During a session at this year’s Blockchain Expo, we heard from IDC Research Director Phillip Silitschanu about the opportunities of Web3 and the journey that lies ahead.
Silischanu shared his insights, based on vast experience, on the applicability of blockchain services and the potential of Web3. He discussed the opportunities and challenges presented by these technologies and their impact on various sectors.
Web2 vs Web3
Web2, also known as the social web, marked a turning point in internet usage by enabling user-generated content and interactivity. Platforms like Facebook, Twitter, and YouTube emerged, allowing individuals to share their thoughts, photos, videos, and engage with others.
However, Web2 was characterised by centralised platforms that controlled data and monetisation, while users were primarily just consumers of content.
Web3 represents the next phase of the internet, driven by decentralised technologies. It aims to empower individuals, foster trustless interactions, and enable equitable ownership of digital assets.
Web3 brings forth numerous opportunities for innovation and disruption across various industries. Some key advantages of Web3 include:
- Content ownership and monetisation: Web3 introduces the concept of decentralised content ownership, where creators have more control over their intellectual property and can directly monetise their work through mechanisms like non-fungible tokens (NFTs) and decentralised finance (DeFi).
- Enhanced data privacy and security: Web3 leverages cryptographic techniques and decentralised storage to provide greater data privacy and security. Users have more control over their personal information and can choose what 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, reducing the risk of fraud and manipulation.
Unlike Web2, Web3 focuses on user control, privacy, and the elimination of intermediaries.
“Once you upload to Facebook, or YouTube, wherever, that [ownership] is gone. They can do what they want,” says Silischanu. “The content platforms are taking the ownership and taking all that equity.”
“By putting all that content on NFTs — whether you’re a person, or you’re a third-party app developer, or you’re a business transacting on the internet — you still retain equity, or agency and ownership of that intellectual property.”
Challenges and security 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 issue of hidden private keys and their vulnerability to advanced AI attacks over the long-term.
“Private keys are very, very, very, very secure, but someday — it might be 5 years, it might be 10 years, it might 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 need to be addressed to accommodate the growing number of users and transactions.
- Regulatory and legal frameworks: The regulatory landscape surrounding Web3 is evolving and clear frameworks are necessary to ensure compliance, consumer protection, and prevent illicit activities.
- Environmental impact: Some Web3 technologies, like proof-of-work consensus mechanisms, consume significant energy. Finding sustainable and energy-efficient alternatives is crucial to mitigate the environmental impact.
Regulatory landscape and progress
Silischanu notes the painfully slow progress of regulatory frameworks in the blockchain industry, but expresses optimism about the ongoing efforts to establish clarity.
In the UK, a Treasury committee recently called for crypto investments to be classed as gambling—at odds with the UK Government’s position to make the country a Web3 and crypto hub.
The Treasury committee statement said: “Unbacked cryptoassets have no intrinsic value, and their price volatility exposes consumers to the potential for substantial gains or losses, while serving no useful social purpose. These characteristics more closely resemble gambling than a financial service, an impression reinforced by the evidence we have received of consumer behaviour.”
The committee’s comments resulted in significant backlash.
Ian Taylor, Board Advisor at CryptoUK, said:
“The committee’s statement does not reflect the evidence we gave the Treasury Select Committee. We set out strong use cases and measures implemented by the industry to track, monitor and report, with robust analytics to mitigate fraud and work closely with regulators and law enforcement agencies to address this.
Crypto has been crucial in serving the unbanked as a force for good, making secure and efficient peer to peer payments available to the most vulnerable in our society.
Also, the report bears no mention of Tokenization of financial products which we specifically highlighted in the evidence session as a key benefit of the technology. The ability to represent financial products such as bonds and equities on a blockchain defers a host of benefits. These include faster settlement times, reducing intermediaries thus saving costs, new access to markets, increased liquidity, and automation through smart contract technology.
We acknowledge that consumer risk exists, and this should be mitigated 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 it on “good authority” that clarity on crypto regulations will be achieved within the next 12-18 months.
Although still early, there are already numerous examples of how blockchain — especially non-fungible tokens (NFTs) — are being used for numerous real-world purposes:
Going forward, the use cases will only increase as more businesses realise that NFTs aren’t just Bored Apes and other artwork (not that there’s anything wrong with that, if that’s what people deem valuable.)
Silischanu jokes he can buy a poster of the Mona Lisa, put it up on his wall, put a velvet rope in front of it, and claim it’s the original. With NFTs, he can indisputably prove he owns the original of any art.
This becomes more powerful with greater adoption into areas like automotive 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 could prove ownership of the Porsche with an NFT and transfer it to the new owner when the money hits his account—all within a trusted smart contract without any intermediary. The previous owner wouldn’t even have to manually notify authorities about the change in ownership as they’d be working from the same ledger.
Crypto was originally designed to disrupt finance and solve legacy issues with the system. Silischanu highlights the game-changing potential for 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’m sending over 20 container loads of chairs that I manufacture, before they get to my buyer on the West Coast of the US, for example, I want to make sure I’m gonna get paid when they get those chairs … so you have an intermediary, or a bank in the middle that provides letters of credit,” explains Silischanu.
“That entire transaction can essentially be wrapped up in smart contracts.”
As fundamentally very secure ledgers, blockchains can also provide immutable proof of funds to settle debates (or prevent them from even arising!)
“I have a spreadsheet on my laptop that says I have $5,000 in my account. I’m old school 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 $1,000. When I go to an ATM, I have $500. The IRS says I have $2 million and I’m going to need to pay taxes,” says Silischanu.
“With DLT and blockchain, there’s only one truth. We all share that truth because we’re all on the same database.”
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 providers who specialise in related solutions as it’s up to them to keep on top of advancements, make investments where required, and have the right team in place.
Considering the rapid advancements within the industry, Silischanu says he wouldn’t be surprised to see a brand new protocol emerge within the next 3-5 years. Building the solution in-house means the “onus” would be on the business to do the upgrade work themselves at great time and cost.
In three to five years there could be a whole new protocol, a whole new layer one that no-one here has even dreamt of yet. And if you built your solution in-house instead of buying it outside, now it’s your problem to get your team to upgrade,” explains Silischanu.
“If you partner with a third-party that provides blockchain-as-a-service or DLT-as-a-service. The problem is theirs. They have expertise, they have the team, they have the developers, they’re staying on top of that. All you have to do is basically just run an update and you’re up-to-date.”
Blockchain, DLTs, and crypto have transformative potential as the fundamental pillars of Web3. They present significant opportunities across industries but there are still challenges and security concerns that need to be addressed.
For his part, Silischanu predicts that a “full Web3 takeover” is 3-5 years away.
“For those of us that 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 you.”
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