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‘Get comfortable with discomfort’ for Web3 success: PBW 2023

A group of professionals in Web3 took the Venus de Milo stage at Paris Blockchain Week 2023 to discuss the dos and don’ts of metaverse regulation.

The metaverse continues to be a hot topic in the Web3 space, as a group of industry professionals took to the Venus de Milo stage at Paris Blockchain Week 2023 to discuss the future of digital reality. 

In the panel “Metaverse Regulation: Dos and Don’ts,” the group discussed how regulators around the world might interpret what goes on in the metaverse, along with how businesses should navigate their entrance into digital reality.

PBW venue, Paris, France. Source: Cointelegraph

Lawyer and founder of Jacob Avocats Julie Jacob said she sees privacy, regulation, and ethical standards as having “different cultures in different countries.” According to Jacobs, the new challenge is creating regulations that can be applied worldwide:

“There is no standard. It's really a fantastic opportunity, in my opinion, to now create rules all together and also to create ethical standards.”

Arnaud Pelletier, the innovation director for IBM Consulting France, said regulation is key to ensuring “fairness, competition and protection of individuals,” especially as more businesses enter the metaverse

However, Pelletier stressed that too much regulation would have “drawbacks” such as limited innovation, too much interpretation and stunted adoption.

Related: South Korea launches ‘Metaverse Fund’ to expedite domestic initiatives

In the United States, this has already started to happen, according to Andy Albertson, partner and co-lead at Fenwick. He said it's pushing "good, hard-working entrepreneurs" out of the country into others that are more receptive:

“It also creates an opportunity for countries that want to lean into this innovation and provide an appropriate level of regulation.”

For enterprises ready to jump into the space, Albertson said they need to “get comfortable with discomfort” to succeed in Web3. As the industry continues to grow, there are still a lot of "grey areas" to work with, he said, adding:

“You have to be comfortable with the strategic risk. I'm not talking about being reckless. I'm talking about marrying up the business opportunity with the risk that you couldn't eliminate.”

Recently, Margrethe Vestager, the executive vice president of the European Commission, said that current legislation lags behind the technology. She also said that the Commission wants to ensure "healthy competition" in the metaverse in its jurisdiction.

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Davos 2023: Education is key to driving sustainability in blockchain and beyond

Cointelegraph’s editor-in-chief Kristina Lucrezia Cornèr moderated a panel discussion at the 2023 Davos conference in Switzerland on sustainability in the world of blockchain.

The World Economic Forum (WEF) in Davos, Switzerland, brings together global leaders and thinkers across various industries to hone in on global issues each year. As the world of crypto and blockchain continues to push into the mainstream view, it, too, has become a topic of discussion at the legacy event. 

Cointelegraph editor-in-chief Kristina Lucrezia Cornèr moderated a panel on Jan. 17, which touched on sustainability efforts in the blockchain industry. 

Even though not all panelists come from the same background, they unanimously highlighted education and learning as the key way to drive sustainability in emerging technologies during "The emergence of Breakthrough Technologies" panel.

The focus of the panel viewed sustainability in the blockchain industry through two lenses. One of which is in the “green” sense of the word - more energy efficient and sustainable for the environment. While the other speaks to the long-term impact of projects and initiatives in the greater Web3 space.

Mark Mueller-Eberstein, the CEO of business consultancy Adgetec Corporation, pointed out that the industry does suffer from “greenwashing,” but verification standards that can be taken from the blockchain can bring out productivity in sustainability practices in the industry.

“Knowing that we can trust the data is extremely important. This is why I think blockchain especially is so important.”

He continued to say that educating the community, especially the next generation, will be “the cornerstone for all of us, as societies and individuals."

Related: From games to piggy banks: Educating the Bitcoin ‘minors’ of the future

Christina Korp, the president of Purpose Entertainment and founder of SPACE for a Better World, pointed out the significance of education in older generations as well with an example of a U.S. congressman over the age of 70 who began educating himself on artificial intelligence.

“How can all these people make the decisions about what happens with the laws, when they don't even understand the technology or this new world?”

The CFO and treasurer of the Hedera Foundation, Betsabe Botaitis, also touched on trust as a foundation for a more sustainable industry, especially she said, as the blockchain industry can sometimes have a bit of a negative reputation.

“We need to be careful with that because it is easy to think that a new idea can be immediately funded. And that’s not always the case.”

Botaitis used carbon credit tracking as an example of a trust-building niche, in which blockchain can be utilized for this transparency and verification.

“It's such an honor to see how companies are coming together to really build this trust infrastructure, an immutable layer.”

Botaitis continued by saying that creating and leaving a sustainable legacy for the next generation is not just about wealth, but having a safe environment for that wealth and education, once again, the key.

“There's very, very little technology that is given for the education of wealth management. I think that it is the private sector that needs to have that education, the regulators and everyone that is having this conversation.”

Education continues to be a major touch point in the Web3 space, with many brands and initiatives focusing on educating users alongside technical developments. 

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90% of businesses adopting blockchain technology, data

A new survey from CasperLabs found that despite education gaps, enterprise adoption of blockchain technology in the U.S., U.K. and China is set to increase in the next year.

The crypto and blockchain space has had a turbulent past year, but that is not stopping users and enterprises from looking into the industry.

A new survey from CasperLabs and Zogby Analytics revealed that the sentiment around blockchain adoption is especially positive among enterprises. The poll was conducted via 603 business enterprise “decision makers” in the United States, the United Kingdom and China.

