Web 3.0 represents a new era in the Internet. It’s been around since the advent of artificial intelligence, blockchain, and machine learning. New financial instruments are being developed on the basis of these technologies. Crypto-beards are speculating on the formation of a new financial industry, and states are seeking ways to regulate it.
Anna Kuzmina is an advisor to Bank 131’s Chairman about digital currencies and the problems they solve. She also discusses why businessmen and countries are skeptical about decentralization and whether Web 3.0 technologies can rebuild the global financial system.
Three generations of the Internet. What is the difference?
The Internet was created in 2001 as a network that allowed two computers to be connected, and one person can communicate with another person (peer-2–peer) before the dot-com bubble burst. We call this era Web1.0 today.
Web 2.0 was created in the mid 2000s, with the advent blogs and social media. This network brought together many users, not just two. A company such as Facebook is the heart of any interaction within a Web 2.0 system. It allows users to communicate with one another through a single server. This is how we communicate today.
We are witnessing the creation of the Internet of the future. It is decentralized, and it is based on blockchain. The network will be created on a server that is not owned by any company. Anybody can install the software, and act as both a client and server. This is Web 3.0.
How the Web 3.0 technologies can influence the way the financial system looks
The development of Web 3.0 from the perspective of finance is an attempt to eliminate the intermediary and make operations more decentralized.
Financial services used to be based on a central server. This was a central bank with a correspondent network that allowed users to debit and accrue funds from each other.
Web 3.0 proposed blockchain to be a technological foundation for new finance in an attempt to create a system without a single centre. The idea of creating digital currency was born. These currencies are decentralized payment systems that can be fully automated and have an accounting for all operations.
The innovation of Bitcoin was the fact that it eliminated a third party from financial transactions. Anyone with enough computing power could create cryptocurrency and offer debit and credit.
Cryptocurrency owners have built a community that allows them to manage their own debits and credit. The blockchain was able to facilitate the digitalization of money. Everything is actually quite straightforward, and this is the normal digitalization.
Digital money is similar to the digitalization of music and movies via streaming and online cinemas.
Is there a digital currency that is more reliable than Bitcoin or other coins?
Yes. There is already a branch to the usual cryptocurrency and CBDC, the digital currency of the central banks. This branching was made possible by the desire of governments to regulate digital finance.
Because of transparency and the ability to track each transaction history, control supporters approve the creation cBDCs. The second option is to maintain the current market state with thousands and hundreds of projects, which can be managed by a decentralized user group.
All cryptocurrencies will be banned and controlled by the central banks that issue CBDCs. The decentralized system, however, is more friendly to CBDC. It allows for mutual recognition. Digital coins and crypto can be equated with shares and considered digital value or a payment assets.
How to deal with new technologies in different parts of the world
Although they support the spread of cryptocurrency, decentralized development advocates do not deny that it is necessary to regulate the market. Smaller countries, cities and regions with high levels of innovation have the legal capacity to establish a set or rules.
In the US, for example, Miami issues currency and the mayor accepts a salary paid in bitcoins.
Many people in Latin America, El Salvador is the leader, have become bitcoin supporters because they’ve witnessed currency crises, inflation, and other problems. Many people support decentralization in financial centers like Singapore, Dubai, Switzerland, and Dubai.
These actors do not compete through subsidies but rather through sound policies. A two-way market is emerging between crypto proponents, governments, and those who can provide the necessary regulation to attract people.
Advocates for regulation
We also see the PRC as an example, following the closed sovereign Internet model with its own rules. The Chinese authorities have the technology control to manage all aspects social life in China quickly and accurately. This social rating is well-known and provides super-effective solutions to the introduction of quarantines in order to combat COVID-19 outbreaks.
China may be a conservative country, but it has a far superior approach to technology development and application than many other countries. In the production of products and services, machine learning, artificial intelligence, or blockchain has been used for a long time.
Chinese authorities have been testing their CBDC for over a year. launched a digital Yuan for the Beijing Olympics which began in February 2022.
The Russian Central Bank followed the Chinese example and is now to regulate cryptocurrencies in Russia. Despite the fact that Russian officials disagree with the ban on crypto (the Ministry of Finance, the State Duma and others do not support it), the Bank of Russia will create a digital currency. This will be the first official electronic payment method. The authorities are now discussing the future regulation.
Web 3.0, despite the differences in approaches, is widely recognized around the globe as a necessary and logical stage in the evolution of the Internet. This technology is basically the same as smartphones a decade ago. No country can deny it.
Maybe Web 3.0 is a marketing tool?
These accusations against a16z, a venture capital firm founded by Mark Andressen & Ben Horowitz, were made by Jack Dorsey, former CEO of Twitter.
The founder of the social networking site stated his views on Web 3.0. He said that Web3 is not yours, it belongs to venture capitalists or their partners. They will not be able to escape him. Web 3.0 is still the same central organization, just with a new name.
Elon Musk joined in the discussion and responded ironically to Dorsey’s tweet: “Has anybody seen Web 3.0?” It’s not there.”
The discussion was ended by Mark Andressen banning Jack Dorsey. But the most important result is that there is no clear understanding of how and when Web 3.0 will be implemented in the world of visionaries and blockchain enthusiasts. Although Bitcoin has been around for 13 years, the internet is still much closer to Web 2.0.
Web 3.0 will allow for a smooth transition to a new system of financial management.
The transition to a new system of financial services will not occur until regulators agree on a common language. Web 3.0 refers to a collection of technologies already in use. It is unclear when the states will agree to the details of restructuring the socioeconomic system.
It seems impossible to imagine decentralization, democracy, or anarchy in a complex field like finance. We can build a decentralized infrastructure faster and more secure than ever before and we are ready to switch fully to finance using a backend on blockchain.
The states won’t give the chance to decide the future of global finance to any “community”. Web 3.0 can be a technical but not conceptual change to the global financial system.