giant BlackRock applied with the SEC to register a Bitcoin ETF. In case you don’t know, BlackRock owns a notable part of our world without exaggeration.

Three problems that prevent the revolution from happening

As you can see, the facts show that the Web3 revolution in the world of finance is already in full swing. So why is it still not obvious to most people? There are several problems that prevent its final arrival both in fact and in the mass consciousness. I will highlight the three that seem to me to be the main ones below.

Problem #1: Today it is a bear market and crypto projects need a lot of investment, since it is pure R&D. To make crypto mass adoptive, it is necessary to invest a lot of money in marketing, infrastructure development, vast services, and education. Since the venture capital market is in decline, it stops the domain from growing fast.

From our own experience, we feel that the process of raising money has become much more complicated. We had strong soft commitments from 3 VC interests in 3 weeks after the start of the campaign but then all of them put the communication on hold. In addition to macroeconomic factors, last year’s collapses of FTX, Terra, and several other large crypto projects had a strong impact.

Despite all the above-mentioned facts, we believe that the market will be very, very loud before the beginning of next year. There will be a lot of new investments and new interesting products.

Problem #2: lack of regulation and interoperability. Web3 doesn`t have the unified regulated legal landscape and it causes a lot of spaces to manipulate and scam, the lack of it to some extent hinders the final financial paradigm shift. It was the wild, wild west, and that’s what allowed projects like FTX to go dark behind the scenes. However, the world is moving to the legal setup with the new announced focus to clarify legal rules of blockchain in general.

GeekPay doesn’t have a hidden agenda, we have no intention of fooling investors or ripping off our customers. Our approach is to research and build a product using blockchain technology to satisfy business needs of the customers. That is why we want the regulated rules of the game in the market where everyone is on the same footing.

However, the regulation flow is not that simple. There are certain financial sector standards that work in the paper money world whereas DeFi, decentralized finance, is a much more complex system built on different principles. The paper money standards sometimes can hardly be implemented in full scope to DeFi due to technology specifics.
In addition, there are many different ecosystems in Web3 – bitcoin, ether, Near, TRON, and so on. And each of these ecosystems is also built on its own principles. All of them are based on blockchain technology, but how exactly it works, how much it costs, what transaction fees it has – all of this is very different. Creating a unified set of products, procedures, and regulations is a very complex task that requires a lot of time, investment, and effort. This path may take another five years and cause a lot of changes in the industry, but I think it’s the right thing to do, because otherwise it’s impossible to develop Web3 systematically.

Problem #3: education and onboarding. One of the problems of the Web3 industry is that products are often created for people who already understand what it is. But blockchain itself is a very complex technology, the logic of which will take a certain time to understand.

It’s not even about financial logic, but at least about software implementation. We are all used to Web2 interfaces and previous-generation fintech services. We know how to connect to online banking, register, and so on. Most people don’t understand how to do it in Web3. The obstacle is the complexity of the technology itself and onboarding in Web3 services, as well as the lack of popularisation and education.

It took years for Wi-Fi or smartphones to become widespread and understandable to the general public, including the elderly. Web3 must go through the same evolution. We need universal and accessible terminology, and clear instructions – what is a wallet, how to create it, what is a gas fee, chain, and so on.

To sum up

For each problem described, there is a scenario to overcome it. Web3 has already happened and there is no turning back. In the Web2 world, there is no financial technology as powerful as blockchain. It provides agility and flexibility that simply could not exist before. Sometimes it will take 1-2 years, sometimes all 5 years, but it is already clear that digital currencies are about to become the new standard of money. I think that in a year or two, there will be no difference in the convenience of paying with fiat money and cryptocurrencies for the buyer. There will be a seamless transition.

My prediction is based on the understanding that people and businesses today are actively looking for more flexible ways to pay/get paid for their services or other financial transactions. We need to give convenient innovative services the opportunity to develop, we need to regulate and standardise the industry, and finally, we need to provide high-quality onboarding of users in these services.

Veronika Korzh has over 10 years of experience in management positions in product and service IT companies, and the investment sector and was recently recognized as one of the top 10 Women in Web3 Changemakers for 2023. She is a board member at Sigma Software Labs (the investment wing of Sigma Software Group) and a partner at SID Venture Partners. For the past two years, Veronika has been working in the field of cryptocurrencies and blockchain. In May 2022, she co-founded GeekPay, a platform to streamline and secure batch payments in digital currencies to gig workers.

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