Nearly 90% of the businesses surveyed reported deploying blockchain technology in some capacity, with 87% saying they plan to invest in blockchain in the next year. This is particularly pronounced in China, where over half of the respondents plan to invest in blockchain in 2023.

Ralf Kubli, a board member of the Casper Association, said that despite the recent turbulence, companies continue to turn to blockchain for solutions:

“It’s hugely encouraging to see businesses understanding that blockchain is not a competitor but a solution.”

Businesses that are already utilizing the technology are benefiting from two of its main capabilities: security (42%) and copy protection (42%). Those in IT-based operations are using blockchain for things such as internal workflows (40%), supply chain efficiency (34%) and software development (30%), among others.

Cast your vote now!

Kubli commented that 2023 will be a consequential year for the adoption of blockchain technology, “especially in providing real solutions for real-world problems and creating long-term value.”

Related: The most eco-friendly blockchain networks in 2022

However, an important finding was revealing where enterprise leaders fall short. Despite the majority feeling confident in their knowledge of blockchain technology (73%), 54% of the respondents still see the terms “blockchain” and “crypto” as interchangeable.

In the same vein, it was reported that the biggest hurdles to adoption are limited developer knowledge, lack of tools, interoperability and cynicism toward the industry. Nonetheless, nearly all of the respondents said they would be more likely to adopt with more understanding and insight into how peers are utilizing blockchain.

Education, along with accessibility, has been a long-standing challenge and barrier for those outside the space wishing to interact with the technology and communicate with clients.

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Ava Labs Partners With Amazon Web Services to Accelerate Blockchain Adoption, AVAX Jumps 16%

Ava Labs Partners With Amazon Web Services to Accelerate Blockchain Adoption, AVAX Jumps 16%Ava Labs, the team behind the layer one (L1) smart contract platform network Avalanche, has partnered with Amazon Web Services (AWS), according to an announcement made on Jan. 11, 2023. Founder and CEO of Ava Labs, Emin Gün Sirer, said the collaboration was a “big deal” and, in comparison with other blockchain announcements that involved […]

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Blockchain tech driving institutional-grade solutions: Blockchain Expo Europe

Blockchain Expo Europe 2022 in Amsterdam highlights meaningful strides in enterprise-grade blockchain solutions driven by mainstream institutions.

Blockchain is no longer a buzzword being thrown around by mainstream institutions as meaningful and fully-working pilots and programs come to the fore at Blockchain Expo Europe 2022 in Amsterdam.

Before the Covid-19 pandemic, a number of mainstream companies from various industries started to explore ways blockchain technology could be used to improve processes and products.

After two years of social distancing and working from home, the time to harvest the fruits of sewn seeds has arrived, as evidenced by some intriguing updates from major corporations utilizing blockchain technology.

The world of business consulting, healthcare and pharmaceuticals and the energy sector are all delivering working, blockchain-powered solutions that have seemingly proved the broad spectrum of utility promised by the burgeoning technology.

Cointelegraph was on the ground for the event and managed to touch base with a number of speakers who showcased how their firms were using the technology to drive innovation.

EY, the global business consulting firm, has been working hard to build enterprise-grade blockchain capabilities over the past three years. Federico De Poli, who heads up the global development of the EY OpsChain functionality, outlined how the firm had spent over $100 million over the past three years building a fulling working product solution.

Federico de Poli at Blockchain Expo Amsterdam.

Driving enterprise adoption has been key, helping clients navigate a new environment, building privacy tools focused on safety and helping companies run business processes on the Ethereum blockchain.

As De Poli explained, the company’s proprietary EY Opschain and EY Blockchain Analyzer are two main tools using blockchain technology.

“Opschain products is our business suite of products. We have traceability which is our most used tool which is being used in production by several clients in different industries. We have a contract manager which is being used in a first trial - it's a tool which helps us do digital contracting between parties."

EY’s public finance manager also allows governments to track the expenditure of funds, proving the widespread useability of blockchain solutions.

Healthcare and pharmaceutical firms also attended the RAI Amsterdam Convention center. Alex Popa, associate director of Blockchain for Pharma Supply Excellence, MSD (Merck), outlined a pilot that was aimed at addressing problems with multi-faceted healthcare networks.

Alex Popa at Blockchain Expo Amsterdam.

Plagued by expensive, inefficient and vulnerable systems, blockchain technology provides practical solutions to these problems. MSD has operated a pilot to combat a vexing industry issue, counterfeit drugs, using Hyperledger Fabric which allowed patients in Hong Kong to verify medicines’ authenticity from their source.

Jessica Lee, head of Blockchain for Johnson & Johnson’s Janssen Commercial North America, also showcased a piloted use case for a value-based health care system to share data privately, securely and transparently using blockchain technology.

Sabine Brink, blockchain lead at Shell, gave a compelling presentation focused on digital innovation in the energy sector. A key takeaway was the growing use of blockchain technology to drive transparency in energy.

Sabine Brink at Blockchain Expo Amsterdam.

The firm is engaged in several blockchain-powered projects deployed on public blockchains to address a long-standing propensity for the energy sector to work in silos. A key highlight was Shell’s work supporting Avelia, a sustainable, blockchain-powered aviation fuel tracing aimed at decarbonizing air travel.

Outlining that 90 percent of airline emissions are attributable to business travel, Avelia acts as sustainability as a service product for corporate flyers and airlines to book and claim sustainable aviation fuel.

"Energy is becoming distributed and decentralized, and it's hard to imagine it's being orchestrated in a centralized way. There is no other way to get it done on a global scale, and blockchain has a huge role."

