Blockchain Expo: The possibilities of Web3
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During a session at this year’s Blockchain Expo, we heard from IDC’s Research Director Phillip Silitschanu about the possibilities of Web3 and the journey ahead.
Silischanu shared his insights, based on vast experience, about the applicability of blockchain services and the potential of Web3. He discussed the opportunities and challenges these technologies bring and their impact on various sectors.
Web3 vs Web3
Web2, also known as the social web, marked a turning point in internet usage by enabling user-generated content and interactivity. Platforms such as Facebook, Twitter and YouTube emerged, allowing individuals to share thoughts, images, videos and engage with others.
However, Web2 was characterized by centralized platforms that controlled data and revenue generation, while users were primarily just consumers of content.
Web3 represents the next phase of the Internet, powered by decentralized technologies. It aims to empower individuals, promote trustless interactions and enable fair ownership of digital assets.
Web3 brings forth a number of opportunities for innovation and disruption across various industries. Some key benefits of Web3 include:
- Content Ownership and Monetization: Web3 introduces the concept of decentralized content ownership, where creators have more control over their intellectual property and can monetize their work directly through mechanisms such as non-fungible tokens (NFT) and decentralized finance (DeFi).
- Improved data privacy and security: Web3 utilizes cryptographic techniques and decentralized storage to provide greater data protection and security. Users have more control over their personal information and can choose which data to share.
- Trustless transactions and smart contracts: Web3 enables peer-to-peer transactions without the need for intermediaries. Smart contracts, powered by blockchain, ensure transparent and self-executing agreements, and reduce the risk of fraud and manipulation.
Unlike Web2, Web3 focuses on user control, privacy and elimination of intermediaries.
“When you upload to Facebook or YouTube, wherever, it [ownership] is gone. They can do whatever they want, says Silischanu. “The content platforms take the ownership and take all that equity.”
“By putting all this content on NFTs — whether you’re an individual, or you’re a third-party app developer, or you’re a business that trades on the Internet — you still retain equity or agency and ownership of the intellectual property.”
Challenges and safety concerns
Web3 is a generational leap for the internet and comes with its own set of challenges to overcome.
There are threats associated with blockchain technology, particularly the problem of hidden private keys and their vulnerability to advanced AI attacks in the long term.
“Private keys are very, very, very, very secure, but one day – it could be 5 years, it could be 10 years, it could be 50 years – technology will advance far enough that private keys can be hacked,” warns Silischanu.
Other key challenges include:
- User experience and scalability: Web3 technologies are still in their early stages, and user interfaces can be complex and less intuitive compared to Web2 platforms. Scalability issues must be addressed to accommodate the growing number of users and transactions.
- Regulatory and legal framework: The regulatory landscape around Web3 is evolving and clear frameworks are needed to ensure compliance, consumer protection and prevent illegal activities.
- Environmental impact: Some Web3 technologies, such as proof-of-work consensus mechanisms, use significant energy. Finding sustainable and energy-efficient alternatives is crucial to reducing the environmental impact.
Regulatory landscape and progress
Silischanu notes the painfully slow progress on regulatory frameworks in the blockchain industry, but expresses optimism about ongoing efforts to establish clarity.
In the UK, a finance committee recently called for crypto investments to be classified as gambling – contrary to the UK government’s position to turn the country into a Web3 and crypto hub.
The Finance Committee statement said: “Unbacked crypto-assets have no intrinsic value and their price volatility exposes consumers to the potential for significant gains or losses, while serving no useful social purpose. These characteristics are more reminiscent of gambling than a financial service, an impression reinforced by the evidence we have received about consumer behaviour.”
The committee’s comments resulted in considerable backlash.
Ian Taylor, board advisor at CryptoUK, said:
“The committee’s opinion does not reflect the evidence we gave to the Treasury Select Committee. We present strong use cases and measures implemented by the industry to track, monitor and report, with robust analytics to reduce fraud and work closely with regulators and law enforcement agencies to address this.
Crypto has been instrumental in serving the unbanked as a force for good, by making secure and efficient peer-to-peer payments available to the most vulnerable in our society.
