In 1492, Columbus set sail from Western Europe and discovered America. Today, America has become an important hub for the development of Web3. In contrast, the progress of Web3 on the European continent seems to have been overshadowed by domestic internet development. This article aims to shed light on this mysterious veil by providing a brief overview of Web3’s growth in the Europe continent.

Overview

Since July 2020, the European crypto economy has accelerated, with “conservative” investors shifting their attention towards this promising sector due to the impact of the COVID-19 pandemic and the Ukraine conflict. According to Chainanalysis data, except for the Eastern European region, the trading volume of cryptocurrencies in Europe has surpassed an impressive one trillion dollars in the past year alone. Europe is rapidly emerging as one of the largest and most active crypto economies globally.

In contrast to Asia’s focus on the financial sector, Web3 development and application in Europe have cross-industry characteristics, with this technology being gradually applied across various industries, from financial services to gaming, from social media to smart contracts, and from digital assets to blockchain technology.

Furthermore, the European continent boasts a favourable entrepreneurial atmosphere and an open communication environment, with cities such as Berlin, Amsterdam, and Switzerland’s Crypto Valley Zug, leading the way. Additionally, most countries have good policy support and continuously improving regulatory measures, which are crucial in propelling the development of Web3 in Europe.

The 2022 Geography of Cryptocurrency Report — — Chainalysis

Technological Progress

Europe has long been a hub for global software development talent, attracting a large number of developers during the Web2 era. This has also provided a strong foundation for the development of Web3. In the post-pandemic era, the restrictions of traditional office environments have been lifted, and people can now work from anywhere, which has significantly promoted the decentralization of blockchain technology.

In the Web3 era, financial institutions, Web2 technology companies, and political institutions are all facing significant disruptions. However, for Europe, which did not lead the way in Web2, the threat of Web3 to Web2 is not as great as it is for the United States, which firmly holds the position of Web2 giant. Therefore, Europe can leverage the momentum of Web3 to achieve digital sovereignty and financial independence. In summary, Europe has the largest development potential and the lowest destruction cost for the development of Web3.

The development of Web3 requires a technological infrastructure centred on blockchain, smart contracts, and digital assets and tokens. The European continent is investing heavily in developing Web3 technology, from traditional enterprises to startups, and is committed to promoting Web3. European developers are exploring ways to apply blockchain technology to traditional industries such as finance, the internet, energy, gaming, and artificial intelligence to revolutionize the way traditional networks are utilized.

According to data from ChainEurope, as of 2021, there are a total of 716 blockchain startups on the European continent, with 118 located in Berlin. Overall, Germany accounts for 16% of Europe’s blockchain startups. Switzerland has the second-highest number of blockchain startups, with most of them located in Zug. In terms of industry distribution, investment activities account for 10.9%, followed by enterprise infrastructure (7.8%), enterprise infrastructure (6.2%), and the Internet of Things (5.4%).

Blockchain startups in Europe, 2021 — — ChainEurope

Conversely, various Southern and Eastern European countries are actively involved in Web3-related activities, such as hackathons, blockchain conferences, etc., to create a favourable environment for entrepreneurship and gain global attention. However, the European continent still has limited influence due to its dispersed geographic location and competition between countries. Furthermore, the language barrier posed by various small languages, despite English being the primary communication language, could lead to locals sticking together in “small groups,” making diversity challenging to achieve and setting a threshold for non-European language speakers. Nevertheless, many European nations are making significant progress in creating an entrepreneurial-friendly environment, attracting global attention, and building a robust Web3 ecosystem.

Entrepreneurial Environment

The European continent has emerged as a hub for encrypted transactions, accounting for at least 25% of global trading volume in recent years. This level of activity has attracted the attention of entrepreneurs from around the world, and Europe has openly expressed its ambition to become the centre of the crypto economy. In addition to the favourable technological environment, active investment activities in the region have provided confidence for entrepreneurs.