Conversations with conference delegates and speakers highlighted the apparent strides made in developing working blockchain solutions across industries. The technology has driven innovation across industries, and mainstream companies are doing their part to drive new use cases and solutions for blockchain-based systems.

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ETH Merge will change the way enterprises view Ethereum for business

Industry experts explain how the Ethereum Merge will impact enterprise adoption for business use cases.

A recent report from the Ethereum Enterprise Alliance (EEA) highlights how the Ethereum ecosystem has matured to a point where the network can be used by businesses to solve real-world problems. From supply chain management use cases to payment solutions utilized by companies like Visa and PayPal, the report demonstrates how the Ethereum network has grown to become one of the most valued public blockchains. 

Although notable, the EEA report also points out that the rapid growth of the Ethereum ecosystem has created a number of challenges for companies, specifically regarding energy consumption, scalability and privacy. For example, the document states that “sustainability was cited as one of the main concerns, along with transaction fees, in relation to using the Ethereum Mainnet.” The report further explains that the transparency associated with a public blockchain like Ethereum has been a hurdle for enterprises seeking data security and trust.

As such, upgrades such as sharding and layer-2 (L2) scalability solutions remain critical for businesses using the Ethereum network. Yet, the complex nature behind such implementations continues to be difficult for companies to navigate. For instance, the EEA report states that “Many layer 2 solutions and sidechains are relatively new projects, with relatively new technology. They do not necessarily have the track record or proven security and stability of the Mainnet.”

The Merge will change how enterprises view Ethereum

However, industry experts predict that the Ethereum Merge, which is scheduled to take place on Sept. 14, will likely improve enterprise adoption. Paul Brody, global blockchain leader at EY, told Cointelegraph that while the Merge will not affect most enterprise use cases that are presently in use, it will change how businesses perceive Ethereum. He said: 

“For years, competing layer-1 networks have talked about how Ethereum can’t get the Merge done. The incredible organizational maturity of Ethereum has been working nicely in the background to do it in a careful and professional manner. As an enterprise, that’s the kind of institutional maturity I want to see.”

Although the Merge has been in development for several years, Brody explained that upgrades on mission-critical infrastructure should never be rushed. As such, he believes that this will remain a key point for businesses using the Ethereum network. “I think future efforts to dismiss Ethereum won’t get much airtime in the post-Merge era,” he said. 

While it’s too early to detect how enterprises will react to the Merge, Robert Crozier, chief architect and head of global blockchain at Allianz Technology, told Cointelegraph that his firm will monitor the progress of the Ethereum Merge to see how it stabilizes certain use cases.

Recent: How high transaction fees are being tackled in the blockchain ecosystem

This is noteworthy, as Crozier shared that Allianz has only considered Ether (ETH) and Ethereum-based use cases for experimentation purposes on a small scale. The insurance giant currently uses Hyperledger Fabric and the decentralized ledger platform Corda to streamline cross-border auto insurance claims throughout Europe. Crozier added:

“At Allianz, our International Motor Claims Settlement product utilizes Hyperledger Fabric at its core. We would need to understand and be confident that other protocols like Ethereum would deliver the similar benefits in terms of ease of use, scalability and finality.”

With benefits in mind, Brody explained that the Merge will eventually result in better scalability and privacy for enterprises. “I think we’re heading into a new era of enterprise applications. With both scalability and privacy maturing, it will be possible to address enterprise process needs quite comprehensively in the future,” he said. 

Shedding light on this, Ivan Brakrac, senior decentralized finance market strategist at ConsenSys, told Cointelegraph that although the Merge does not directly increase scalability, a number of planned upgrades to Ethereum will address scalability over the next few years.

For example, Brakrac explained that transitioning the Ethereum network from proof-of-work (PoW) to proof-of-stake (PoS) was the first step to enable “shard chains.” As Cointelegraph previously reported, sharding is the act of dividing up a database, or in this case, the blockchain, into various smaller chains known as shards.

“This will reduce network congestion and increase transaction throughput,” Brakrac remarked. This is key for adoption, as Brody shared that EY’s enterprise clients looking at supply chain applications are going to need support for 2–20 million transactions per day. “Pre-Merge Ethereum could not have accommodated this,” he said.

Regarding privacy, a report entitled “The Merge for institutions,” published by ConsenSys on Sept. 5 mentions that L2 solutions also address privacy concerns for enterprises. An increase in L2s will unlock greater privacy mechanisms for business use cases. 

For example, Brody explained that EY developed a zero-knowledge proof L2 scaling solution known as Nightfall to handle Ethereum gas constraints and keep fees low. According to Brody, multiple powerful L2 networks will enable different options for enterprises that may require more gas and bigger transactions. He elaborated:

“Privacy starts to unlock a much bigger set of use cases for enterprise users. For example, instead of minting one token that represents a batch of product and gives origin information, I can mint one token for each piece of inventory, and then I can manage specific supply chain inventory levels across a multi-company network on Ethereum.” 

In addition to scalability and privacy, sustainability concerns will be addressed once the Merge is implemented. According to Brakrac, Ethereum currently uses an inordinate amount of electricity, noting that the Merge will reduce energy usage by 99%. “This will make Ethereum very sustainable in the long run. By design, this further secures the network and resolves an environmental concern which is net positive from the institutional adoption standpoint,” he said. 

Indeed, industry experts believe that sustainability efforts addressed by the Merge will be critical for enterprise adoption. Dan Burnett, executive director of the EEA, told Cointelegraph that while L2s and sidechains have served as bandages on sustainability concerns, large organizations with environmental, social and governance goals tended to shy away from building solutions on Ethereum because of its reputation for being environmentally unsustainable. Yet, he noted that with these concerns being addressed, the Merge may enable the Ethereum business ecosystem to leap ahead.

