Why Virtual Digital Assets are integral to Blockchain development and key to the proliferation of Web3?

Employing principles of cryptography and blockchain technology, crypto assets are powering path breaking use cases that are redefining how humans interact on the Internet today. This class of virtual digital assets (VDAs) are not only driving financial inclusion, but also form the backbone of the thousands of DApps that are providing a truly decentralized web experience. To better understand their significance, let us look at how VDAs are supporting developers in expanding the frontiers of Web3.

Fast-tracking blockchain development and facilitating higher transaction speeds

While Ethereum's launch in 2015 was a watershed moment for the crypto world, its proof-of-work (POW) consensus model meant that its transaction speeds and costs were prohibitively expensive for powering large-scale decentralized applications (dApps). This led to the development of blockchain protocols that adopted the proof-of-stake (POS) consensus mechanism, with new platforms being innovated to solve the blockchain trilemma of ensuring utmost security, scalability, and decentralization. In this journey, it has been the native crypto tokens that have brought together consumers, investors, and entrepreneurs to constantly innovate and realize blockchain's true potential in creating a trustless future-proof Web3 ecosystem.

Incentivizing developers and investors to achieve an equitable Web3 economy

A key aspect of the rapid expansion of the Web3 economy has been VDAs' role in galvanizing an equitable reward mechanism for investors and developers contributing to a blockchain project. While transaction validators are awarded tokens in a POW blockchain, those staking tokens in a POS blockchain receive a share of the total transaction fees generated on the platform. Retail crypto investors or token holders can transact with anyone using their crypto holdings and even earn high yields on tokens allocated to staking pools on the numerous decentralized finance (DeFi) platforms that are providing financial access to billions across the globe today. Add to this the long-term price appreciation potential for crypto tokens of fundamentally solid blockchain projects, and it is easy to see why VDAs continue to be the hottest asset classes to invest in.

What's more, Web3 provides innovative income generation opportunities to investors while incentivizing developers with crypto tokens for keeping blockchain networks safe and promoting innovation. In fact, these Web3 protocols provide various services and thus, anyone willing to develop, contribute, govern, or improve the ecosystem of any of the decentralized projects, is given a financial incentive in the form of crypto tokens. Moreover, Defi protocols offer users easy access to capital by collateralizing their digital assets, while Play-to-Earn games enable them to lend out their NFT to other players in return for a portion of their future winnings. As blockchain applications proliferate traditional industries and extract further operational efficiencies, VDA-related transactions will witness an exponential growth and its intertwined relationship with blockchain development will become more evident.

Bringing revolutionary concepts to reality to power the next leg of Web3 expansion

Although blockchain technology is an evolved distributed ledger technology (DLT) that was designed to underpin decentralized systems, it can also be deployed on centralized systems to ensure superlative data integrity, reduce operational costs or to solve myriad issues plaguing traditional businesses today. Smart contracts have already established themselves as the most vital building block for Web3 developers and are touted to be the future of contracting. More recent solutions like Bonded Identity Services are providing a secure solution for managing multiple digital identities, while giving the end user full control over what details are divulged to Web3 businesses. Similarly, Notary services powered by blockchain technology are increasingly gaining preference for digitally signing documents, proving its authenticity and validity while being tamper-proof. What's more, Smart Property-related use-cases are enabling the fractionalization and trading of illiquid assets in a safe and secure manner, with the potential to spawn many further possibilities as its development gains further pace. Acting in concert with VDAs, blockchain technology is thus giving rise to a number of Web3 and real-world use cases that can amalgamate the physical and digital world into one homogenous entity- the Metaverse.

Similar to how the domestic Information Technology (IT) sector has metamorphosized into a global leader, the Indian crypto ecosystem is well-poised to emulate the same if supported by favorable regulations and policies. With blockchain and Web3-focused businesses expected to add $1.76 trillion to the world economy and generate more than 800,000 jobs by 2030, the time is ripe for Indian developers, entrepreneurs, and investors to jump onto the VDA bandwagon. Acting as a proxy for the rapid expansion and fast-paced development taking place within the Web3 ecosystem, these VDAs have the potential to multiply investor wealth and accelerate the transition from Web2 to the decentralized future that Web3 promises.

(The author Vivek Gupta, is Chief Technology Officer at CoinDCX. The opinions in the article are that of the author and may not necessarily reflect the opinion of Greynium Information Technologies Pvt Ltd)