That part of the world is the APAC region – Asia-Pacific, which is not only difficult for western companies to access, but even comprehend. As a melting pot of cultures and narratives, APAC is accepting of innovation and even appreciates the diversity offered by Web3 as an instrument of individual and regional empowerment.

The reluctance of western businesses to enter the APAC region’s Web3 space is understandable, since they have little experience of doing profitable business there. But that is precisely the biggest challenge that has to be overcome, since Web3 is the ideal platform for collaboration on a global scale.

In this material, we shall take a deep dive into the statistics of Web3 of APAC and understand what the appeal is and how it can be leveraged to better advance global adoption of the next iteration of the internet.

The Numbers Speak

Web3 is a gigantic and promising frontier that is slowly taking center-stage ever since its first impact on the broader crypto audience with the advent of metaverses and the opportunities they offered. As Web2 recedes, Web3 is starting to introduce entirely new workflows and user interaction scenarios. Businesses are exploring the possibilities offered by AI, virtual reality, machine learning, and the blockchain. Coupled with cryptocurrencies and NFTs, the Web3 space is a vast and untapped environment that not only upends the marketplace experience, but also couples with the phenomenon of a digital reflection of everyday life for intuitive, customizable, personalized, and useful browsing.

Market Growth

In terms of market growth, the Web3 market is expected to witness an uptick in CAGR of up to 39.3% in the period between 2021 and 2025. That translates into a total value of over $107.32 billion. The astronomical increase is associated with the snowballing development of new applications and the transformation of entire industries to suit the Web3 narrative, as well as the adjustment of others for the same purpose. With such a valuation, the possibilities for new application and use case scenarios are almost limitless, giving both businesses and users a distant horizon for imagination. In addition, the global Web3 blockchain-as-a-service market is expected to grow at a CAGR of 35.2% from 2022 to 2029.

User Number Growth

The number of monthly active users, or MAUs, in the Web3 domain overstepped the landmark figure of 1.5 million in 2021. By 2023, over 73 million gamers will use Web3-based games, such as Fortnite and Roblox, the latter having upwards of 43 million users. This rise indicates that Web3 adoption is progressing at a rapid pace, with South Korea, Taiwan, Hong Kong, Vietnam and India leading the way. The rise is attributable to the interest in cryptocurrencies and the interest garnered by the applications in Web3 that provide a fully personalized and user-centric experience. At the same time, user retention rate is estimated to be around 18%.

The TVL

Total Value Locked in Web3 projects overstepped the $50 billion mark in 2021 and has remained at that point well into 2023, though having gone through a massive surge to all-time highs in the period between the years. The importance of DeFi cannot be underestimated, since it acts as a magnet for institutional investors entering the Web3 space. DeFi is also a source of liquidity, trust, transparency, and acts as a gateway to many other Web3 applications, effectively functioning as an on-ramp. Most importantly, DeFi exemplifies the self-governance principles of Web3 and the complete financial sovereignty that users can attain in the space.

Mobile Dominance

Statistics indicate that 66% of Web3 users prefer mobile wallets for accessing decentralized applications. The same statistics indicate that the number is similar for the APAC region. The convenience associated with mobile access is a major factor in accelerating Web3 adoption, but also highlights the user-centric approach that optimizes interaction experiences with applications. There are immense growth points to consider in the mobile domain, considering that decentralized applications are the basis for virtually all Web3 services.

The NFT and DeFi Share

Statistics also reveal that over 90% of all Web3 applications are dedicated to NFTs and DeFi projects, the remaining 10% being attributed to games and niche applications. The numbers reveal that there is immense potential in NFTs and financial vesting is still of prime focus for users who are already in Web3 and those still being onboarded. The allure of DeFi in Web3 is largely attributed to the presence of borrowing and lending facilities with collateralized assets like gold and silver. The presence of NFTs indicates that the merger of real-world assets and their digital counterparts is growing. In addition, the numbers make it clear that there are use case scenarios for NFTs and that users are attracted to this type of asset, paving the way for their future development and innovation.

