By Sean Li, CEO of Magic
As we put 2023 behind us and focus on 2024, we reflect on a year of highs and lows in the world of Web3 and cryptocurrency. The year kicked off with robust funding in the crypto space, though this momentum didn't sustain into the second half. We witnessed significant regulatory focus, marked by high-profile legal proceedings, including Sam Bankman-Fried's court case and Ripple's victory against the SEC.
Despite these challenges, the industry achieved notable technical advancements, including Account Abstraction and Layer 2 developments. Moreover, tech giants like Google, AWS, and Microsoft made strategic Web3 partnerships. Notably, we saw the seeds of enterprise adoption of Web3 being planted, hinting at its potential impact on businesses and customer relations.
For this year, what can we expect from Web3 and cryptocurrency? We've gathered insights from Magic’s executives to explore the industry's trajectory in the upcoming year.
Enterprises Will Dive Headfirst Into Web3
Enterprises will embrace Web3 as a means to improve customer loyalty and engagement in an increasingly digital world. This trend is expected to see brands moving away from traditional loyalty programs, favoring NFTs for their flexibility and interoperability, thus driving Web3's widespread adoption in 2024.
However, this transition may be gradual. A Coinbase report reveals that over half of the Fortune 100 have delved into crypto, blockchain, or Web3 initiatives since 2020. Yet, their full potential in Web3 remains largely untapped. In 2024, millions of people will make their first interaction with Web3 without realizing it. The introduction of ‘invisible’ Web3 solutions, enabled by the growing Wallet-as-a-Service category, will make it easier for businesses to bridge the gap between the current web and the next web being built on blockchain rails.
This so-called “Web2.5” will provide a staging post on the journey to greater Web3 adoption. In this intermediary adoption phase, applications will maintain the UX and features consumers have come to expect of Web2 products, but these will be augmented by connection to blockchain rails. This will bring benefits in terms of true asset ownership and P2P trading of things like in-game assets and NFTs. But the elimination of long-standing obstacles to Web3 onboarding, through features like gas-less transactions, will smooth this process.
User Experience Will Be at the Core of Everything
Wallet-as-a-Service will become more critical than ever for businesses and developers wanting to deliver a seamless UX for their users. Expect to see Fortune 100 companies explore Web3 strategies for heightened brand loyalty and improved customer experiences, aligning with the preferences of the next generation of consumers. We’ve already started seeing some companies do so, such as Mattel, 7-Eleven, and Macy’s. Notably, 64% of Fortune 500 executives recognize Web3 as vital for their companies' survival, and have no desire to fall behind their competitors.
It’s taken longer than many in the industry hoped for Web3 UX to catch up with that of Web2. We’re very close now, thanks to concerted efforts to improve the way users interact with blockchain-connected applications. From eliminating seed phrase requirements to introducing social account recovery, Web3’s imagineers are pulling out all the stops to put on a show for new arrivals. With impediments to greater adoption smoothed out, the stage is set for Web3 experiences to be determined by the quality of the product rather than the process.
Less Hype, More Utility
While DeFi is expected to drive stablecoin volume and growth, 2024 will witness an expansion of stablecoins beyond DeFi, especially in financial services like remittances and payroll. Next year will also see the blending of physical and digital realms to deliver more real-world applications for crypto and blockchain. An example is Lufthansa's NFT loyalty program, where passengers can redeem NFT trading cards for tangible perks.
According to BCG, 54% of consumers are drawn to online communities for real-world benefits, with 21% motivated by NFTs, showcasing the potential of merging technologies like NFTs with tangible advantages. Allow consumers to earn stablecoins for completing simple tasks and brands now have a way to reward engagement with micropayments – and users will be dabbling with DeFi without even knowing it.
Institutional Capital Will Flow Into RWAs
Tokenized real world assets (RWAs) will continue their impressive growth, with the sector on course to double in 2024 as institutional capital flows in. TVL should reach $6 billion, excluding stablecoins, as enterprises seek sustainable yield to be earned from RWAs. The ability to tokenize real estate, art, and bonds unlocks new possibilities for capital-efficient investment, deepening liquidity and supporting fractionalization.
This year, the infrastructure was put in place to provide a compliant framework for accessing RWAs. Projects such as Backed have taken the lead here, enabling the creation of tokenized treasury bonds and synthetic instruments derived from the S&P 500. T-bills have been the prime beneficiary of the race to tokenize real-world assets but next year it’s businesses with capital to place onchain that will reap the dividends.
Against a backdrop of institutional support for Bitcoin ETFs, corporations moving a chunk of their balance sheet onchain no longer seems exotic. The regulatory environment has softened, providing the clarity businesses need before trading in blockchain-based financial products. DeFi-native projects have already embraced RWAs with the likes of MakerDAO electing to use physical assets as collateral.
Enterprises have yet to embrace RWAs at scale, but next year expect all that to change. From gold to oil, it’s all ripe for trading, collateralizing, and borrowing against onchain as the RWA juggernaut picks up speed.
Conclusion
2024 is poised to be a pivotal year for Web3 and cryptocurrency, focusing on practical utility rather than mere hype. The emphasis will shift from speculative NFTs to applications with real-world benefits, particularly among enterprises. This upcoming year promises not only technological advancement but also a meaningful integration of Web3 into everyday business and consumer experiences.
Author bio
Sean Li is an accomplished Web3 / Blockchain professional, product innovator, and the co-founder of Magic, the leading Wallet-as-a-Service provider. Before joining Magic, Sean occupied different leadership positions. He began as the co-founder and Chief Product Officer at Kitematic, an application designed to automate the Docker installation and setup process. Following its acquisition by Docker, Sean assumed leadership of Docker Desktop, an enhanced iteration of Kitematic that contributed to approximately 80% of the revenue generated.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.