Sep 02, 2021
Web 3.0 has become one of the most talked-about digital trends of the decade. But what exactly is Web 3.0, and how can financial companies leverage the changing Internet landscape to future-proof their business models?
Read on to learn more about Web 3.0 and how it could change how we interact with financial services.
The definition of Web 3.0 is contentious— it’s hard to even find a single, standard definition.
The most common definition of Web 3.0 is an increasingly machine-readable web that will provide more personalized services to users.
Instead of users interacting directly with web pages and applications, data on Web 3.0 is much more interconnected. Not only do users interact with applications — applications and devices on the web also communicate with each other, creating a more open and intelligent Internet.
It’s much easier to understand what Web 3.0 is and what it means by taking a look at Web 1.0 and 2.0.
Web 1.0 was a major breakthrough, allowing anyone to publish content and reach a worldwide audience. There were no search engines, though, so navigating web content was not easy. The most common way to find web pages was through directories.
It may have been difficult to use, but it excited many because it seemed like information would be accessible to anyone. Opinions could be shared freely without the pressures associated with traditional gatekeepers of knowledge like publishers and universities.
Web 2.0 added a whole new layer of interactivity. Real-time communication with websites enabled the rise of social media, with features like leaving comments and likes.
E-commerce is another good example. With Web 1.0, going to an online store would basically be looking at the store’s catalog. With Web 2.0, users could leave reviews, browse the reviews left by other buyers, or receive personalized recommendations based on their purchase history.
Web 1.0 was a one-way street where information flowed from the website to the user.
Web 2.0 turned that into a two-way street, with the user becoming an active participant in creating web content.
The vision of Web 3.0 is an Internet where all devices in our lives are continuously connected and communicating with each other. Artificial intelligence will help machines to understand web content better, provide better search results, and detect fraud like fake reviews.
At the same time, the great hope is that cryptography will empower Internet citizens to take back control of their data from centralized platforms like Facebook and Google.
Bitcoin was the first concrete example of blockchain technology empowering individuals with alternatives to centralized monopolies.
Money, in the digital world, is really nothing more than data. What blockchain technology makes possible is trustless data verification. This means you no longer need to trust a bank to make sure that account balances are accurate. Instead, a decentralized network proves that all account balances are accurate.
This kind of verification can also be used for any other kind of data, from legal contracts to certificates of ownership or medical records. The encryption methods used by blockchains can preserve privacy, even if data is stored on an open network.
This is key to the vision of Web 3.0.
In order for applications and users to communicate securely with each other requires both openness and trust. Cryptography and blockchain technology allow secure ownership and sharing of data.
So instead of Facebook or Google harvesting your data and selling it to third parties, you can theoretically hold the keys to your own data and only allow access to who you choose.
There are still many technical challenges to making this vision a reality, but if it works, it could mean a declining role of centralized platforms like Facebook as mediators between people. Instead, internet users would be able to interact directly with each other via open platforms where they can choose how their data is used and potentially profit from it.
This new vision of the Internet means a transformation of not only social interactions but also financial interactions.
In the past, when you transferred money to someone online, you needed a trusted service like PayPal or a bank to make the transfer.
With blockchain networks, like Algorand, you can now transfer money directly to anyone with an Internet connection on a peer-to-peer basis.
But the changing Internet landscape doesn’t end there for financial services.
Open financial protocols that anyone with an Internet connection can access could revolutionize how we interact with financial services.
For example, investors can lend directly to borrowers via decentralized, peer-to-peer lending pools using digital currency. This enables anyone across the globe to access funding while providing new opportunities for investors to earn yield (i.e Yieldly).
Additionally, the ownership of any asset, including stocks, bonds, real estate, and cash can be “tokenized” and represented on a blockchain. These assets can then be traded directly between individuals, democratizing access to financial markets.
What’s more, the data integrity provided by blockchain technology eliminates the need for trusted third parties to verify things like identity, proof of ownership, and proof of funds.
The new digital financial trends born out of Web 3.0 could result in increased efficiency for financial services companies that are willing to embrace decentralized technologies and provide access to new customer segments that were previously difficult to reach.
Forward-thinking financial institutions and fintech companies have the opportunity to future-proof by embracing the new opportunities that will come with Web 3.0.
The first step to future-proofing is to master the fundamentals of blockchain technology. Once you understand how it works, you can start to look for ways that it can solve problems or improve workflows.
The best way to do this is to gain familiarity with a user-friendly blockchain that is already seeing wide adoption within the financial sector. Algorand is a prime example.
Algorand has been praised for its accessibility and is already used by a range of industry leaders for applications as diverse as microfinance, asset issuance, and identity verification.
The financial sector and the way we do business are changing rapidly. By embracing the change, you have the opportunity to be a part of building a better future.