Gaming

Gaming in Web3 is one of the biggest attractions for users. The possibilities opened by virtual and augmented reality, as well as AI and NFTs provide entirely new gaming experiences with innovative scenarios and gameplay options. Entertainment through gaming in Web3 is expected to exceed $29 billion by 2024. Coupled with the recent lackluster performance of traditional PC and console gaming studios and publishers, the allure of mobile-based and Web3 gaming seems well founded as an alternative, one that requires no expensive hardware and no reliance on the whims of developers. Web3 gaming is actually viewed as a benchmark in innovation for the industry, one that reinforces user engagement and incentivizes them to invest both time and money in the gameplay experience. Furthermore, the APAC region is home to over 40% of Web3 game developers. North America trails with 30%. The period between 2023-2024 is believed to be a turning point at which over 50% of Web3 game developers will originate from Asia.

The Geography of Web3

A statistical breakdown reveals that APAC accounts for over 40% of all Web3 users, with North America trailing at 34%. However, cryptocurrency involvement in Asia has seen a surge of over 706% in user attraction since 2020, leaving all other markets far behind. The US currently holds a 34% stake in Web3 economic matters and assets, followed by Europe at 24%, the remaining being evenly distributed between other countries, with Asia at 18%, African at 14%, and South America at 10%.

Key Takeaways

Asian countries are rapidly developing in the cryptocurrency space thanks to two main factors: the low entry requirements of Web3 and the accessibility of Web3 applications via mobile to a vast audience of young users. The statistics indicate that Web3 has exhibited immense potential in attracting users from such countries as Vietnam, which has little capital, but a huge population willing to rely on convenient and globally accepted cryptocurrencies. If adoption persists at the same pace as in 2023, it is possible to envision that 2025 the APAC region will outpace the United States in terms of user numbers, integration of Web3 services, their deployment, and innovation.

Tokenization is also a powerful instrument for attracting liquidity and empowering speculation, which ultimately raises the value of the tokenized asset on secondary markets. The peer-to-peer basis is what makes tokenization most attractive alongside the universal ability of the blockchain to create a digital twin of any asset in the real world.

In this material, we shall delve into the intricacies of real-world asset tokenization and explore some of the main opportunities that such an option provides to both businesses and users.

Tokenization – The Benefits

Fractional ownership is a key term of tokenization that has been used for over a decade to signify that a single whole real-world asset can be owned by multiple individuals who buy shares of it in tokenized format. This means that a business can sell anything from a work of art to a real estate property to multiple individuals at the same time. The business does not ultimately care who or how many individuals or parties purchase an asset, the important thing is to sell it. Tokenization allows this by giving a large number of smaller investors to acquire shares of a larger property or asset that would otherwise have been inaccessible to them.

Tokenization of real-world assets is most commonly associated with stablecoins when it comes to fiat currencies like the US Dollar, or any other. USDT Tether is an excellent example thereof, which can be successfully translated to other types of currencies or real-world assets. Tokenization is a major driver of digital asset adoption, since real-world assets, or RWAs, are quite expensive and are becoming inaccessible to a growing number of investors due to their localization and sanctions regimes. The blockchain and tokenization erase those barriers and open up investment markets to retail investors with small amounts of capital.

The Boston Consulting Group forecasts that the market for tokenized assets could mushroom to $16 trillion by 2030. This is based on estimates of the market and how firms are experimenting with tokenization in the on-chain domain. Though still largely isolated to TradeFi, tokenization can explode with the advent of Web3.

The Limitations

Though the benefits and prospects of tokenization seem bright, there are a number of serious challenges that impede its development to the level required for it to become a truly global phenomenon. The main hurdles are actually technical, rather than isolated in the minds of investors. On the contrary, investors are eager to explore the possibilities of tokenized real-world assets, but technical limitations like infrastructure interoperability and blockchain bottlenecks do not allow for mass adoption and implementation.

The recent developments in the blockchain domain, however, allow experts and analysts to predict that these limitations can be overcome in the near future. The fact that firms like Hamilton Lane and JP Morgan are developing tokenized asset projects is a good illustration of such assessments. The ease with which structured instruments and index-based products have been transferred on-chain gives these firms reason to believe that real-world assets will attain a similar level of popularity and a warm reception on the part of investors.

