Web3: How Close Are We to a Whole New World Wide Web?

By Hugh Scantlebury, CEO and Founder of Aqilla


You’d be forgiven for thinking that Web3 is a new concept. It’s been in the news a lot over the last 18 months as cryptocurrency use continues to grow (El Salvador made bitcoin legal tender) and metaverse discussions gather pace (Facebook becomes Meta). Celebrities have also started to take a keener interest (Madonna releases controversial NFT art collection). But the term was first used back in 2006 in an article by New York Times journalist John Markoff. Seen at the time as future gazing and blue-sky thinking, it took until 2014 and Ethereum co-founder, Gavin Wood’s Web3 musings to ignite the public’s imagination.

Today, big tech hitters like Elon Musk, Jack Dorsey, and Mark Zuckerberg are bringing Web3 closer. And companies outside the tech sector are getting involved too. Starbucks, for example, has announced it intends to unveil a Web3-based rewards program. There’s talk too that Web3 has the potential to create a much more equitable and frictionless global trading environment. All of this got me thinking about the start of Web3’s mainstream crossover and what it could mean for our everyday lives.

What is Web3?

Hugh Scantlebury

But let’s not get ahead of ourselves: What is Web3, anyway? Web3 is a concept for the next generation of the World Wide Web based on blockchain technology. And blockchain is a system that records personal data and financial transactions. But unlike the transactions that you make with your credit card or via your bank account — or the personal data you share with online organisations — information is stored across several decentralised computers or servers (the block). These machines are linked to a peer-to-peer network (the chain) rather than housed centrally in a financial service provider’s or online company’s data centre.

The decentralisation offered by blockchain sits at the heart of Web3. It’s why lots of people talk about Web3, blockchain and cryptocurrencies in the same breath. The intention behind Web3 is to provide users with increased data security, scalability, and privacy. It’s also hoped that Web3 will give more control back to individuals on how their data is used and accessed — and give users self-sovereign identity. In many ways, it’s a reaction to the monetisation of personal data, like the kind we’ve witnessed with Facebook, other social media platforms and tech giants — and an attempt to combat their influence.

Web3 also incorporates token-based economics, including NFTs (Non-Fungible Tokens). The most famous (and most expensive) NFT sale to date was Beeple’s Everydays: The First 5000 Days, which sold for $69.3 million and rocketed NFTs into the public consciousness. Be very wary of these; they’ve got what many refer to as the Emperor’s New Clothes potential.

What does Web3 mean for the financial sector?

Most people would welcome improved online security and privacy and a return to the more democratised ideals of the early web pioneers. But to date, Web3 has been a little bit like driverless cars and nuclear fission, always five years away but looking like it could finally be a reality very soon.

Part of the problem is that we’re not fully set up to deal with the new implications of Web3 – especially from a financial perspective. Central banks do not handle cryptocurrency or NFTs; you can’t pay for your supermarket shop with bitcoin — yet! However, last month, in a positive sign that things are moving in the right direction, the European Central Bank announced its intention to standardise a way for Eurozone banks to offer crypto assets through a crypto regulatory framework.

The proposed framework will consider crypto company risk profiles and capabilities — and should start to give more confidence in the technology to the mainstream financial community. But many Web3 purists question if the involvement of traditional banks and fintech might curtail some of the advantages and economic democratisation that Web3 promises.

Web3 and Decentralised Finance

Web3 also offers the chance for more mainstream adoption of decentralised Finance (DeFi). It’s based on secure distributed ledgers like those used by cryptocurrencies and is intended to deliver financial products without using banks and exchanges as intermediaries. Robinhood Markets, which hit the headlines for opening stock markets to amateur investors and trading “meme stocks,” is possibly the most famous (or notorious) example of a DeFi service provider.

DeFi uses Ethereum’s decentralised blockchain to enable two parties to exchange currencies by entering into an agreement known as a smart contract. Recorded on the blockchain, the DeFi transaction is completed once both parties decide on their agreed conditions.

DeFi ultimately creates a more flexible and accessible way for people to benefit from financial services, such as taking out loans. It also cuts the lengthy vetting process usually conducted by banks. This means those with poorer credit scores can access such services. But it comes with risks as there’s no third-party involvement or regulation.

Reaching our destination

For all its current issues, there’s a groundswell of optimism around Web3 right now — and it’s an optimism I wholeheartedly share. The hopes and aspirations for our future that are bound up in the next version of the web represent some of humanity’s best ideals, as well as its capacity for imagining a brave future and then making it a reality.

However, perhaps for the moment, there’s still too much theoretical blue-sky talk and not enough practical work, particularly around cost, crypto mining, energy consumption, scalability, accessibility, and user experience. To make Web3 a reality, we need our cleverest people to develop the environment. People that can give it safe, practical applications and a stable framework — while still maintaining the core principles of decentralisation, democratisation, and data sovereignty. It will definitely require some experts from the global banking sector — those who understand what it took to enable secure transactions at the dawn of Web2.

There are also some sustainability and environmental issues to tackle. Bitcoin’s decentralised structure means it has a substantial carbon emissions footprint. It’s estimated that Bitcoin uses electricity at an annual rate of 127 terawatt-hours. To put that in context, that’s more than Norway’s entire yearly electricity consumption. It also makes bitcoin transactions incredibly slow — some can take nearly a quarter of an hour. Web3’s blockchain power usage simply can’t be allowed to spiral in this way.

Sir Tim Berners-Lee is one person that I would trust to lead the way to Web3. He is currently working on a web decentralisation project with the Massachusetts Institute of Technology (MIT) called ‘Solid’. This group aims to change how web applications work today through actual data ownership and privacy. Initiatives like these could catapult Web3 into the mainstream, but to get there, we need to cut through the hype, consider what’s achievable now, and what needs to happen to reach the ultimate goal.

Think back to how Open Banking, which at the time was a big, bold step for the global financial community, has created a much more dynamic, democratised way of running our personal finances. With the proper application and hard work by principled, intelligent people, we could deliver an internet with less exploitative data harvesting, freer trade, and greater online security. So, enough talking about what could be and let’s make it happen!


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