Unlocking the Future of Finance with Web3
Mainstream companies are rushing to get on the Web3 train--and fast.
Financial services giants like Mastercard, Visa and Stripe are using the tech behind the next incarnation of the internet to gain an early competitive advantage.
The rest of the players in the financial sector have quickly realised the opportunities presented by a digital society driven by a data economy. Its creation of tradeable digital assets (with tangible value) is of great interest to investors too.
How Web3 matures — specifically in the context of finance — largely depends on how financial institutions integrate themselves with blockchain technology. Now is the time to invest ample resources in this, or face losing out later.
Web3 is Changing the Game
Web3 and its underlying tech is turning the digital landscape as we know it on its head. The penny has officially dropped with the realisation that an online world with less friction, more freedom and proven ownership of digital assets is highly possible.
This kind of digital society simply isn’t possible in Web 2.0, the current iteration of the internet. By design, it is impossible to track authentic ownership of data, not mentioning the improbability of assigning actual value to digital assets.
As things stand, it mostly generates returns for a handful of tech companies working to scale user attention (data points) for profit. By not actually owning their data, legitimate value creators and everyday consumers only get a tiny fraction of a pretty gigantic pie. Daniel Hövermann hit the nail on the head in the hit 2020 Netflix documentary The Social Dilemma, saying that in the current online landscape, “if you're not paying for the product, then you are the product”.
Web3 is changing the game by facilitating self-owned data in a decentralised data economy. Digital assets are traceable, monetizable and tradable at the same time.
The DeFi Experiment
Decentralised finance (also known as DeFi) is an ongoing Web3 experiment focusing on blockchain-based applications (dApps) that perform a range of financial transactions without middlemen like brokers or banks.
It taps into lending, investing, asset management and insurance, so investors are sitting up and taking notice. Major banks clearly want a piece of the action too - a good indicator that they realise the need to shape up or ship out.
Consumer interest in DeFi is growing thanks to the prospect of faster transactions and lower fees. In theory, this makes it one of many potential catalysts for the widespread public adoption of Web3.
Where dApps are primarily exposed
The blockchain infrastructure that most dApps are currently built on leaves much to be desired. In combination with these being mostly unregulated around the world, transactions within dApps aren’t fully tamper-proof. This makes it vulnerable to widespread fraud and money laundering.
The problem is rooted in how the data is handled at the fundamental infrastructure level. Most dApps rest on layer 2 chains, where data is still largely vulnerable. The companies behind them are focusing on showcasing the promise of DeFi as a priority, rather than developing the actual infrastructure to actually make it viable in the long run (putting the cart before the horse).
Bridging the Infrastructure Gap
An improved infrastructure is one that allows for data protection through unequivocal ownership by the users themselves. In this landscape, data is captured and stored in the form of tangible assets. These can be linked to additional protections like human, economic and legal rights.
Zenotta is working hard on making this a reality by combining the performance of the internet with the security of blockchain technology. The platform operates through a secure, decentralised peer-to-peer network that rests on a new Layer-1 blockchain infrastructure.
This infrastructure has the capacity to validate data in a way that goes beyond just creating safe transactions. It legitimises data as a brand new asset class at the heart of digital society. This creates space for the development of new business models and related trading opportunities, revealing the true nature of Web3 as a force for innovation.
Towards a Mature Data Economy
With this infrastructure firmly in place, the data economy can start its maturation process. Web3 can become the customer delivery mechanism it’s long been promised to be, with blockchain the security and trade infrastructure, and user-owned data the primary commodity being traded.
The financial services industry doesn’t have to reinvent the wheel to keep up. It only has to change how it uses the (blockchain) wheel to continue offering value to its customers.
The technical revolution will eventually become a social one. Embrace the changing landscape, or risk being left in the dust.
About the Author
Zenotta is the peer-to-peer electronic trade system powered by smart data. It is dedicated to solving the “digital ownership problem”, namely implementing an inseparable link between a token and the digital product in a blockchain environment. For more info, visit our website or social media platforms.