Yorke Rhodes III, co-founder of blockchain at Microsoft and board member and treasurer of the EEA, further told Cointelegraph that the Merge will put to rest one of the main concerns for enterprises that have a big focus on environmental impact, such as Microsoft.

“This removes one of the key arguments enterprises raise when evaluating whether to build solutions on Ethereum mainnet,” he said. To Rhodes’ point, Crozier mentioned that moving to a more environmentally friendly proof-of-stake mechanism will mean that some enterprises, like Allianz, will take a second look at Ethereum.

Benefits not immediate 

All things considered, the Merge will likely increase enterprise interest in Ethereum due to the advancement of the network. Moreover, Rhodes believes that removing the key critique of sustainability will encourage additional movement to the Ethereum Mainnet, even if this is just as a base layer for security. “As a key step in realizing the vision of Ethereum, the ETH merge sets things up for a closer enterprise review sooner rather than later,” he said.

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However, it’s important to point out that the benefits promised by the Merge won’t be seen immediately. According to Brody, it will take at least 12–24 months until privacy-enabled use cases are established following the Merge. He said:

“I hope to see pilots by the end of this year, but feedback loops and infrastructure maturity takes time. Unlike consumer applications, there’s little patience among enterprise buyers for products that don’t work on the first go-round and little willingness to experiment. Enterprise buyers are generally quite conservative, and so the cycle will take longer than consumer users.”

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Ethereum advances with standards for smart contract security audits

The Enterprise Ethereum Alliance has published a smart contract security audit specification to ensure consistency when it comes to smart contract security.

The Ethereum ecosystem continues to witness a flurry of activity that has individuals and organizations deploying token contracts, adding liquidity to pools and deploying smart contracts to support a wide range of business models. While notable, this growth has also been riddled with security exploits, leaving decentralized finance (DeFi) protocols vulnerable to hacks and scams. 

For instance, recent findings from crypto intelligence firm Chainalysis show that crypto-related hacks have increased by 58.3% from the beginning of the year through July 2022. The report further notes that $1.9 billion has been lost to hacks during this timeframe — a figure that doesn’t include the $190 million Nomad bridge hack that occurred on August 1, 2022.

Although open source code may be beneficial for the blockchain industry, it can unfortunately easily be studied by cybercriminals looking for exploits. Security audits for smart contracts aim to solve these challenges, yet this procedure lacks industry standards, thus creating complexity.

An industry standard to ensure smart contract security 

Chris Cordi, chair of the EthTrust Security Levels Working Group at the Enterprise Ethereum Alliance (EEA), told Cointelegraph that as the Ethereum blockchain industry grows, so does the need for a mature framework to assess the security of smart contracts. 

In order to address this, Cordi, along with several EEA member representatives with auditing and security expertise, helped establish the EthTrust Security Levels Working Group in November 2020. The organization has since been working on a draft document of a smart contract specification, or industry standard, aimed at improving the security behind smart contacts.

Most recently, the working group announced the publication of the EthTrust Security Levels Specification v1. Chaals Nevile, technical program director of the EEA, told Cointelegraph that this specification describes smart contract vulnerabilities that a proper security audit requires as a minimum measure of quality:

“It is relevant to all EVM-based smart-contract platforms where developers use Solidity as a coding language. In a recent analysis by Splunk, this is well over 3/4 of mainnet contracts. But, there are also private networks and projects that are based on the Ethereum technology stack but running one their own chain. This specification is as useful to them as it is for mainnet users in helping to secure their work.”

From a technical perspective, Nevile explained that the new specification outlines three levels of tests that organizations should consider when conducting smart contract security audits.

“Level [S] is designed so that for most cases, where common features of Solidity are used following well-known patterns, tested code can be certified by an automated ‘static analysis’ tool,” he said.

He added that the Level [M] test mandates a stricter static analysis, noting that this includes requirements where a human auditor is expected to determine whether the use of a feature is necessary or whether a claim about the security properties of code is justified.

Nevile further explained that the Level [Q] test provides an analysis of the business logic the tested code implements. “This is to ensure that the code does not exhibit known security vulnerabilities, while also making sure it correctly implements what it claims,” he said. There is also an optional “recommended good practices” test that can help enhance the security behind smart contracts. Nevile said:

“Using the latest compiler is one of the ‘recommended good practices.’ It's a pretty straightforward one in most cases, but there are a lot of reasons why a contract might not have been deployed with the latest version. Other good practices include reporting new vulnerabilities so they can be addressed in an update to the spec and writing clean easy-to-read code.”

Overall, there are 107 requirements within the entire specification. According to Nevile, about 50 of these are Level [S] requirements that arise from bugs in solidity compilers

Will an industry standard help organizations and developers? 

Nevile pointed out that the EthTrust Security Levels Specification ultimately aims to help auditors demonstrate to customers that they are operating at an industry-appropriate level. “Auditors can point to this industry standard to establish basic credibility,” he said. 

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Shedding light on this, Ronghui Gu, CEO and co-founder of blockchain security firm CertiK, told Cointelegraph that having standards like these help ensure expected processes and guidelines. However, he noted that such standards are not by any means a “rubber stamp” to indicate that a smart contract is entirely secure:

“It’s important to understand that not all smart contract auditors are equal. Smart contract auditing starts with understanding and experience of the specific ecosystem that a smart contract is being audited for, and the technology stack and code language being used. Not all code or chains are equal. Experience is important here for coverage and findings.”

