Is Web3 crashing? After months of plummeting cryptocurrency usage values, there are still a few issues that need to be addressed if Web3 is to enable mass selection.

Regulatory oversight, customer experience and basic technology need to be further improved before it can be completely invincible.

McKinsey&Co. is for investment analysts.

"The key consumer target group for Web3 is a powerful target group," the consulting management firm emphasizes in an industry report called "Web3Beyondthehype."

In fact, Web3 is so powerful that ignoring the potential of Web3 is more risky for the business than choosing this approach from the start.

McKinsey insists that business leaders must not confuse the "ups and downs or various bad actors" of the sales market with the potential primary uses of digital currencies and the technology behind them.

"While there are real life risks associated with this cutting-edge technology and primary use, applications of the next generation Internet continue to appear in a growing number of areas with hidden transformational hazards."

So let's warn ourselves to commit to the third phase of Internet technology.

In theory, Web3 is a vehicle for new open financial norms, protocols, and organizational structures that include everything everyone does on the Internet. Operations are no longer concentrated on medium and large platforms and aggregators, but typically use decentralized blockchain and blockchain smart contracts.

"Web3 may refresh the existing power structure and go back to the customer," McKinsey said.

Rectifying -- and this is one of the thorniest issues with Web3 -- focuses on being present in the community, rather than being self-contained. Revenue can be refunded to originators and users, and some incentive is provided to help customers acquire and improve.

However, McKinsey stresses that Web3 enthusiasts have experienced "difficult improvements" in recent months. Key cryptocurrency market prices continue to fall, this is irreplaceable (NFT) and on top of that, a number of pioneers in the field have declared bankruptcy due to risk control failures and customer asset abuse.

If Web3 is to live up to this ideal, this article discusses the key tests ahead.

The main friction resistance is control and validation. According to McKinsey, regulators in many countries are seeking to issue a new manual for Web3 to balance risks and innovation potential, but the situation remains intractable.

"At this stage, this classification of property, service and improvement models lacks picture quality and management consistency. For example, blockchain smart contracts cannot be legally applied for enforcement."

"Web3 is the cornerstone of the metaverse concept, a completely virtual parallel world that has attracted investment from client companies and venture capital firms among many other projects."

-- McKinsey & Company

Instead, it limits the possibilities for organizational choice. The overhaul is still a work in progress, and decentralized autonomous organizations (DAOs) -- the new global collective community system of blockchain technology that is supposed to be regulated -- "vary widely and so are often not strong enough."

There are more obstacles. The customer experience in the new ecosystem is not quite ready for mainstream options.

"Pages are often poorly designed and the underlying technology is still too complex for customers to get a seamless feel."

Security is another issue. "Until customers feel comfortable, they may not choose this technology on a large scale. Fraud remains a risk, with all manner of "canvassing", Ponzi schemes and social engineering scams plaguing this new industry, often with a lack of knowing your customers and compliance management procedures."

A prominent anxiety is that consumers participating in Web3 will certainly be well informed about the technical risks of blockchain technology." As a result, they expect the same type of maintenance they prefer from decentralized (generally controlled) physical lines."

For example, transactions on blockchain are inherently irreversible, so the concept of divestment or customer asset recovery does not exist at this stage (although technically sound).

Transaction costs are also a factor, making some technology solutions too expensive at this stage. For example, investment analysts have found that the cost of trading and recording transactions on the Ethereum blockchain (the so-called cost of oil) could spook consumers in many parts of the world.

"The flexibility of blockchain smart contracts is unproven, with new code or applications of shortcomings in 'logical network hacking' being generated every week, and the accuracy of information characteristics commonly used in blockchain smart contract management decisions remains a puzzle."

Finally, give due consideration to their environmental footprint. At a time when there is a growing focus on natural environmental and social betterment, proof-of-work blockchain technology is likely to test specific options for businesses and regulators.

That may seem like a lot of steep hills to climb - but McKinsey insists that the revolutionary potential of Web3 remains the key Internet trend to watch.

"C-suite management is likely to want to keep it on his radar, if only because it represents the potential for a quick demise."

"Until customers feel comfortable, they may not choose this technology on a large scale. Fraud remains a risk, with various' canvassing ', Ponzi schemes and social engineering scams plaguing this new industry, often with a lack of customer and compliance management procedures that know you."

-- McKinsey & Company

It has been reported that leading Web3 game players are aware of this test and are actively and diligently addressing it, often with financial support from many venture capitalists. In fact, the more than $18 billion VC invested in Web3 in the first half of 2022 is expected to exceed the $32.4 billion VC invested in 2021.

McKinsey suggests that "management should think carefully about the growth strategy and understand how the Web3 proto-enterprise is disrupting its space and the challenges and opportunities it may bring."

Despite recent market weakness, the pace of innovation is unlikely to slow.

Now we are beginning to see the birth of Web3's original ecological sales marketplace, payment Internet and its savings and loan platform. The birth of Web3 mobile games, social media and online media (the Web3 meta-universe concept) could be next.

"Web3 is the cornerstone of the metaverse concept, a completely virtual parallel world that has attracted investment from client companies and venture capital firms among many other projects."

McKinsey reports that many new developers are adding Web3 fitness campaigns every month. Due to the open source system nature of this approach, developers can easily develop applications by building existing programs.

"Even large institutions often struggle to compete with such large developers around the world, but the pace is likely to accelerate as more people and developers support it," it warns.

"Management can take a hard look at strategy and understand how the Web3 proto-enterprise is disrupting its space and the challenges and opportunities it may bring."

-- McKinsey & Company

More importantly, participation has increased, especially among the younger generation.

In a recent McKinsey survey of 35,000 active online customers in some of the largest digital asset markets (India, Singapore, the United Kingdom and the United States), 20% of respondents aged 25-44 indicated that they owned digital currencies. Two-thirds of them use digital currency for payments (around point-to-point payments or Web3 business receptions), and more than half use NFT as a digital identity or digital currency for online game-making themed activities.

"As with any new technology application called a breakthrough, the level of disruption of blockchain technology, blockchain smart contracts and digital currencies remains to be seen. Despite some scepticism, particularly after the sharp fall in data asset valuations and the recent bankruptcy of some funds and transaction savings businesses, client enthusiasm remains high."

The approach itself is likely not quite ready for mainstream options - but the desire for Web3 is still there.