The report also does not mention the tokenisation of financial products which we specifically highlighted in the evidence session as an important benefit of the technology. The ability to represent financial products such as bonds and stocks on a blockchain presents a number of advantages. These include faster settlement times, reducing intermediaries and thereby saving costs, new access to markets, increased liquidity and automation through smart contract technology.
We recognize that consumer risk exists, and this should be reduced through education, awareness and a more robust regulatory framework. But equating cryptocurrency with gambling is both unhelpful and untrue.”
In the US, Silischanu says he has “good authority” that clarity on crypto regulations will be achieved in the next 12-18 months.
Examples from the real world
Although it is still early days, there are already many examples of how blockchain – especially non-fungible tokens (NFTs) – is being used for a variety of real-world purposes:
Going forward, the use cases will only increase as more companies realize that NFTs aren’t just Bored Apes and other artwork (not that there’s anything wrong with that, if that’s what people consider valuable.)
Silischanu jokes that he can buy a poster of the Mona Lisa, put it up on the wall, put a velvet rope in front of it and claim it’s the original. With NFTs, he can indisputably prove that he owns the original of any art.
This becomes more powerful with greater use in areas such as car registration. Silischanu says he could offer someone to buy his Porsche outside, take the money, and the buyer could then find out he doesn’t even own one.
In the future, Silischanu can prove ownership of the Porsche with an NFT and transfer it to the new owner when the money enters his account – all within a trusted smart contract without any middleman. The previous owner would not even have to manually notify the authorities of the change in ownership as they would be working from the same ledger.
Crypto was originally designed to disrupt economics and solve legacy problems with the system. Silischanu highlights the transformative potential of tracking the performance of fund managers.
“You can track the performance of multiple managers,” says Silischanu. “Every trade, every transaction … you can track every single one in the blockchain.”
For business transactions, blockchains can offer a new element of trust and cut out the middlemen.
“If I’m a manufacturer in Vietnam and I ship over 20 container loads of chairs that I manufacture, before they get to my buyer on the west coast of the United States, for example, I want to make sure that I’m going to get paid when they get those the chairs … so you have an intermediary, or a bank in the middle that gives letters of credit,” explains Silischanu.
“The entire transaction can essentially be wrapped up in smart contracts.”
As fundamentally highly secure ledgers, blockchains can also provide immutable proof of means to settle debates (or prevent them from even occurring!)
“I have a spreadsheet on my laptop that says I have $5,000 in my account. I’m old, so I still have a checkbook, and the checkbook somehow says I have $4,000 left. Bank of America swears, based on their database, I only have $3,000. My CPA says I have $1000. When I go to an ATM, I have $500. The tax authorities say that I have 2 million dollars and that I have to pay taxes, says Silischanu.
“With DLT and blockchain, there is only one truth. We all share that truth because we are all on the same database.”
As-a-service
Silischanu goes over the concept of Blockchain-as-a-Service (BaaS) and DLT-as-a-Service.
He highlights the significant benefits of partnering with third-party vendors that specialize in related solutions, as it is up to them to monitor progress, make investments where necessary and have the right team in place.
Considering the rapid advancements in the industry, Silischanu says he wouldn’t be surprised to see an entirely new protocol emerge in the next 3-5 years. Building the solution in-house means that the “burden” falls on the business to carry out the upgrade work itself in good time and cost.
In three to five years there could be a whole new protocol, a whole new team that nobody here has even dreamed of yet. And if you built your solution in-house instead of buying it outside, it’s now your problem to get your team to upgrade, explains Silischanu.
“If you partner with a third party that offers blockchain-as-a-service or DLT-as-a-service. The problem is theirs. They have the expertise, they have the team, they have the developers, they stay on top of it. Everything all you need to do is run an update and you’re up to date.”
Travel on
Blockchain, DLTs and crypto have transformative potential as the foundational pillars of Web3. They provide significant opportunities across industries, but there are still challenges and security issues that need to be addressed.
For his part, Silischanu predicts that a “full Web3 takeover” is 3-5 years away.
“For those of us who missed the boom of the ’90s and the dot com boom, this is your second chance,” says Silischanu.
“You don’t have to dress up like Vanilla Ice or anything to take advantage of it, I promise.”
Want to learn more about blockchain from industry leaders? Check out the Blockchain Expo taking place in Amsterdam, California and London.
Explore other upcoming tech events and webinars powered by TechForge here.
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