Bonds and equities are the next logical step for tokenization, with commodities like gold, silver, art, real estate, and any other type of asset soon to follow. Use cases of fractionalized ownership of artwork are already available and have been proven to be successful. But the biggest market for tokenized asset ownership is the real estate market. Complete digitization and near-instant settlement are the main benefits to be had, since they will open up the market to a completely new audience of buyers who had only dreamt of owning a share of a luxury property before.

Critics and skeptics would state that the actual use of owning a tiny fraction of a luxury property is moot at best, but they are neglecting the main benefit – speculation. Real estate is only gaining momentum and appreciation as an investment asset, meaning that tokenized fractions of real estate will reflect that, allowing them to act as value carriers. This also makes investments more accessible and can result in the explosive growth of the industry, which has suffered significantly as a result of the Covid pandemic and ensuing global crises.

Another major hurdle is the question of regulation, which is completely reliant on the stance of governments towards cryptocurrencies. The challenges that impede the rapid adoption of tokenized assets include risks associated with cryptocurrency fraud and the lack of clear guidelines that would define such assets in many jurisdictions. Should universal guidelines be introduced, they would launch a truly global scale of real-world asset tokenization on both the institutional and retail investor levels. However, at present, this prospect is distant at best, and most investors will have to contend with either localized investments in real-world assets, or deal with risk management.

The Future of Tokenization

Almost anything can be tokenized, ranging from real estate and commodities to agricultural goods and merchandise. This opens up vast opportunities for businesses to sell their products and services in the Web3 domain to a completely new audience of investors. The progress already being made in the United States on the legislative level aimed at recognizing the status of tokenized assets means that adoption is sure to accelerate.

Available forecasts provide valuable insights into the future of tokenized real-world assets, which are currently valued at $300 billion. Projections until 2030 indicate that the market could grow to as much as $10 trillion, according to Roland Berger, a 40x increase of the present value in 2023. The same analysts state that such estimates are conservative and based on current bearish market statistics. Should the market grow in light of the resolution of global conflicts and the lifting of restrictions, we could witness a significant boost in investments directed at real-world tokenization instruments.

Whatever the commodity or digital instrument, the blockchain can digitize it and make it available for sale. Though such an outlook makes the blockchain seem more like a huge marketplace, rather than a technology capable of being applied in many real-world industries, the fact is that Web3 is the future of real-world industries and the blockchain is its basis.

However, logic and traditional thinking have little to do with a progressive outlook that is based on the capabilities offered by innovation. The power of the blockchain and what it has to offer in terms of revolutionizing or even disrupting traditional concepts has yet to be evaluated. The true selling point of utilizing on-chain passes for conducting traditional operations like ticket purchases lies in more than just the reminiscent convenience of doing so like on any theater website. What the transition to an on-chain paradigm grants is insight based on compilations of user data that cannot be implemented in the Web2 domain.

The long-term benefit is the ability of the blockchain to rely on the data pileup provided by on-chain apps to totally redefine the user experience by identifying individual patterns to better match product and service offerings. This approach not only saves time and budgets, but also improves the overall browsing and shopping experience, which translates far beyond the traditional movie ticket buying scenario.

The design of blockchain space will be completely redesigned with the advent of Web3 and the necessary modules that can make data buildup possible. In this material, we will explore how that can happen and the benefits that on-chain apps will bring into the everyday lives of users.

The Vision

In the modern interpretation of the blockchain, a user is a blockchain wallet with a unique identifier that conducts transactions. These wallets exist as on-chain addresses that interact with other on-chain applications. The wallet thus acts as a carrier of information within the blockchain. This, in turn, means that the blockchain, including all the networks operating under that term, are, in fact, large repositories of information – untapped information that can be utilized for a variety of purposes.

Should the information stored in on-chain applications across networks be unified under a universal protocol or approach, then it will become of value for developers and service providers as a source of data and insights into user behavior. Further analysis and segmentation of the data will allow the identification of so-called superusers, influencers, patterns of behavior, and other valuable stepping stones vital for tailoring product and service offerings. The more information – the more meaningful connections can be established and the higher the quality of the matches as a result.

Superusers in this case will play a vital role, as they will act as anchors for identifying potentially viable and predictable user behavior. These users are more active and exhibit higher levels of activity on-chain. Though this is less than an ideal approach for generalizing such behavior across all other users, the fact remains that most user behavior remains untraceable even on the blockchain, or is scarce at best.

