True believers will tell you that Web3 technologies are transformational for business: they will liberate us from dependency on the giant tech companies which have dominated Web 2.0, creating an open, egalitarian internet based on shared resources.
This might seem idealistic, but many of these technologies are already in use: distributed ledger technologies (DLT) such as blockchain are creating decentralised Web3 networks, and the number of decentralised apps (DApps) is growing quickly. So, what does Web3 really mean for business today; and how might businesses use it in the future?
Web3 networks: turning crypto hype into reality
Many Web3 use cases are linked to decentralised finance (DeFi) and crypto. Despite the “Crypto Winter” of the past few months, business and consumer interest in crypto is still growing; and if (or when) central banks, including the Bank of England, launch new Central Bank Digital Currencies (CBDCs), this may also encourage further demand for crypto-based Web3 products and services.
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Kim Grauer, director of research at data and security specialist Chainalysis, restates the basic theoretical advantage for businesses using crypto: “It eliminates the need for banks, ensuring financial transactions are only between business and customer, allowing businesses to be more competitive.
“Every transaction can, in theory, be recorded and tracked in the decentralized blockchain ledger,” she continues. “Businesses can use this transparency to build trust with their customers. We believe blockchain will revolutionise the exchange of value, much like the internet did for the exchange of information. We are building for a future when all value is transferred on blockchains, and every company is a blockchain company.”
Web3 blockchain business applications
The security and immutability of blockchain-based Web3 networks mean they are well-suited to some business applications. One use case becoming increasingly popular is decentralised, Web3 cloud-based storage, in which data is stored across multiple blockchain nodes in multiple repositories – an almost endlessly scalable, relatively cost-efficient arrangement which offers security and business continuity benefits due to the fact that it is never all held in a single location and there is no single point of failure.
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Another use case for blockchain is improving visibility of supply chains, to verify provenance of products, components, and raw materials. “Blockchains are indelible records, so in theory you would have complete traceability,” says Sam Gilbert, researcher at the Bennett Institute for Public Policy at the University of Cambridge. Businesses already making use of such technologies within their supply chains to reduce the risks of fraud and waste include the Renault Group and Home Depot.
Web3 and the sharing economy
The success of sharing economy businesses and apps has been a major feature of the Web 2.0 world. Some sharing economy brands, such as Airbnb, have become shorthand for productive disruption and commercial success.
A Web3 sharing economy would use a shared blockchain to run networks through which people could buy and sell goods and services without middlemen taking a cut from transactions. There would be legal and regulatory issues to resolve, but there are already organisations working on this idea, such as the peaq network, which lists some potential use cases on its website, including transport, food, equipment and trading renewable energy applications. Businesses seeking to participate in a Web3-based sharing economy but unable to occupy the middleman role would need to find other ways to benefit from participation, such as marketing or supplying other goods or services to network members.
Blockchain and Web3 networks could also enable buying and selling of fractional ownership real estate or vehicles, Grauer suggests. “Sellers would be able to access capital they can’t today, while buyers could invest in those assets more affordably via partial ownership,” she explains.
In a similar way, she continues, decentralisation will enable “community ownership” of businesses – a model already visible in the form of Decentralised Autonomous Organisations (DAOs), in which investors can cooperate to guide decision-making. Examples in the DeFi sector include the cryptocurrency exchanges Uniswap and AAVE. “As Web3 grows, we expect to see [DAOs] … in other industries,” says Grauer.
NFTs and a Web3 metaverse
Another use case for Web3 is trading of non-fungible tokens (NFTs), which grant ownership rights over unique items of digital property such as artwork, or video and audio content. Brands from industries including sports, fashion and food and drink have issued them, capitalising (literally) on growing consumer interest.
“For companies looking to connect with consumers in increasingly experiential ways, decentralised virtual worlds could offer a new playground for advertising and marketing,” says Mike Bechtel, chief futurist at Deloitte Consulting. “For brands [with] … a consumer base who appreciate rarity and novelty, generating NFTs could be an opportunity to … engender customer loyalty.”
Use of NFTs is also now widespread among players of mass multiplayer online (MMO) games, offering a glimpse of the financial and economic frameworks Web3 technologies might run in a metaverse environment.
“Tens of billions of dollars are being spent,” Gilbert notes. “In future many more adults will be using virtual environments, for gaming or possibly for socialising.”
Web3 social platforms
In addition, more consumers and businesses may one day communicate via shared, decentralised Web3 social media platforms, like MINDS, DiamondApp and Mastodon. User numbers are tiny compared to Web 2.0 social networks at present, but the world of social media is unpredictable and it is possible that a Web3 social network will acquire the scale which makes it worth businesses using it in the same sorts of ways they use social networks today, for marketing to and transacting with customers.
Theoretical advantages for doing so would include more direct interactions with customers and being able to draw on the traceability and security enabled by blockchain technologies.
Web3 business barriers
Any business considering use of Web3 technologies will have to assess the legal or regulatory risks to which they might be exposed. But, as Adam Hunter, a lawyer in the global tech group at legal firm Clifford Chance, warns, the current legal and regulatory landscape “was not built for a virtual environment”. He notes that in a decentralised system “it becomes very difficult to point to who takes responsibility when something goes wrong”.
Despite this, Hunter reports widespread client interest in Web3 business applications, particularly around gaming and financial services.
Bechtel also predicts a bright future for at least some of them: “Use cases focusing on creating trust, disintermediating unnecessarily complex processes and engaging with customers will stand the test of time,” he says. We will find out.
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