[Feature] Riding the Autobahn: Why More Web2 Companies are Moving into Crypto

• From the likes of Gucci, Nike, and even PayPal, the list of Web2 companies beginning their move into the Web3 space is increasing at an unprecedented pace amidst the daunting bear market
• Exploring opportunities in the Web3 space helps create a signalling effect for these companies that they are ready and willing to future-proof their business models, while also catering to a new advent of technological breakthroughs
• However, the Web3 space is far from a safe haven; companies still need to observe their due diligence and be cautious while operating within

The Web3 train is plowing on despite the undulating winter. Even as stock prices fall (check Binance smart chain’s drop in user activity by over 15% this week) and anxieties surrounding the longevity of the industry peak, an impressive number of Web2 companies are leaping on board.

Payment services giant PayPal raised eyebrows yesterday following its announcement that it will be partnering with blockchain software technology ConsenSys to create a way for its users to purchase Ethereum (ETH). In its announcement, popular crypto wallet MetaMask will be integrating PayPal on to its platform to cater to this very objective:

“Today, ConsenSys, a market-leading Web3 company, announced that US MetaMask users will be able to purchase crypto (ETH) from within the app using PayPal. MetaMask will be the first Web3 wallet to leverage PayPal to drive more successful on-ramp transactions.”

While this news has definitely sent waves of reassurance throughout a shaken industry, it does not detract from the fact that the year has been met with numerous crashes and exploits that have culminated in untold billions.

2022 itself saw the toppling of giants such as Celsius, Three Arrows Capital, Terra, and most recently, the bankruptcy of centralised trading platform FTX. Even Binance, which holds the current top spot per size on the list of crypto exchanges globally, has come under intense scrutiny in recent times. Apart from reports that the US Justice Department has been investigating Binance over the company’s compliance with financial crime rules, the embattled exchange has been trying to assuage investor confidence, claiming that it dealt with net outflows of around $6 billion over 72 hours the previous week despite the steep drop in the value of its digital token.

It is undeniable that the crypto industry has been hit hard the past year, however that has clearly not deterred prominent firms from dipping their toes in the waters. Apart from PayPal, there is an ever-increasing laundry list of Web2 companies hopping on board. Starbucks’ novel rewards program Starbucks Odyssey launched this year would allow members to earn, buy, and trade NFTs that hold real-world utility such as granting its most ardent coffeeholics access to attend virtual classes on brewing their own caffeine concoctions, or even exclusive invites to special events at Starbucks outlets.

Fashion labels such as Nike and Gucci have also been fairly active in this space, with the former launching a series of digital collectibles and shoes following its acquisition of metaverse-native brand RTFKT. Upping the game, Disney also boasts its own accelerator program that is targeted specifically towards projects featuring NFTs, augmented reality (AR), the metaverse, and blockchain technology in general, with the aim of ushering in the “next great storytelling frontier”, as coined by CEO Bob Chapek.

Content and news discussion platform Reddit made waves over the past month as well, with the successful launch of its NFT line that featured artwork from members of its very own community. The series, which could be paid for without even requiring users to transact using cryptocurrency, proved a massive hit, with floor prices skyrocketing ever since its launch, proving the classic adage that not everything needs to be on the blockchain to be popular amongst Web3 enthusiasts.

Indeed, entering into the Web3 space promises significant boons for these businesses. Notably, it showcases a commendable intention to future-proof their business strategy through embracing (and capitalising) on novel technologies and solutions. In addition, building the infrastructure layer and gaining user trust is much more streamlined with Web3 projects – public ledgers ensure accountability over project endorsements made by the company. For instance, if a company announces a release of 1,000 NFTs, the public can easily ascertain this veracity through the public ledger, ensuring that trust can be gained in a more streamlined and accessible manner.

Gucci Garden, an immersive multimedia experience on metaverse platform Roblox

Donald Trump’s recent NFT collection was proof of just this mechanic taking place. Despite selling out almost immediately, on-chain analysts soon discovered that 1,000 of the NFTs were minted internally just a day before the project launched, of which 68 held the rarest traits in the entire collection, drawing the ire of many collectors and minters alike.

Especially in the wake of FTX’s collapse, regulators and investors have been increasingly on edge with regards to cryptocurrencies and digital assets. There still remains strong support for the industry from politicans, however.

U.S. Senator Pat Toomey had some remarks to share regarding FTX’s downfall:

“The wrongful behavior that occurred here is not specific to the underlying asset,” he explains. “What appears to have happened here is a complete breakdown in the handling of those assets.

“The code committed no crime,” he continues.

“FTX and cryptocurrencies are not the same thing. FTX was opaque, centralized, and dishonest. Cryptocurrencies are open-source, decentralized, and transparent.”

Regardless of the senator’s comments, companies and businesses contemplating an entry into Web3 and crypto still ought to be mindful of several key aspects. For one, cryptocurrencies are indisputably renowned for their inherent volatility, planting them as risky investments. This can be particularly dangerous especially for larger companies that may not have enough leeway for large fluctuations in the value of their assets.

Furthermore, as regulatory bodies scramble to keep up with the rapidly-evolving industry, companies ought to be aware that most of the Web3 space remains, as America’s Securities and Exchange Commission (SEC) chair Gary Gensler puts it, a “wild west”. Vineeth Bhuvanagiri, the Managing Director of Emurgo Fintech, the official commercial arm for the Cardano Blockchain, echoes his sentiments on the matter.

“There may be regulated ways to enter and exit the space, especially for portals or gateways into the crypto ecosystem,” he says. “But once you’re actually on it, the speed limits, so to speak, do not apply.”

Indeed, while entering the Web3 space may undoubtedly be a boon for most companies, due diligence and caution still ought to be practiced.

“I think the mistake that many investors make is that they’re trying to rush into the market,” Imran Mohamad, the Head of Marketing at decentralised exchange Kyber Network, adds on. “This results in insufficient checks and precautions being taken.”

This is an Op-ed article. The opinions expressed in this article are the author’s own. Readers should take the utmost precaution before making decisions in the crypto market. Coinlive is not responsible or liable for any content, accuracy or quality within the article or for any damage or loss to be caused by and in connection to it.