Is Web 3.0 the Future of the Rising Digital Economy?
“Has anyone seen web 3? I can’t find it.
It’s somewhere between A and Z.”
There’s a buzzword that tech, crypto, and venture-capital types have recently become obsessed with. Conversations are now peppered with it, and you’re not serious about the future unless you include it in your Twitter bio: Web3.
Web 3.0 is the next step in the internet’s evolution. Following the rapid acceptance of decentralized finance and later NFT apps, Web 3.0, along with blockchain-based gaming and the metaverse, is emerging as one of the next growth areas in the blockchain world.
The first iteration of the web represents Web 1.0, which, according to Berners-Lee, is the “read-only web.” This was followed by Web 2.0, which basically refers to websites throughout the world that emphasize user-generated content, usability, and interoperability for end users. But now, we have the New, Semantic Web (3.0), which claims to establish “the world’s information” in a more rational way than Google’s current engine schema can. It allows for the advancement of the web’s back-end after a long period of focusing on the front-end.
But, why do we really need it? What improvements is this new internet world promising to bring about? Let’s find out!
Web 3.0 seeks to diversify the Internet in order to minimize hackers, leaks, and our dependence on centralized repositories. This version of the internet will enable the users to have their own data and digital footprints, thanks to verified data scarcity and tokenized digital assets. Online 3.0 will become increasingly essential in 2022, as most users seek customized and unique web surfing experiences, facilitating personal interactions.
On the corporate front, Web 3.0 will aid in the disintermediation of enterprises and the removal of rent-seeking intermediaries, which ensures direct transfer of value to customers and suppliers in a network.. Hence, this helps in solving the problem of reliance on intermediaries.
On the same grounds of relationship development, humans, organisations, and robots will be able to exchange more data while retaining more privacy and security thanks to peer-to-peer networking. Thus, we can lessen our reliance on individual platforms and future-proof entrepreneurial and investment activities by gaining an understanding of this next Internet Generation.
Having innumerable areas of application, Web 3.0 does not leave behind any unturned stone. Isn’t it obvious that it has multiple connections with Finance too? Let us delve deep into the financial and digital infrastructure that it aims to build!
Financial and internet technology have advanced at a rapid pace, resulting in the emergence of new firms. Institutions are increasingly under pressure to reinvent their services and business models in order to keep up with technological breakthroughs that have the potential to transform the future of money, payments, and digital assets. Just as the pandemic resulted in physical and digital convergence, this universe is sure to change the way we work too.
It is impossible to talk about finance and Web 3.0 without the mention of Decentralized Finance (DeFi). DeFi is an emerging financial technology based on secured distributed ledgers which disempowers middlemen and focuses on peer-to-peer networks. Being based on blockchain technology, Defi challenges the centralized banking system too. In the last two years, the ‘total value locked in Defi’, which indicates the amount of money working in various DeFi protocols, has climbed dramatically, clear by the below shown figure.
With this ground work, we have tried to simplify the ties between Web3 and Financial Economics into 5 sub fields, which are as follows:
Banking
Today, we have high-fee checking accounts and low-yield savings accounts in our physical banks, right?. We have low-cost consumer finance products on web 3 as well. Companies like AAVE, Eco, and Compound have developed high-yield automated lending methods using this new world technology.
Consumer Lending
Today we have a credit bureau oligopoly with an opaque credit scoring method for consumer lending. Whereas, companies like Truefi are competing in the Web 3 platform market for on-chain credit rating based on transparent and audible data.
Payments
Venmo and PayPal are stacked on top of current banking ties, adding to the complexity and expenses. Web 3 systems such as Valora and Worldcoin, on the other hand, offer quick payments to the underbanked and unbanked.
Privacy
Today, there is a contradiction between preserving revenue streams and protecting privacy in ad-supported enterprises. Web 3.0’s decentralized design, represented in the figure below, tackles challenges such as user confidence, privacy, and transparency. Web 3 platforms, on the other hand, such as Aleo, have applications developed from the ground up keeping privacy in mind. They even offer enhanced compliance without losing privacy.
Participatory Governance ( DAOs )
Decentralized Autonomous Organizations (DAOs) offer any type of organization—nonprofits, collectives, cooperatives, businesses, or investment funds—a road to community governance. This is a credit union or cooperative’s web3 version: instead of a product being engineered and sold to individuals, consider a community of people who participate in the joint development of a product. DAOs are already being used to supervise the development of software protocols with tremendous success. For any type of multi-stakeholder project, they can be a very efficient and auditable form of governance. They also create a decentralized talent market, allowing people from all over the world to contribute to value creation in a truly meritocratic manner.
By now, we know the power of decentralization and the working of this magical universe. However, there is yet another economic opportunity generated by this metaversical tool. What is it?
Decentralization is a method of connecting creators directly with fans and communities on a large scale while reducing the role and power of middlemen. WEB 3.0 is a valuable internet. This implies that producers now have the technology to make their digital work one-of-a-kind and hence more valuable, opening up a whole new world of possibilities in the creative economy.
Metallica famously sued Napster out of existence because it allowed individuals to duplicate and share the same MP3 millions of times. Apple and iTunes came in next, charging musicians exorbitant amounts to distribute their music. Most musicians are unable to make a living with the current generation of music distribution and streaming platforms. Even artist-owned streaming sites like Tidal have struggled to find a viable strategy.
Here’s where Web3 again makes a dashing entry. It gives musicians and content creators the option to sell unique digital artifacts such as music, experiences, and art directly to their customers over the internet. When people gain access to unique digital content, substantial secondary markets emerge—think record stores, thrift shops, eBay, or Etsy for digital content—creating additional thriving economies. Certain platforms are also experimenting with fractionalized ownership, which allows a community to pool its resources and collectively own a multimillion-dollar work of art, with individuals able to buy and sell their fractional stake to other individuals without the community selling the underlying work of art.
Value is created by and accrues to network participants—the community—in web3 networks. Individuals will have new chances to earn a living as a result of their participation in these communities. While Wikipedia is an excellent example of a thriving nonprofit community that has added value to the world, it is nearly exclusively run by volunteers, which limits the amount of people who may participate. Web3 platforms are now being used to incentivize maintenance activities like routine upkeep and knowledge production. This allows volunteers to be compensated for their worth and services.
A similar story is unfolding in the world of “play-to-earn” video games. Because the one-of-a-kind digital artifacts created in WEB 3 games may be owned, bought, and sold by players, virtual economies are being formed, in which people can earn money by playing. Cool, no?
To conclude, Web 3.0 has an influence on everything from retail to applied molecular biology, and from micro-businesses to major companies. Hence, Web 3.0 is essentially the next step in the evolution of the Web, carrying with itself a potential to drive new conversations. This brings us to a fair question: Does WEB 3.0 genuinely hold the potential to bring about a true technology revolution in the upcoming future?
Curated By: Aryan Jain, Ayush Malhotra and Raunak Poddar
(Aryan Jain is a 1st year student pursuing B.Com(H) at St. Xavier’s College (Autonomous), Kolkata and a Research Analyst of the Xavier’s Finance Community.)
(Ayush Malhotra is a 1st year student pursuing B.Com(H) at St. Xavier’s College (Autonomous), Kolkata and a Research Analyst of the Xavier’s Finance Community.)
(Raunak Poddar is a 1st year student pursuing B.Com(H) at St. Xavier’s College (Autonomous), Kolkata and a Designing & Marketing Analyst of the Xavier’s Finance Community.)