According to a 2021 Atomico report, decentralized finance (DeFi) and the crypto field have become some of the hottest investment areas globally. In 2021, Sorare, a French blockchain gaming company, completed the largest B-round financing in the history of the European continent, raising a total of $3.2 billion in the capital. This demonstrates the immense potential of Europe in the encrypted economy. With capital emerging explosively worldwide, emerging funds such as Semantic Venture and Fabric are focusing on cryptocurrency/Web3 investment activities in Europe, laying a solid foundation for the continent to become the centre of the crypto economy.

The State of European Tech, 2021 — — Aotomico

By 2022, despite the cooling of the Web3 investment boom, there were 31 funds globally specializing in raising cryptocurrency funds, raising over $31 billion in the capital. During this time, Europe has also grown a group of unicorn companies, such as Bitfury, Blockchain.com, Ledger, Bitpanda, and others.

Investors on the European continent have a higher level of technical knowledge compared to investors in Asia and the US. They emphasize the long-term value of investments over short-term gains and tend to have a more “conservative” investment approach. They focus on the long-term growth and stability of risk investments, investing in projects that have good development prospects, can provide stable returns, and have good regulatory protection.

The explosion of the European Web3 Landscape: Enabling the Next Frontier of Crypto — — Sapphire

The European Web3 landscape is rapidly expanding, enabling the next frontier of crypto. This development is being driven by a combination of supportive regulation, growing investment activity, and a culture that values innovation and technological advancement. Europe’s rise as a hub for encrypted transactions is expected to continue, attracting entrepreneurs and investors from around the world.

Europe Takes the Lead in Establishing Web3 Regulatory Framework

The European continent has a unique advantage in establishing legal regulations for Web3 as most modern laws originate from Europe and the civil law system used is more universal and clear than the standard law system used in the UK and the US. The development of Web3 legal regulations has long been a consensus of the European Union, which proposed the Regulation on Markets in Crypto Assets (MiCA) in 2020, officially passed in October 2022.

MiCA has significant implications for the global development of Web3 as it establishes a completely unified and binding regulatory framework, providing a model for global crypto regulation. Although the law has some shortcomings, it guides the establishment of the entire Web3 legal system. Germany seeks to establish a digital securities law adapted to Web3 under existing securities laws, while Liechtenstein seeks to establish an independent law that is more compatible with all aspects of Web3 development.

Revolution in the German Capital Market: Securities Become Digital — — Philipp Sandner

Many European countries are studying the inclusion of digital assets into their existing financial services framework, and companies and financial institutions in traditional industries are actively expanding related developments. However, there are still some differences in implementation speed, adoption methods, covered services and products, and even definitions and terminology among different interest groups. Investors or product providers need to find targeted legal frameworks to promote the stable development of the industry.

Challenges and Opportunities

As the development of Web3 continues to gain momentum, the European continent is emerging as a key player in the global Web3 landscape. With a history of institutional regulation and a stable legal framework, the region is uniquely positioned to provide much-needed regulatory clarity for the growing crypto industry. However, there are also challenges to overcome.

One of the key challenges for investors in Europe is navigating the differences in management between countries, such as tax and monetary policies. These differences can increase investment risks and make it difficult for investors to make informed decisions. Additionally, the overall technological level of Europe is not yet developed enough, and there is a technological gap in the development of Web3 compared to other regions.

Despite these challenges, there are also many opportunities for growth and investment in Europe’s Web3 ecosystem. The region boasts a talented workforce and a favourable development atmosphere. Many projects, such as Dune Analytics, have demonstrated good performance in the global market. The European Union has also taken the lead in establishing a unified regulatory framework for crypto assets, providing a model for global regulation.

For Asian investors or products, the European continent may not be the first choice regarding market size and geographical location. However, Europe’s stable legal framework, favourable development atmosphere, and regulatory clarity make it a worthy research and investment destination.

Ultimately, the development of Web3 is a global trend, and stakeholders should maintain an open attitude and actively explore different regions. Only by constantly exploring new opportunities and mining useful experience can the global development goal of Web3 be achieved.