Given this, Gu believes that companies wanting to have their smart contracts audited should look beyond the certification an auditor claims to have and take into account the quality, scale and reputation of the auditor. Because these standards are guidelines, Gu remarked that he thinks this specification is a good starting point. 

From a developer’s perspective, these specifications may prove to be extremely beneficial. Mark Beylin, co-founder of Myco — an emerging blockchain-based social network — told Cointelegraph that these standards will be incredibly valuable to help smart contract developers better understand what to expect from a security audit. He said:

“Currently, there are many scattered resources for smart contract security, but there isn’t a specific rulebook that auditors will follow when assessing a project’s security. Using this specification, both security auditors and their clients can be on the same page for what kind of security requirements will be checked.”

Michael Lewellen, a developer and contributor to the specification, further told Cointelegraph that these specifications help by providing a checklist of known security issues to check against. “Many Solidity developers have not received recent formal education or training in the security aspects of Solidity development, but security is still expected. Having specs like this makes it easier to figure out how to write code more securely,” he said.

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Lewellen also noted that most of the specification requirements are written in a straightforward manner, making it easy for developers to understand. However, he commented that it’s not always clear why a requirement is included. “Some have links to external documentation of a vulnerability, but some do not. It would be easier for developers to understand if they had clearer examples of what compliant and noncompliant code might look like.”

The evolution of smart contract security standards 

All things considered, the security level’s specification is helping to advance the Ethereum ecosystem by establishing guidelines for smart contract audits. Yet, Nevile noted that the most challenging aspect moving forward is anticipating how an exploit could occur. He said: 

“This specification doesn’t solve those challenges completely. What the spec does do, though, is identify certain steps, like documenting the architecture and the business logic behind contracts, that are important to enabling a thorough security audit.”

Gu also thinks that different chains will start to develop similar standards as Web3 advances. For instance, some developers within the Ethereum industry are coming up with their own smart contract requirements to help others. For example, Samuel Cardillo, chief technology officer at RTFKT, recently tweeted that he has created a system for developers to publicly rate smart contracts based on good and bad elements in terms of development: 

Although all of this is a step in the right direction, Gu pointed out that standards take time to be widely adopted. Moreover, Nevile explained that security is never static. As such, he explained that it’s possible for individuals to send questions to the working group who wrote the specification. “We will take that feedback, as well as look at what the discussions are in the broader public space because we expect to update the specification,” Nevile said. He added that a new version of the specification will be produced within six to eighteen months. 

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Three-quarters of institutions to use crypto in the three years: Ripple

Ripple’s new Value Report on enterprise crypto and blockchain highlights NFT, blockchain and CBDC utility in business settings.

A whopping 76% of surveyed financial institutions plan on using crypto within the next three years, according to the report. Ripple’s new report highlights trends in the adoption and utilization of emerging technologies like crypto and blockchain in enterprise and financial institutions. 

Both financial institutions and enterprises are understanding the benefits of internal crypto usage. The most common reason is that crypto gives more people access to more financial services, says 42% of financial institutions and 41% of enterprises.

According to the survey, portfolio management and payments come forward as the most valuable additions to the enterprise world. Portfolio management is detailed as hedging against inflation, hedging against other asset types and asset appreciation. Participants said data security and quality are two major benefits of blockchain and crypto usage for payments.

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Nonetheless, as this is an emerging technology, adoption is still an uphill battle for large institutions. According to the report, enterprises and financial institutions both find that a general lack of understanding is one of the biggest challenges. 

However, the report also stressed that the slow-moving process of regulations surrounding the industry stirs up hesitation from potential users. Regulations from countries across the globe have been in constant flux as officials rush to keep up with the fast-paced crypto scene.

Recently, regulators in the United States came under scrutiny from the U.S. Congress for their “non-judicial actions” against crypto companies. The Securities and Exchange Commission (SEC) is in the throes of implementing effective crypto regulations for one of the industry’s most active regions.

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Despite setbacks in crypto-ed and murky regulations, the report still reveals the active interest of global institutions and central bank digital currencies (CBDCs). 34% of surveyed institutions say CBDCs will help with the “acceleration of digitization of finance” and give “greater access to credit for consumers and businesses.”

From a global perspective, the report analyzed regional nonfungible token (NFT) interest based on emotional vs. functional benefits. Respondents in the Asia-Pacific region were three times more likely to purchase an NFT for sentimental or emotional reasons compared to other reasons. Of the eight NFT genres listed, 55% said music-related NFTs are of the most interest. 

Sustainability was also assessed, as it remains a hot topic both in and outside of the industry. According to Ripple’s data, over 75% of surveyed consumers prefer to buy sustainable cryptocurrencies. More than 20% claim they would only purchase “sustainable” crypto. 

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Blockchain and NFTs are changing the publishing industry

Traditional publishers are using NFTs to build communities and engage with audiences.

Web3 has become the most sought-after investment sector of 2022, as use cases for nonfungible tokens (NFTs), the Metaverse and other blockchain applications come to fruition. Therefore, it shouldn’t come as a surprise that different segments of the publishing industry have begun to use Web3 technologies to transform traditional models. 

For example, the textbook publishing giant Pearson recently announced plans to use NFTs to track digital textbook sales to capture revenue lost on the secondary market. Time magazine, which was founded 99 years ago, has also been using NFTs to create new revenue streams, along with a sense of community within the publishing industry. Keith Grossman, the president of Time, told Cointelegraph that the magazine is demonstrating the new possibilities of engagement that Web3 brings to the publishing industry. He said:

“Web3 can evolve one's brand in a world where individuals are moving from online renters to online owners, and privacy is beginning to move from platforms to the individual.”