The blockchain can help change that by giving complete transparency of user behavior and the associated information flows. Among the activities that on-chain behavior can be evaluated based on are:

• Likes in social media and messengers;
• Subscriptions;
• Purchases of merchandise;
• NFT collections;
• QR code scans;
• Website browsing history
• Social media posts.

Though fragmented at best on their own, if compiled into a coherent and holistic picture of a user’s behavior, these elements help create a profile that can be used to evaluate preferences and thus better match ads and other offerings. The blockchain acts as the framework for such a map to be built, using the elements of user behavior as map keys for analysts, largely automated ones built on AI, to create user profiles.

The Prospects

There have not been too many Web3 applications that have successfully been fielded in the last few years precisely due to the question of user behavior tracking. Users are still apprehensive and skeptical of such applications that record their behavior and personal details. However, some applications of this sort have allowed users to take command of their data and monetize it. The approach was also experimental and has not gained widespread recognition as yet.

The presence of the underlying cryptocurrency factor in such applications is also a hampering factor, since it boils the app down to a money-making instrument, which does not produce as much useful data as it should. The vision is to create a blockchain-based environment that is detached from cryptocurrencies and as the basis for their existence, and rather extends into Web3 as a natural and inherent building block. The native presence of on-chain apps with user behavior data tracking in the background is still some time away, but it does seem to be inevitable.

The challenge lies in identifying the products and features that users would actually find useful and would be willing to turn to in an on-chain environment. The presence of open source data is a vital element, since it is the basis of Web3 that transcends time and space in the virtual domain.

Most analysts and experts believe that such a moment of Web3 adoption on a large scale will arrive when a critical mass of data has been compiled to create a functional and attractive application capable of capturing user attention. At present, most apps in this domain are lacking innovation and are copycats of the same concepts with no long-term development prospects.

The User Benefits

Users are the core of Web3, the main players and the drivers of innovation through their adoption and demand. At present, cryptocurrencies play a vital role in attracting new users through promises of profit. The approach is obtuse and neglects the core intrinsic values that users can get access to if they turn to the blockchain for aid and forsake some everyday tasks that they are used to fulfilling off-chain.

Among the benefits that users gain by turning to on-chain apps are:

• Cryptocurrency use is cheaper, faster, more transparent, and more efficient than fiat in many cases;
• Secondary market creation is another benefit, which means that users will always have a place to sell unwanted on-chain products;
• Tracking and transparency are key points, since they immediately make the shortcomings of traditional systems apparent;
• Security is a paramount issue that has yet to be addressed in full in the blockchain space, but is already on a tier higher than in most centralized systems that are inherently subject to fraud and corruption;
• Global access is vital, since cryptocurrencies and Web3 are devoid of censorship and sanctions.

Allowing the blockchain to enable these benefits is what remains, and that step is the competence of developers, while the users should, in turn, encourage development by demanding said benefits.

The Takeaways

Web3 is still some time away from reaching a high enough degree of adoption, but it is clear that traction will be gained only when developers provide a breakthrough solution that can capture the attention of a large enough audience. That being said, the benefits of on-chain apps extend beyond the browsing experience of users into their everyday lives, since the blockchain is just as much a basis for online activities as it is a reflection of their off-chain reality.

The collapse of several exchanges like FTX in 2022 and the ensuing crackdown on the part of the US Securities and Exchange Commission revealed some glaring vulnerabilities in the crypto space regarding users’ neglect towards exchange decentralization and the security of centralized entities. Following the troubles with Binance and other exchanges, trading on decentralized exchanges soared by 444% in early 2023. This opens up an entirely new chapter of opportunity for DEXs and their positioning as the only true and reliable hubs of crypto exchange in the industry.

The DEX Opportunity

Decentralized exchanges offer a number of significant advantages over their centralized adversaries. Apart from being free of a legal entity that would be vulnerable to external interference and pressure, DEXs grant the advantage of being more secure by the same virtue of having no centralized operating mechanism. The hackers will have a difficult time accessing not just most, but even some of the hubs that make up a DEX, eliminating the possibility of a breach by simply outweighing the potential gains by the resources required to achieve such a feat.

