At a glance
- Web 3.0 is the next step in the evolution of the internet, in which control over data is gradually being transitioned away from large, centralised organisations and back to its creators.
- This disruption is taking place across multiple sectors. In the finance sector it comes in the form of decentralised finance (DeFi)
In an episode of the popular podcast Crypto Curious, host Tracey Plowman describes a job she had in the late 1990s. Part of her role with Western Australia’s Tourism Commission was to travel around the state and teach small tourism operators about the potential value of the internet to their business.
Plowman explained to those operators that the web would introduce their businesses to travellers from around the globe, to an audience bigger than they could ever imagine. They could showcase what they do with photos, videos and descriptions.
“Back then it was so hard,” she says, “A lot of them would even say, ‘Look, we just don’t believe in the internet.’ That was seriously what I was getting... it was quite funny.”
The point she was making in the podcast was that she is sensing the same reaction from many businesses today, as Web 3.0 approaches at pace. They simply aren’t as aware as they should be about what Web 3.0 involves and the opportunities and risks it presents.
A few businesses are already on board.
Stuart McLeod, co-founder and CEO of Karbon, the collaborative practice management platform for accounting firms, flags Myna Accountants – the UK’s leading cryptocurrency accounting firm – as one that is differentiating itself from the entire market with its expertise around Web 3.0.
Yet it would be a mistake to consider that Web 3.0 is simply about cryptocurrencies. It is so much more.
Web 3.0 in a nutshell
To understand Web 3.0, it’s important to know what has come before.
Web 1.0, developed in the early 1990s, involved static pages that simply offered information, like an online version of a hard-copy magazine.
There was no interaction or communication. If contact was to be made as a result of a web page capturing a person’s interest, it would be via the phone number or email address found on the site.
Web 2.0, generally agreed to have begun in 2004, brought enormous leaps forward. Social media was developed, meaning people began interacting and connecting online.
We began online shopping and having items we purchased delivered to our doors. With web 2.0 we became online consumers.
This came with a massive trade-off in the form of our privacy. Large, centralised organisations owned and exploited our data. At times the data was alleged to have been used for nefarious purposes, as discussed widely during the Facebook/Cambridge Analytica case.
“The easiest way to think of Web 3.0 is the ability for individuals to not just read and write data from the web, but also to own the data,” says Karl Mohan, General Manager APAC for Crypto.com.
Firstly, according to Mohan, Web 3.0 is about taking back the power from large, centralised organisations.
“How does this help? First it’s about privacy,” Mohan says. “As much as the Googles, Amazons and Facebooks of the world talk about privacy, a lot of their contracts allow them to sell your data.”
“Second, increasingly we’re seeing content creators – people who write freelance, people with photography skills, musicians, etc. – having the ability to own the creative rights over the content they create, to track every sale and make a commission from every sale.”
This means that by owning their own data, individuals can now share, commercialise and control that data themselves, removing the middleman.
From centralised finance to DeFi
With Web 3.0, all industries will be disrupted. In finance, it will arrive in the form of DeFi.
“DeFi is decentralised finance,” Mohan says. “It’s basically peer-to-peer finance.”
Peer-to-peer finance has been around for a while, b Web 3.0 offers the ability to supercharge and democratise the idea. Coded, smart contracts saved in a blockchain can be created between individuals.
These contracts remove the need for a centralised financial organisation. When seeking a loan, for example, an individual will no longer have to deal with a bank or credit provider. This means the fees and time-consuming processes that currently characterise such middlemen will become a thing of the past.
There are several benefits to the DeFi model, Mohan says. These include contract transparency and negotiability, cost transparency and immediacy of transaction. It also opens up banking and credit facilities to anybody, anywhere in the world, as long as they have a smartphone and a web connection.
What are the downsides?
As with today’s centralised financial model, there are downsides.
There is no centralised controller in the DeFi environment, so if things go south, there is nobody to complain to. In a largely unregulated environment, this means there is room for bad behaviour.
Hence, the value of accountants and advisors familiar with the landscape.
For better or worse – likely both – this will mean people must take greater responsibility for their own finances rather than trusting major institutions, which themselves have sometimes proved untrustworthy.
“DeFi is probably going to take a generation to even start realising its potential,” McLeod says. “The technology always goes faster than the people.”
“I think there’s scepticism from the older generations, but younger generations are more enthusiastic for a finance system that is less elitist and more inclusive of more economies.”
Gavin Appel, founder of start-up and business advisory Ignition Lane, says businesses that familiarise themselves with the Web 3.0 environment will quickly differentiate themselves in an increasingly competitive market.
“The technology world is evolving faster than ever before,” Appel says. “Status quo is your biggest competition, and it is now impossible to separate business strategy from technological innovation.”
“How you decide to embrace new waves of technology will be a determining factor in creating a competitive advantage for you and your customers.”