Recently, people are talking about Web 3.0. Let aside the different definitions of Web 3.0, what matters the most is the financial flows. The new technology and market growth are driven by the inflows of money and people. Currently, investment funds and capitals are increasing in the technology companies that deal with Blockchain, NFT, DeFi, and Metaverse. This is why Web 3.0 has become a new mega-trend based on these technologies. The arguments on Web 3.0 among Andreesen Horowitz, Elon Musk, and Jack Dorsey are interesting because similar arguments were common back in the Web 2.0 era. However, market leaders such as Google and Amazon eventually emerged from the massive inflow of funds. The Series B investment on Lambda256 – about $60 million – in just two months clearly shows a great interest in Web 3.0.
Lambda256 believes Web 3.0 can make the real world transition to web. People have created a world where most content and services in the real world are connected on the web; one of the very few exceptions is the digitization of assets. When I was in Samsung Pay development project, my team sought to bring the wallet-based payment experience to mobile. People at that time were already used to digital payments with credit cards, so our payment service product successfully brought about the mass adoption of the mobile payment. But another significant problem remained: how can we convert the fiat currency into digital assets? A simple answer was to issue loyalty points backed by the fiat currency deposit. However, it had limitations because it was not reliable, scalable, or manageable enough. The only answer, I believe, is blockchain-based digital assets. The tokenization technology of blockchain grants various economic models via digitalizing diverse forms of assets and connecting each of them through web. Linking traditional assets to service&content-based web. This is what Lambda256 expects from Web 3.0.
There are two choices to issue and link assets on Web 3.0. One is the private blockchain model meeting the current compliance and regulations, and the other is the decentralized blockchain model which brings the disruptive innovation. There’s no compromise because the governments equate decentralization and illegality. Thus, they control decentralized projects with regulations or taxes.
All virtual asset service providers with the private blockchain business model must comply with government regulations. Even in South Korea, all virtual asset companies must obtain ISMS certification and comply with the Travel Rule from March, 2022. For example, Travel Rule states that withdrawal from centralized exchanges to decentralized wallets such as Metamask that do not comply with the rule is prohibited. In other words, there would be a border between the centralized and decentralized wallets.
The Regulatory-based Blockchain Technology Will Be Important For the Private Blockchain Services.
Existing requirements for the traditional financial services, such as KYC/AML, Travel Rule, and fraud detection system are also required for virtual asset services. Therefore, companies must comply with these regulatory demands when conducting various virtual asset-based businesses such as crypto custody service, and NFT trade platform. Ironically, the virtual asset regulation market might grow according to this trend. For example, VerifyVASP, a Travel Rule service developed by Lambda256, is already deployed to +30 VASPs, and Chainalysis is growing rapidly by providing anti-money laundering (AML) solutions. The decentralized blockchain businesses are growing rapidly, thanks to its infinite competition and enlarging liquidity due to various ideas becoming protocols.
Ethereum Becomes Popular But with Slower Speed, While Layer 2 Solutions Will Increase.
Ethereum 2.0, the most popular public chain, will take a few years to be developed due to its slow speed; nevertheless, it will continue to develop as a platform for issuing trust-based asset contracts, and its asset volume will increase as well. Therefore, roll-up-based layer 2 chain technologies such as bridge technology, optimistic roll-up, and zero knowledge certification (zk) that peg ERC20 and ERC721 assets issued on Ethereum into side chains will grow significantly. The optimistic rollup solutions include Optimism and Arbitrum, and zero-knowledge (zk) roll-up includes looping, zk swap V2, zk sink, AZTEC, Polygon, etc. In addition, Dapper Labs’ sidechain Rhonin and Lambda 256’s sidechain Luniverse are in the spotlight as they can utilize ERC20 and ERC721 assets through Layer 1 Bridge. Of course, layer 1 public chain projects such as Avalanche and Solana, which are compatible with Ethereum EVM, are also growing.
The Growth of the Tokenization of the Virtual Assets, Defi, NFT Will Continue
According to a report published by South Korean National Assembly’s Budget Office (NABO) in September 2021, the size of the virtual asset market has exceeded $1.68 trillion USD globally. According to DeFi Llama, a DeFi dashboard, the total value of cryptocurrency locked (TVL) in the DeFi protocols as of the end of 2021 is $245.2 billion, approximately. NFT market, which has been surging recently, is estimated to be at least about $26.9 billion in 2022, according to an analysis by Chainalysis. Even now, various types of virtual assets, NFT, and DeFi protocols are being created around the world, and the scale continues to increase accordingly. Plus, these new digital assets are not centralized service operations like Google or Naver, but are operated in the services with a new community-type governance models such as DAO(decentralized autonomous organization), in which people with digital assets participate and operate services.
Blockchain as a Service (BaaS) with Easy and Productive Environment will grow rapidly
Technically speaking, current virtual assets consist of ERC20 tokens, ERC721 NFTs, and smart contracts written in languages such as solidity using them. Clearly, a development environment with high productivity to build contracts and DApps is necessary. Currently, among the most prevalent include Web3.js, Truffle, Ganache, and HardHat, but their environments are far below expectation. Developers who are used to the existing environments like Java, C++, IDE will encounter a lot of difficulties in solving debugging, calculating the execution cost (gas fee), and managing security defects when developing smart contracts. In particular, the nature of blockchain, such as nonce management of large-capacity transactions, data inconsistencies between nodes, and pool-based transaction processing method, hampers developing stable services.
To solve these difficulties, blockchain service solutions like Luniverse provide a stable chain management and productive development environment. For example, Luniverse lets its users create a sidechain that can be effortlessly connected to Ethereum nodes or Ethereum, develop and distribute contracts with ease, and make use of various utility services necessary for contract development. In addition, security defects can be detected and solved through smart contract audit services such as Odin of Sooho.io. Given that losing a large amount of assets due to a small mistake in smart contract code is not uncommon, you will see how important and helpful this development environment is.