The last few decades have witnessed a tremendous amount of advancement, in terms of technology. The internet, in particular, has served as the backbone of digitization, providing affordable and easily accessible global connectivity. Likewise, the web provided robust and convenient navigation for all kinds of information.
Since 1989 when the web was first introduced, it has since evolved from its original form as Web 1.0, which was essentially read-only and allowed organizations to create content as well as connect it through. HTML hyperlinks.
It then evolved into Web 2.0, which created a range of web applications and broadened the consumer’s ability to generate content through social media and, recently, moved on to the next big phase – Web 3.0, which is happening. doubles as a new method of using and interacting with data online.
Web 3.0 is a term coined by Ethereum co-founder Gavin Wood in 2014 and has since materialized in what can be described as the foundation of the decentralized economy, gaining even more popularity in 2020.
Web 3.0 has been touted as the Internet of the future, destined to radically change the way the Web works in the hands of a select few organizations that control centralized Web 2.0.
Web 3.0, on the other hand, leverages machine learning, artificial intelligence, and blockchain to achieve real human communication in a new decentralized world with blockchain as the main cornerstone. With many exciting offers, Web 3.0 frees up from centralized regulation and returns it to its users.
What is Web 3.0 and how does it work?
Web 3.0 was originally dubbed the Semantic Web by Tim Berners-Lee, the creator of the World Wide Web, and was intended to be a more autonomous, intelligent and open Internet.
Unlike the previous web generation, Web 3.0 can be further extended as the data will be interconnected in a decentralized manner, taking a big step forward from Web 2.0, where data is mostly stored in centralized repositories.
While it has grown in importance lately, Web 3.0 has yet to be fully implemented, so there is no solid definition. However, it does suggest that users and machines will be able to interact with data in a more efficient and liberal manner.
For this to happen, however, software programs must understand information both conceptually and contextually. From this perspective, the two fundamentals of Web 3.0 are the Semantic Web and Artificial Intelligence (AI).
At its core, Web 3.0 attempts to empower organizations and individuals by getting rid of centralization and middlemen, which further means that you can own your data and monetize it.
Besides, you can also do business, network and interact with your peers without any third party interference. Equals.
The most intriguing aspect of Web 3.0 is how it works; Specifically, it leverages the power of blockchain technology to eliminate the need for centralized operators and instead work with immutable encrypted data. In general, web 3.0 has five characteristics:
- Semantic web: Web 3.0 goes beyond focusing on keywords and numeric values to understand content like photo, video, or audio and the more complex associations between specific products, locations, and behaviors.
- Artificial intelligence: Artificial intelligence software is able to decipher natural language and understand intention. It can also recognize right from wrong and provide more reliable data.
- 3D graphics: The third generation of the Internet is expected to integrate the use of 3D graphics and virtual reality technologies to deliver results regarding real-life places, various products and objects of interest.
- Connectivity: information is more connected via semantic metadata, exploiting all available information.
- Ubiquity and security: Data silos are removed. Each device must be connected to the network and the content must be operated by different applications.
What Web 3.0 Means for Centralized Finance
In a world that essentially runs a centralized economy and, by extension, a centralized financial system, Web 3 poses a destabilizing threat to the existing system. Centralized finance was, before the emergence of decentralized finance (DeFi), the standard for crypto trading. It holds a stronghold in the cryptocurrency industry.
In centralized finance (also known as CeFi), all crypto trade orders are processed through a central exchange. Funds are managed by specifically running the central exchange for which you do not have a private key that allows you to access your wallet.
While centralized finance has its own advantages, including cross-chain services and more flexibility in conversions, it does come with drawbacks that have clearly crept into the system for quite a long time, such as lack of transparency. With DeFi surfing the waves of Web 3, innovation combats the sheer adaptability of CeFi. Transparency, privacy, and user control are fueling Web 3.0.
Smart contracts and cryptocurrencies focus on financial empowerment, with users doing peer-to-peer transactions around the world without the need for centralized authorities. Additionally, blockchain enables collective governance, removing centralized authorities and single points of failure from systems.
What decentralized economy means in a new world
Free power from below is what a decentralized economy looks like and we are already moving towards more freedom. To a large extent, this is high despite the hiccups so far.
The decentralized economy, supported by blockchain, has improved the way we do business, but will also radically change the way we manufacture, design and produce physical and digital goods. There is still more progress to come in the New World.
With Web 3.0, tech giants like Facebook, Microsoft, Twitter, Google in Web 2.0’s open application ecosystems that mine user data will have less control. The decentralized web allows users to have more power over how their data is used.
One of the biggest benefits of the idea of using blockchain technology to reinvent the financial space is how the market can become unlicensed and open to everyone. Another attraction is the concept of composability, which means anyone can mix and match any existing DeFi offering to create a new one.
More and more countries are putting themselves at the heart of DeFi to change their economies. Recently, the government of Dubai became the first in the world to without paper by moving all transactions to Block chain, an encrypted online database.
Regulate the decentralized economy
The decentralized economy is accompanied by many good and revolutionary fruits. DeFi allows people to engage in financial services like borrowing, lending, and investing, but without intermediaries like banks using blockchains and cryptocurrencies. It is also transparent, immutable and without authorization.
However, the regulation of DeFi is a thorny subject. How can the authorities enforce regulations on a system that does not rely on the presence of intermediaries? And how will the regulations protect users and the market?
On the one hand, there is a certain difficulty with accountability. No person or entity in particular can be held responsible for a technological failure in this market. It could be hacking or the theft of digital assets, to name a few.
Regulators are alarmed by growing money laundering schemes being implemented on DeFi. The global anti-money laundering watchdog, the Financial Action Task Force (FATF), released new draft guidelines in October which, if implemented, may even require plans. -forms of decentralized financing (DeFi) to find a way to implement Know Your Customer (KYC) rules. This is sacrosanct in the fight against money laundering on DeFi platforms.
Likewise, there is room for the right level of regulation to give DeFi just enough room to make a difference: increase transparency, increase financial inclusion, and enable credit for the 8 billion people who will see the world take a huge leap towards prosperity.
In order to effectively regulate the DeFi economy, regulators must acquire technological expertise and be willing to engage with a wider group of stakeholders, including blockchain software developers, to effectively regulate DeFi.
Web 3.0 is the next generation of the Internet, and big companies like Twitter, GameStop, Reddit, and venture capitalist a16z are all devoting resources to its creation. In the next internet age, you won’t have a social account for every platform. Instead, you’ll have a single social account, capable of switching from Facebook and Twitter to Google, shopping websites, etc.
Web 3.0 aims to empower organizations and individuals by getting rid of centralization and intermediaries: you can own your data and monetize it. You can also do business, network, and interact with your peers without a middleman.
Disclaimer: The views and opinions expressed by the author should not be taken as financial advice. We do not give advice on financial products.