In the previous article, I mentioned that the development of the Web3 industry will move towards increasing the number of users. Today, let's discuss in detail why the direction of increasing users has promising breakthrough potential.
Firstly, everyone can feel the changes in global geopolitical conflicts, such as the Russia-Ukraine conflict, the Israel-Palestine conflict, the India-Pakistan conflict, and various other ongoing events. Along with geopolitical events, there are often economic sanctions, such as being banned from using SWIFT, foreign exchange decoupling, and other restrictive measures. Even in countries without geopolitical influence, they will still be affected by the economic downturn in the international environment, resulting in a demand for wealth preservation for citizens of various countries. Of course, when we talk about wealth preservation here, we are not referring to buying cryptocurrencies, but rather utilizing the open and decentralized network of Web3 to bypass economic sanctions, foreign exchange controls, investment access thresholds, and other restrictions.
However, the frequent occurrence of geopolitical conflicts will stimulate the demand for counter-geopolitical politics. This demand is likely to be taken over by Web3 in the current stage, which is why I believe it is a potential incremental market for Web3. Constrained by geopolitical conflicts and changes in the economic environment, ordinary people within the affected areas have an urgent need for wealth preservation and wealth transfer. For those who are capable and influential, these are not issues, but we cannot ignore the needs of ordinary people. This is also where Web3 can achieve inclusive finance.
Because Web3 has inherent resistance to geopolitical politics, such as decentralization, immutability, transparency, and so on, which we are all familiar with, these are the natural advantages of Web3.
Taking China as an example, the average interest rate on deposits in China is generally between 1.5% and 2.5%, even for large deposits or bond-based financial products, it is only around 3.x%. At the same time, there is a foreign exchange control limit of $50,000 per person, which is always a constraint. Of course, you can also buy foreign currency financial products by opening a foreign exchange account and purchasing foreign currency. However, when you convert the currency back, the exchange rate difference will eat into your investment returns. Considering the downward trend in China's economy and employment, the situation is not optimistic.
Therefore, the RWA track of Web3 can help citizens in countries with such restrictions to preserve their wealth. For example, MakerDAO's DSR interest rate is as high as 5%. Simply put, the purpose of introducing RWA assets into MakerDAO is to diversify the assets supported by external credit and to stabilize the exchange rate of DAI by leveraging the long-term additional returns brought by US Treasury bonds. This can increase the flexibility of DAI issuance and reduce its dependence on USDC, thereby reducing single-point risks.
Web3 enables the mapping of cross-border and barrier-free returns on US Treasury bonds. This is undoubtedly a strong demand for those who are subject to foreign exchange controls.
Another case I want to mention is the hypothetical RWA mapping of gold ETFs. In some war-torn regions, even if people rush to buy gold, they may not be able to protect their wealth properly. The physical gold they carry with them may be looted, and local gold ETFs may not be able to fulfill their obligations due to economic sanctions (most of the gold in various countries is stored in the United States).
Therefore, a Web3-based RWA mapping of gold ETFs may be more feasible. For example, a well-known institution can issue a gold ETF and then map it onto the Ethereum blockchain. Users around the world can indirectly obtain wealth preservation by accessing Web3. Of course, you may say that this is too decentralized, but if you look at the cornerstone currency of the entire Web3, USDT, isn't it also a kind of US dollar bill issued and accepted by corporate institutions? The RWA mapping of gold ETFs is just an on-chain bill of the gold ETF.
There are many similar cross-border investment cases like this, such as wanting to buy China's Jiang Xiang technology in the United States, or wanting to buy Samsung in South Korea in China, and so on. These can be achieved through Web3's synthetic asset project Synthetix. Of course, there are still many technical issues to be solved in between. But this may be a promising future for Web3.
Finally, because of the demand caused by geopolitical conflicts and changes in the economic environment mentioned above, this is likely to stimulate the rapid influx of incremental users, making the Web3 industry more prosperous. I hope that articles like this science fiction imagination of Web3 can bring some ideas to Web3 practitioners and ultimately become more marketable Web3 products.
Author: Liu Ye Jing Hong
Official Account: Wesman Notes
Personal WeChat: liuyejinghong_
RSS3 Personal Homepage: liuye.rss3.bio
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The cover image of this article is from Unsplash.
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