Imagine a world without the Internet! The world of the Internet was once an unreal imagination. The world of the Internet is a transitional movement, from web1 to 2 and 3.
The Internet has evolved over the years from web 1.0, which focuses on offering a static page where information can only be consumed. Gradually, it moved to web2.0, which focuses on enhancing excellent user experience by providing a platform where users can get information, provide news and improve social networking. The ideas of web 2.0 were successful, but due to lack of users, privacy, and exploitative business models, it failed.
Web 3.0 capitalizes on the infrastructure the other web generations laid down and focuses on giving users power, ownership, and privacy on the Internet. Web 3.0 offers innovative solutions using decentralized finance (Defi), artificial intelligence, blockchain, and cryptocurrencies to enable better decision-making and avoid the exploitative business model of the Internet. After briefly examining the web transition, let’s discuss how web 3.0 revamps the financial ecosystem.
How Web3 plans to change the financial sector
Web 2.0 would have been the best model, but it poses challenges with controls and ownership of user data. Web 3.0 model plans to provide solutions to these challenges and provide a decentralized platform possible. Its model will be characterized by decentralized data, a secure and transparent environment with a brilliant machine, and a three-dimensional design.
Web3 birthed innovations in decentralized finance (DeFi), such as digital assets, cryptocurrencies, smart contracts, distributed ledgers, etc. All the Web3 technologies and innovations grew the total capitalization of blockchain finance to $3.2 trillion as of early 2022. Still, the recent market crash devastated back on evaluation of $900 billion (according to blockchain.com), which makes it grow by over 1000% annually.
Data Security, Ownership, and Privacy
Traditional banking felt insecure due to its centralized structure; with Web3’s massive adoption in the financial market, many companies and businesses are moving to adopt the early decentralized structure. In 2021 only, more than 1 million Web3 companies increased their capitalization rate to over 300% with over $700b. Web3 is transforming the financial market with the help of technologies through the semantic Web.
As a decentralized financial system, Web3 gives everyone full control of their data and information in a personalized way; unlike traditional centralized finance, customers are concerned about their data privacy with several institutions.
In 2020, when the world financial market has a huge disruption due to the world pandemic (COVID-19), 57% of customers reported against Banks and not trusting them for their long-term financial well-being. And as of early January 2022, 59% of tech industries trusted a fintech rather than a traditional bank as their trusted financial marque.
Access to new and alternative financial products is another driving factor.
DeFi is currently one of the most popular ways to store, use and guard cryptocurrency, and it provides an important service to people interested in cryptocurrency. Banks have long thought otherwise about cryptocurrency and have only recently begun offering custody to high-net-worth clients.
FinTechs have gradually grown, going smoothly with the rapid market changes, regulations, and foreseen transformation. Banks and other traditional institutions are trying hard to catch up and seeking collaboration with innovative FinTechs. Financial bodies are investing in themselves to grow their technological capabilities. Most financial experts are overwhelmed by the potential of artificial intelligence to grow the financial sector. From the recent NVIDIA survey, 83% of finance experts believe AI is crucial to their company’s future success.
Decentralized Finance (DeFi)
Decentralized Finance (DeFi) has led in cryptography transaction management, with total value locked, now reaching $210 billion. Because the well-known traditional centralized systems are prone to fraudulent activities, DeFi is a promising alternative; the transparency and security in a transaction with no intermediaries make it the best.
NonFungible Tokens (NFTs)
Also, in 2021, NFTs have made a landmark in various fields, including art, gaming, real estate, etc. The market capitalization of NFTs is expected to be $20 billion in February 2022. But due to the recent market crash, NFTs are in a downtrend phase.
And with no expectations, NFTs are now massively entering the DeFi world, bringing insights on improving traditional processes and introducing the new secured idea. Many DeFi projects now use NFTs to store value and provide unchangeable proof of ownership.
Another key sector is artificial intelligence enhanced by Web3. Most industries depend solely on artificial intelligence technology to execute their business and define their financial services. Every business is well-known for seeking every possible advantage and way to maximize profits, using machine learning (ML) and artificial intelligence (AI).
From fraud detection to risk assessment, improving customer satisfaction, increasing accounting and transactional automation, and algorithmic trading, AI is used in various financial sector applications. AI is steadily changing the world through massive applications. Many everyday activities are edge towards the responsibility of AI technology.
Virtual and Augmented Reality Banking (VR and AR)
The competition, technological advancements, and constant customer demands are all forcing the traditional banking and local fintech industries to adapt to one of the technologies brought by Web3.
From the Technavio report, the AR and VR market share is expected to grow by $162.71 billion by 2025. These tools made popular by-products such as Oculus, Google Glass, and HoloLens, have been on the rise across industries and are now successfully adopted by the financial sector.
AR and VR are now being used in various inventive and engaging ways, ranging from data visualization to security enhancement. As a result, a new world is emerging in which data insights can be gained, customers can visualize banking products, and financial institutions can improve their services.
With VR and AR banking, businesses can now engage their customers and employees on the specifics of their investments and business projections with augmented reality due to virtual data visualization. This Web3 technology is extremely useful in marketing campaigns that will reach many clients and meet their satisfaction.
Everybody desires and always wants a secure and personalized life. According to psychology, nobody will ever choose anything over his/herself, even if we’re to be rewarded big. We might say things sometimes contradicting due to the overwhelming purpose of positioning but not like exactly what’s in our mind or what our mind foresees. Web3 has brought along everything that enhances our personalized life, with full assured security and less risk with ultimate ownership, which has been growing the financial market.