In recent months, the crypto asset market has soared, reaching around $2.7 trillion in market cap. This surge has sparked a critical question: How necessary are crypto tokens for the success of blockchain and Web3 startups? To explore this, four Web3 leaders—Harsh Rajat (Founder of Push Protocol), Parth Chaturvedi (Investments Lead at CoinSwitch Ventures), Saurav Raaj (Founder of Tokenize), and Mridul Gupta (COO of CoinDCX)—shared their insights during a panel discussion at TechSparks Mumbai 2024 titled “Hot takes: Can Web3 succeed without crypto?”

Understanding Web3 and Crypto

Web3 represents the next phase of the internet, emphasizing decentralization, user control, and enhanced privacy. Cryptocurrencies play a pivotal role in this ecosystem by enabling decentralized finance (DeFi), powering decentralized applications (DApps), and providing incentives for network participation.

Expert Panel Discussion at TechSparks Mumbai 2024

At TechSparks Mumbai 2024, a diverse panel of experts delved into the necessity of cryptocurrencies for Web3 success. The panelists highlighted the different types of crypto and their unique applications, shedding light on whether Web3 can thrive without them.

Different Types of Crypto and Their Use Cases

Mridul Gupta, COO of CoinDCX, emphasized the varied roles of cryptocurrencies:

“Different types of crypto address discrete problems. For example, Bitcoin (BTC) is a store of value. Stablecoins have been applied to fintech use cases in Web3, and altcoins all have their own various use cases.”

Bitcoin vs. Ethereum: Digital Gold and Digital Oil

Parth Chaturvedi, Investments Lead at CoinSwitch Ventures, provided an analogy:

“While BTC is like digital gold, ETH is like digital oil. You need ETH as fuel to run the decentralized computer known as Ethereum. On top of this, you can build decentralized apps (DApps), whose transaction fees are denominated in ETH.”

Non-Crypto Use Cases of Blockchain

The panel discussed several non-crypto applications of blockchain technology, such as digital identity management, land records, and civil complaint systems. These use cases illustrate how blockchain can enhance transparency and efficiency without necessarily relying on cryptocurrencies.

Central Bank Digital Currencies (CBDCs)

Saurav Raaj, Founder of Tokenize, noted the advancements in CBDCs:

“There is also progress on Central Bank Digital Currencies (CBDCs), where Peer-to-Peer (P2P) use cases can be enabled on-chain.”

CBDCs have the potential to revolutionize P2P transactions by leveraging blockchain for secure and efficient settlements.

Web3 Startups and Token Necessity

Harsh Rajat, Founder of PUSH Protocol, explained that Web3 startups might not need a token initially:

“Startups need to define what they are solving for. After they have built their products to a stage where they need other people (and the community) to run it, then they can attach a token as an incentive.”

Rajat cited Uniswap as an example, a decentralized crypto exchange that achieved product-market fit before introducing a token to decentralize ownership.

Permissioned Blockchain Use Cases

The discussion also covered permissioned blockchain use cases, which involve selected participants transacting on-chain without the need for public incentives.

Parth Chaturvedi remarked:

“If you want to create a distributed ledger that will be used by banks, it doesn’t need to be an open network. Even Digi Yatra uses blockchain in the background. There is no need to involve an economic incentive to align new participants.”

Expert Opinions on Crypto Necessity in Web3

The panelists offered varied perspectives on the necessity of crypto in Web3. Harsh Rajat highlighted tokens as community incentives, while Parth Chaturvedi emphasized the practicality of distributed ledgers for specific applications.

Challenges in Web3 Without Crypto

Without cryptocurrencies, Web3 faces significant challenges, including issues of trust and decentralization. Overcoming these obstacles requires innovative approaches to incentivizing participation and ensuring transparency.

Potential Solutions and Innovations

To address these challenges, new models for incentivizing participation and advancements in blockchain technology are essential. Innovations such as automated trust mechanisms and enhanced security protocols could play a crucial role.

The Future of Web3 and Crypto

Looking ahead, the Web3 ecosystem is poised for growth, with cryptocurrencies continuing to play a significant role. However, the potential for non-crypto blockchain applications also remains strong, promising a diverse and dynamic future for Web3.

Final Thoughts

In conclusion, while cryptocurrencies provide essential incentives and enable numerous applications within the Web3 ecosystem, blockchain technology itself holds immense potential beyond crypto. As Web3 evolves, the interplay between blockchain and cryptocurrencies will likely continue to shape its success.

FAQs

1. What is Web3? Web3 is the next phase of the internet, focusing on decentralization, user control, and enhanced privacy. It leverages blockchain technology to create a more secure and transparent online ecosystem.

2. How do cryptocurrencies benefit Web3 startups? Cryptocurrencies enable decentralized finance (DeFi), power decentralized applications (DApps), and provide incentives for network participation, enhancing the functionality and appeal of Web3 startups.

3. Can blockchain work without crypto? Yes, blockchain can work without crypto. Non-crypto applications include digital identity management, land records, and civil complaint systems, which leverage blockchain’s transparency and efficiency.