Web3 enables a community of content owners

While it may seem non-traditional for one of the oldest, most renowned magazine publishers in the industry to host an NFT gallery, Grossman explained that Time has dropped nearly 30,000 NFTs to date. He added that these have been collected by over 15,000 wallet addresses, 7,000 of which are connected to Time.com to remove the paywall without having to provide personal information. “Along the way, the TIMEPiece community has grown to over 50,000 individuals,” Grossman pointed out.

To put this in perspective, Grossman explained that in September 2021, Time launched a Web3 community initiative known as TIMEPieces. This project is a digital gallery space hosted on the NFT marketplace OpenSea, which has brought together 89 artists, photographers and even musicians. “The number of TIMEPiece artists has grown from 38 to 89. It includes the likes of Drift, Cath Simard, Diana Sinclair, Micah Johnson, Justin Aversano, Fvckrender, Victor Mosquera and Baeige, to name a few,” Grossman said. 

Isaac "Drift" Wright's piece from the Slices of Time Collection. Source: Keith Grossman

While notable, the more important aspect of this growth lies within the distinction of “audiences” vs. “communities.” According to Grossman, very few people in the publishing sector distinguish between these two groups, yet he noted that Web3 provides a “tremendous opportunity for those willing to explore this oversight.” For instance, Grossman explained that an audience simply engages with content for a moment. However, he pointed out that a community aligns around shared values and is provided with the opportunity for constant engagement. He said:

“Healthy ‘communities’ have moats making them harder to disrupt or circumvent. However, they take a lot of work to develop and nurture. The long term benefit of a community is stability — and publishing is anything but stable.”

Indeed, NFTs may be key for providing the publishing world with the stability and audience interaction it requires to advance. As Cointelegraph previously reported, brands are using NFTs in a number of ways to better engage with customers over time.

Other sectors of the publishing industry are starting to employ NFTs for this very reason. For example, Royal Joh Enschede, a 300-year-old Dutch printing company, is entering the Web3 space by providing its clients with an NFT platform for “crypto stamps.” Gelmer Leibbrandt, CEO of Royal Joh Enschede, told Cointelegraph that the postage stamp and philately world is very traditional, noting that nonfungible tokens will allow for expansion. He said:

“The crypto stamp opens up a global market that will appeal not only to the classic stamp collectors but also to collectors in their teens, twenties and thirties who buy, save and trade NFTs. This is naturally very appealing for our main customers — over 60 national postal organizations worldwide.”
The crypto postage stamps are launched as NFT collectibles, but they can naturally also be used to mail documents. Source: Royal Joh Enschede

According to Leibbrandt, Royal Joh Enschede started thinking about ways to use blockchain technology over two years ago, yet the Dutch printing firm decided to start with crypto stamps due to the utility and market fit. Leibbrandt explained that not only will stamp collectors be able to own a unique NFT, but the nonfungible tokens will also serve as “digital twins” intended to provide an extra layer of security and authentication to its physical products.

Leibbrandt also pointed out that linking physical objects with their digital counterparts offers customers additional features. While he noted that crypto stamps are just the beginning of Royal Joh Enschede’s Web3 journey, he explained that the company has started developing “notables,” which are meant to rival secure printed banknotes. He explained:

“Through the use of special printing techniques, we can add, among other things, augmented reality, which in turn provides access to special online promotions and a communication platform. Notables are unique and the NFT element can be used as a collector’s item, along with a means of payment in the Metaverse.” 

Like Time, crypto stamps and notables are enabling Royal Joh Enschede to build a community of collectors capable of engaging with the platform and each other. “All kinds of new applications can be linked to these, such as access to real-life events like Formula 1 or Tomorrowland, where only a few notes give entitlement to VIP packages. We are building our business for the next 100 years,” Leibbrandt added. 

Furthermore, independent news organizations are starting to apply Web3 technologies to solve one of the biggest challenges facing the media industry today — “fake news.” For example, Bywire is a decentralized news platform that uses artificial intelligence (AI), machine learning and blockchain to identify false or misleading news content. Michael O’Sullivan, CEO of Bywire, told Cointelegraph that the platform has built and deployed a “trust or not” algorithm. “This can provide readers with an ‘at-a-glance’ reassurance that the content served on the Bywire platform is trustworthy, and those who produce it are indeed accountable,” he said.

O’Sullivan explained that Bywire’s AI technology is capable of “reading” an article in a matter of seconds before it goes live to determine the trustworthiness of the content. Once this has been established, the algorithm generates a recommendation, along with the reasoning behind its determination. “The why is vital because it helps consumers become conscious of the motives and intentions of content producers,” O’Sullivan remarked.

While innovative, O’Sullivan pointed out that any independent news organization can aggregate their news content to Bywire, exposing it to tens of thousands of readers per month. Like other publishers using Web3 technology, O’Sullivan noted that Bywire has a community of readers associated with the platform, noting that these individuals are incentivized to read the content. “Every reader gets a free EOS account and can start earning token rewards immediately, which can be later used in the democratic oversight of the network.”

Will Web3 advance the publishing industry?

Although Web3 has the potential to transform the publishing industry by allowing various sectors to reach and interact with new audiences, the impact remains questionable. For instance, it’s been noted that there is still a lack of clarity among publishers regarding how blockchain can and should be used.

