The following is a guest post from Lloyd Moore, VP of Engineering at Blockdaemon.
Web3 represents the internet’s third phase, with the potential to be most impactful by many factors (think web cubed).
Most importantly, it is built on the foundation of returning the internet to its decentralized roots. Before we elaborate on Web3, let’s recap what preceded our latest phase in the internet’s development.
Web1 (1990-2005) pioneered open, decentralized, and community-governed protocols. In these early days, value accrued to the builders and users of these nascent networks. Peer-to-peer sharing services, internet domain names, and read-only websites shaped the Web1 landscape. It has been said that the architecture of this earlier era favored decentralization.
Web2 (2005-2020) saw the rise of extensive, highly siloed web services. Today, the largest services are owned by a few centralized entities (or monopolies), serving billions of users globally and creating the ‘counter decentralization’ phase of the internet’s evolution.
Such digital ‘walled gardens’ are the gatekeepers to much of the internet as we know it today.
Gatekeepers not only choose who participates but also keep complete control over their users’ data for free. They are pillars of the modern web destined to buckle and are now being overturned via the power of Web3 and the will for a more democratic, decentralized ecosystem.
In 2009, an email from Satoshi Nakamoto described bitcoin as” completely decentralized with no server or central authority.” More than 10 years later, this description and vision remain at the heart of Web3.
Bitcoin introduced the world to objective, programmable scarcity. Within Web2, this digital scarcity is managed by ‘trusted’ institutions. These guardians guarantee that bits on a screen correspond to users’ bank balances, credit history, identity, and much more. In Web3, scarcity is enforced by code and distributed consensus.
Decentralized, pseudonymous individuals can agree on ‘who owns what’ without ever needing to trust one another. Rather than relying on trusted third parties, individuals rely on code to keep their assets, data, and privacy intact.
Blockchain technology is the radical force that enables Web3 and permissionless digital scarcity at scale. History has proven that technology is powerfully disruptive and deflationary, and blockchain enables exciting new use cases and applications for Web3. Institutions are opting for Web3 because blockchain offers a compelling alternative to legacy financial systems.
Optimizing payment infrastructure
Many believe the ‘killer app’ for blockchain is payments that result in a better, faster, and cheaper experience for users globally. Institutions are choosing to offer safe, user-friendly ways to use and pay with crypto.
In 2021, Twitter introduced bitcoin tipping. This was made possible with the Bitcoin Lightning Network, allowing frictionless, low-cost, and cross-border payments. In the Web3 economy, institutions adopt crypto as an additional, seamless payment platform. From travel sites to e-commerce giants such as Shopify, crypto is increasingly seen as the payment rail of the future.
Equally important for adoption, however, is the ability for businesses to provide secure, frictionless on-ramps for customers to enter the crypto ecosystem. Without accessible ramps into the world of Web3, individuals remain disconnected from these decentralized networks.
Institutions can reach more customers and markets with Web3 payments. In 2021, the World Bank estimated that 1.4 billion adults were unbanked. This excludes many of the world’s population from the global digital economy. According to Deloitte, onboarding a new commercial banking client may cost $20,000 – $30,000. The commercial cost of serving unbanked customers often outweighs the benefit.
Web3 radically improves access to financial services by dramatically cutting the cost of financial inclusion. Today, anyone can download a crypto app or buy a hardware device to store and trade their digital assets, empowering individuals to pay (and potentially earn yield) with ease. Web3 is genuinely decentralized. Users, not single entities, can now control digital infrastructure and the emerging ecosystem.
Per this digital infrastructure evolution, individuals are rewarded for their participation: one such example is the internet bond. Real economic value can be used to vote, represent real-world items, and trade without a central authority.
Mind the gap: onboarding institutions
Web3 communities represent modern-day digital democracies, with institutions increasingly focused on adopting Web3 for its unique advantages that birth frictionless payments and financial inclusion.
Blockdaemon subsidiary Gem On-ramp is one such way we are bridging the gap between users and Web3. It is an embeddable checkout flow for users buying/selling crypto, supporting 125 countries, 39+ cryptocurrencies, and multiple payment methods such as SEPA transfers, wire transfers, debit, and credit cards. Users can quickly deposit their crypto to power their in-app transactions.
Beyond the payments case study, blockchain is set to reshape many industries as we know them and for the better, from media, finance, the supply chain, insurance, and beyond.
We remain at the forefront of onboarding institutional investors via our node stack of blockchain technology, built from the ground up and offering 99.9% uptime and blockchain connectivity with one integration.