Though significantly more secure and attractive as a trading venue by virtue of their inherent technical characteristics, DEXs still have a number of shortcomings that limit their spread. Among the most important drawbacks is the slow influx of liquidity, which is being restricted by poorly developed interfaces and lack of knowledge among users, as well as trust.

The cross-chain experience is also still in its infancy, since many DEXs are limited to a single blockchain network and are only just tapping into the potential of Layer 2 and other interaction solutions. There is also the issue with slippage, but it is a small price to pay for security and reliability.

The main selling points that DEX are currently pushing forward are transparency and reliability by capitalizing on the peer-to-peer trading approach. This means that users have to be proven that they can trust DEXs, as they are not entrusting their funds and operations to a centralized entity, but to an automated system that simply links them with other users.

The key competitive advantage that would set DEXs apart from their centralized adversaries is the ability to attract users with a holistic experience that would trump the need to place trust in a centralized traditional authority. Liquidity is much less important in the given market, since it is available to those who require it and there is no longer any difficulty in finding buyers for any type of asset on any type of platform. The focus is now on Web3 users who are placing their stakes on complete decentralization – a selling point that is inherent to all DEXs.

Opportunity Breakers

Decentralized exchanges that exist today have a hard time attracting users with any options other than their decentralized characteristics. The interfaces are still far from resembling the quality of centralized exchanges, which have capitalized significantly in the time since their inception on expanding their scopes of services. Few DEXs can boast of having multiple services or platforms, such as NFT marketplaces, DeFi services, lending and borrowing facilities, and other features all within the scope of a single hub.

Most importantly, DEXs are not very decentralized either, since they comply with the same KYC principles as centralized exchanges. Though this is a necessary measure to prevent money laundering and the financing of terrorist activities, users see this factor as a major breach of their privacy and personal data. The upside is that DEXs do not have centralized storage of user funds, reducing the risk of hacking, and give traders complete anonymity during their operations.

True DEXs require users only to have a username and starting capital to start trading. But that does not stop financial surveillance from being in place on DEXs. The Financial Crimes Enforcement Network or FinCEN, obligates businesses, financial institutions, and exchanges to report suspicious transactions to law enforcement under the Suspicious Activity Reports or SARs:

“Under FinCEN regulations, a person is exempt from money transmitter status if the person only provides the delivery, communication, or network access services used by a money transmitter to support money transmission services. Consistent with this exemption, if a [convertible virtual currency] trading platform only provides a forum where buyers and sellers of [convertible virtual currency] post their bids and offers (with or without automatic matching of counterparties), and the parties themselves settle any matched transactions through an outside venue (either through individual wallets or other wallets not hosted by the trading platform), the trading platform does not qualify as a money transmitter under FinCEN regulations.”

In essence, DEXs act only as platforms that facilitate peer-to-peer transactions and are exempt from the regulation if they are merely trading between each other. This acts as a powerful advantage in favor of DEXs for users seeking true privacy and an escape from oversight. However, such exemption does not mean that DEXs and users are free from all oversight and all of their operations are released from surveillance.

Since surveillance, regulation and laws were put in place to protect investors, their main object of attention are securities. As such, users who trade assets deemed securities on DEXs will have to be careful. The main hurdle is that the definition of a security in the cryptocurrency space is still moot. The sole guidance is that tokens that promise profit in the future to their holders are securities. As such, practice dictates that a DEX that only facilitates the trade of non-security assets is not subject to regulations and laws regarding securities.

The Future

A DEX is more than just a hub for facilitating the peer-to-peer transactions of users who wish to remain anonymous. It is the true embodiment of the blockchain and its principles. With Web3 growing and expanding into an increasing number of everyday life aspects, it is possible that only DEXs will be able to survive in such a fully automated, blockchain-based, and decentralized environment.

Since Web3 entails complete privacy and a peer-to-peer approach to financial matters with protection of personal data, the DEX fits the description of an ideal venue for such a narrative. However, only time will tell if the functionality of DEXs and their development into user-focused and user experience oriented platforms will be able to guarantee their dominance. DEXs are facing stiff competition, since centralized exchanges have a head start in the scaling, user experience, interface, and service range domains.