Lars Seier Christensen, chairman of Concordium — the Swiss blockchain firm powering Royal Joh Enschede's NFT platform — told Cointelegraph that nonfungible tokens currently mean nothing to most organizations. However, he believes that NFTs and other Web3 technologies will soon become the norm:

“Let’s take one step back from the acronym NFT because it can be confusing. What has been proven is that a blockchain can store immutable data — i.e., the records are final and unbreakable, and this data is fully transparent to everyone by simple access to the chain search engine.”

Regarding consumers, Grossman also mentioned that individuals should not be using the word “NFT,” adding that they certainly do not need to know what blockchain platform is powering these applications. “They should be engaging with brands based on the experiences being provided,” he said. Grossman further remarked that the rise of computers sparked constant discussion around technology until Steve Jobs explained that the iPod could hold “1,000 songs in your pocket.” Grossman believes that a moment similar to this will happen for Web3 but has yet to come:

“Most people’s perceptions of NFTs and blockchains are defined by the extremes — extreme good and extreme bad. The reality is that an NFT is just a token that verifies ownership on a blockchain, and education is needed to provide companies and individuals with the many ways in which it can be used to provide value.”

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Layer-1 blockchains: How crypto winter could slow the challenge to Ethereum

A Chainalysis report analyzes the layer-1 blockchain ecosystem, questioning if alternative L1s will continue to challenge Ethereum this crypto winter.

Given Ethereum’s dominance coupled with the current crypto bear market, it remains questionable if L1s will flourish. This was recently highlighted in a Chainalsys blog post entitled “New layer 1 blockchains are expanding the DeFi ecosystem, but no ETH killers yet.” Ethan McMahon, an economist at Chainalysis, told Cointelegraph that Chainalysis published this report to raise awareness for the current L1 ecosystem:

While Ethereum allowed decentralized finance (DeFi) to flourish in 2020, a number of layer-1 blockchains (L1s) have since been developed to address the challenges associated with the network. For instance, as Ethereum’s proof-of-work (PoW) consensus mechanism and high gas fees continue to impact transaction speed and scalability within its ecosystem, L1s like Algorand, BNB Chain, Avalanche and others aim to solve these problems.

“Chain comparison is important because it seems as if most crypto services are only offered on Ethereum, but this isn’t true. There are a few different blockchains with competitive offerings that have advantages Ethereum doesn’t provide.” 

In order to demonstrate this, McMahon explained that Chainalysis gathered data from different blockchains to determine the strengths and weaknesses of the networks. For example, the post points out that with gas fees running high on Ethereum, many developers have chosen to build decentralized applications (DApps) on Algorand. Binance Smart Chain, or BNB Chain, is also recognized for its capability to support new tokens and DApps without the high gas fees of Ethereum. “It’s interesting to see that people are paying exuberant gas fees on Ethereum’s network. Our findings show that transactions less than $1,000 result in a significant amount of money spent on gas fees,” McMahon said. 

Source: Chainalysis

Based on Chainalysis’s overall findings, however, the post concludes that none of the L1-blockchains analyzed have been successful in solving all challenges associated with the Ethereum network. This also raises the question if L1s will survive long-term. For instance, the current crypto winter may slow down investments in these ecosystems. In addition, the merge of Ethereum 2.0 — which is set to take place this year but may be pushed to 2023 — could lead to improvements in the Ethereum ecosystem that may impact alternative L1 uses. 

L1 developments to drive adoption 

In order to determine how L1s will advance, it’s important to take a closer look at recent developments within the various ecosystems mentioned by Chainalysis. For example, the report categorizes Algorand as a top-10 L1 blockchain by market capitalization, stating:

“During Q3 2021, Algorand saw its transaction volume grow 65%, while Bitcoin and Ethereum saw volumes drop 37% and 45% respectively. This may have reflected Algorand’s growing hype — having launched in April 2019, Algorand was a relatively new blockchain, and reached an all-time price high in September 2021.”

Findings also show that 10% of Algorand’s transaction volume comes from retail investors, compared with 5% for Bitcoin (BTC) and 8% for Ether (ETH). Given this, the report notes that this could signify Algorand’s success in enabling a high volume of smaller transactions.

Source: Chainalysis

Staci Warden, CEO of the Algorand Foundation — the organization behind Algorand’s monetary supply economics, governance and ecosystem — told Cointelegraph that Algorand uses a Pure proof-of-stake (PPoS) consensus mechanism, allowing the network to specifically solve problems that require scale. “The most fundamental difference between Algorand and other L1s is the network’s ability to deliver financial inclusion to the two billion people in the world that don’t have access to modern financial systems,” she said. 

Warden elaborated that Algorand’s PPoS consensus mechanism enables this due to its low staking requirements. According to the Chainalysis post, only 1 Algorand (ALGO) token is needed to stake on the network. Warden also pointed out that Algorand is very focused on decentralized finance (DeFi) development, noting that the network is capable of settling about 1,200 transactions per second, with gas fees equating to .001 ALGO.

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“These requirements are necessary for networks to scale,” said Warden. In comparison, the Chainalysis report mentions that Ethereum can only handle roughly 15 transactions per second. Yet, it’s been noted that Eth2 aims to increase this considerably to about 150,000 once upgrades are completed.

In order to stay competitive, Warden shared that Algorand is in the process of rolling out a new feature that would allow the network to settle transactions in 2.5 seconds, compared with the 4.5 seconds it currently takes. Moreover, as multichain networks become more important, Algorand plans to deliver “state proofs” that will allow users to move tokens from one chain to another.

