In recent years, Web3 has been put forward as the most significant democratic revolution in the digital space. With big tech monopolies governing the exchange and monetisation of information today, the promise of Web3 is the empowerment of users when it comes to the ownership and sharing of data. The decentralisation of ownership is expanding to industries beyond the web, too, particularly when it comes to use cases for blockchain technology, such as decentralised finance (DeFi), so Web3 is very much part of a general trend toward the democratisation of platforms and services.  

What Is Web3? 

Web 1.0 was decentralised by default and was defined by static pages of information that were accessible to anyone with a PC and an internet connection. The browsing experience was not tailored to individuals, so the experience was the same for everyone. With Web 2.0, the experience evolved with the advent of server-side scripting (e.g., PHP) and self-generated pages, with individual users not only accessing information but also having content generated just for them. This is where advertising, social media, and the exchange of information took off in a big way. Suddenly, the model became centralised, with large technology firms monopolising platforms, such as Meta (then Facebook), Google, and Amazon.

At its core, Web 3.0, or Web3, holds the promise of bringing us back to a decentralised model. There are three main drivers of this model, which are:

1. Monetisation

When we visit a social media platform, the experience of exchanging information and the consumption of content, targeted or otherwise, appears to be free. But this is, of course, not true. Every time we engage with these platforms, we are the product. It is our information that is being collected and monetised by tech giants. With Web3, the aim is to redistribute the monetisation of information to end users.

2. Governance

Web3 also allows communities to determine how platforms evolve and grow, giving them a stake in the development of the website, its communication, content, and community standards. Discord is a good example of this. It first developed as a platform for gamers to communicate but quickly developed into a collection of communities, many of which now have dedicated servers.

3. Ownership

The third key driver behind Web3 is ownership and, more critically, intellectual property. This bears some relationship to monetisation, except we necessarily always wish to make money from things we own. For example, pictures uploaded to Facebook are not owned by the users, and it is entirely Meta’s right to sell or use photographs uploaded by users for marketing and advertising purposes. Users will rarely wish to monetise their own photos, but that doesn’t mean the platforms that host these photos should be able to do what they want with this content. Web3 would rectify the current model, allowing users to own the content they post.

These three principles have existed for decades, but we struggled to find a good way to apply them effectively at scale, until the advent of decentralised finance, for example, blockchain and cryptocurrencies.

The financial services use case

Blockchain and cryptocurrencies are decentralised by default. In simple terms, blockchain technology enables a decentralised ownership model, while cryptocurrency provides a decentralised model for monetisation and other financial use cases. Both built-in governance, as different models, can be applied to different industries and use cases that serve specific communities, which brings us to the concept of Decentralised Autonomous Organizations (DAOs).

DAOs are distributed communities that own governance tokens that verify their stake in the product on the blockchain or algorithms. They are both a part of the governance protocol and also stakeholders, so can influence the direction of the product. This open governance model truly democratises ownership, which is the core promise of Web3.  

Many make the mistake of thinking Web3 is defined by the incorporation of blockchain and AI, but any organisation operating a model that follows the three guiding principles above can be described as a Web3 company. In many respects, community banks and credit unions are mostly Web3 organisations already, as they operate along a decentralised model. Members own their bank and have a say in its future, which is quite different from having a more traditional account at a major bank.

Of course, Web3 is yet to take off in a big way, and we are a long way from bringing about the most promising use cases that will truly bring power back to users. But decentralised finance offers a promising glimpse at a brighter future of financial empowerment for all. That isn’t to say that DeFi is the only future of finance. Much like Web3 will coexist with Web 2.0, DeFi will be a complementary force to more traditional financial services.