“Algorand could end up being a router for all transactions across chains, since it can handle fast transactions, with little carbon footprint for sub-penny fees,” explained Warden. While state proofs and other developments won’t be rolled out immediately, it’s notable that FIFA recently announced that it will use Algorand to develop its digital asset strategy. “FIFA is building their own wallet on Algorand and creating an NFT marketplace that can accomodate secondary ticket sales,” added Warden.

BNB Chain is also mentioned in the Chainalysis report and is praised for its capability to support new tokens and DApps without high gas fees. In fact, DappRadar found there to be more L2 projects built on BNB Chain than any other blockchain. Gwendolyn Regina, investment director of BNB Chain, told Cointelegraph that the goal behind the network is to help builders create DApps that scale for massive crypto adoption. She said:

“This year, BNB Smart Chain will have 30 times the computing power of Ethereum and will also work on decentralized storage solutions. As a result, blockchain technology will be increasingly integrated into real-world applications.” 

According to Regina, the key focus areas for BNB Chain’s 2022 roadmap include decentralization, faster transaction speed, multichain integration and an increased focus on supporting developers and sustainability. Specifically speaking, Regina shared that the BNB Chain community recently released plans for further decentralization via the BEP-131 proposal, which will introduce candidate validators to BNB Smart Chain

“This proposal would increase the number of BNB Smart Chain Mainnet validators from 21 to 41, providing more decentralization and incentives for validators to constantly innovate their hardware and infrastructure,” she said. While this may create more decentralization, there has been criticism regarding whether or not DeFi is decentralized following Solend’s spontaneous governance proposal related to one of the whale wallets at risk of liquidation.

Decentralization aside, it’s notable that BNB Beacon Chain — a blockchain developed by Binance and its community that implements a decentralized exchange for digital assets — recently became open-sourced. “BNB Beacon Chain is now accessible for developers to build on,” said Regina. She further explained that the benefits of the BNB Beacon Chain are broad, noting its high-speed order book based decentralized exchange to ensure quick transactions. “Harnessing native secure cross-chain support will open doors for blockchain interoperability, meaning users can seamlessly navigate the chains they use,” she remarked.

In addition to Algorand and BNB Chain, Avalanche was mentioned in Chainalysis’s findings. According to the report, Avalanche specializes in customizability, scalability and interoperability. John Wu, president of Ava Labs — the lead developer of the Avalanche blockchain — told Cointelegraph that the network specifically aims to solve a number of problems within Web3 ecosystems. He said:

“Avalanche has the fastest time to finality in the industry at about 500 milliseconds to 2 seconds. This means that all cross-chain and subnet transactions are immortalized in a blink. Financial institutions building DeFi products and Web3 gaming studios developing AAA shooters and RPGs need near-instant finality. It is a precondition to success. Without it, their apps cannot work.”

To Wu’s point, finality is extremely important as more institutions enter the DeFi sector. In fact, Avalanche’s quick finality time could be much greater in comparison with Eth2 finality time, which some believe may never reach under 15 minutes. Ethereum currently processes 15–30 transactions per second with over one-minute finality.

Wu added that regardless of market conditions, the Avalanche community will continue to build. For example, Wu shared that subnets — a set of validators working together to achieve consensus on the state of a set of blockchains — will open new doors for DeFi. For example, he mentioned that a subnet’s ability to incorporate Know Your Customer (KYC) requirements and circumvent the bottlenecking that might occur on a chain shared with third-party applications appeals to institutions. “The first Subnet engineered specifically for institutional DeFi is in production right now,” he said.

Survival of the fittest? 

Although L1 blockchains are advancing, the Chainalysis report still notes the possibility of Ethereum becoming the “dominant player” due to market conditions and expected upgrades to the network. For instance, Raul Jordan, one of the core devs working on the Eth2 merge, told Cointelegraph that soon anyone in the world will be able to run an ETH node, which demonstrates the true power of decentralization.

Alex Tapscott, author and co-founder of the Toronto-based Blockchain Research Institute, further told Cointelegraph that there are two reasons to question the longevity of L1s:

“First, bear markets generally see a drop in interest for crypto-native applications, so if gas fees drop on their own on Ethereum, why use a newer or less proven chain when you can use Ethereum? Second, the merge to proof-of-stake will improve Ethereum’s performance, so even if demand returns, it may be able to handle new growth.”

However, Tapscott added that he believes any decreasing interest in L1s will be short-lived. “Long term, there will be surging demand for block space, with some developers and users willing to trade off between security (Ethereum) for speed and convenience. Also, I think many alternative L1s for all their potential are still pretty early stage tech, and as they mature they will become more reliable, useful and broadly adopted.”

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Tapscott further pointed out that “L1s were initially successful not because they attracted investor capital, but because they drove user adoption and interest.” And, if history has taught the crypto space anything, it would be that bear markets are a perfect time for projects to build. “A bear market would be a fantastic way to assess and support projects that actually make a difference in the blockchain ecosystem as long as innovative teams keep emerging to solve real-world problems using blockchain technology,” Regina pointed out.

On the other hand, a number of projects also tend to fail in bear markets. Warden commented that there will indeed be fallout for several L1 blockchains: “Crypto winter is a time when every component of the crypto ecosystem is going to be questioned and tire-kicked, and not just DApps, but all aspects of crypto infrastructure, including L1s.”

However, Warden added that projects that can scale and handle transactions will continue to accelerate, posing a challenge to Ethereum: “Businesses or projects that are building for long-term utility and real-world adoption will accelerate and garner attention during this period.”

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