The world is moving fast to Web 3.0 — a fundamental transition from the current centralized Web 2.0 to one that is decentralized and backed by blockchain technology, a distributed digital ledger or database where encrypted blocks of data are stored and chained together. 2021 was a defining year for Web 3.0 that witnessed rapid adoption of cryptocurrencies, DeFI, NFTs, and the metaverse. India has been an early proponent of Web 3.0 in terms of adoption with the potential of becoming a leader in the emerging economy as well.
To start with the fundamentals of Web 3.0, the same cannot be understood without being familiar with how the Internet progressed from the early days of Web 1.0, and the more important question, why is the world in a rush to shift to Web 3.0?
The first version of the Internet, also known as Web 1.0, started in the 1990s and was a more akin to a static website explicitly designed for corporations, without much scope for user engagement.
The next phase was Web 2.0, which still caters to the current internet generation started from 2005 onwards and brought a wide range of iterations allowing users to create content and distribute it on global networks. Social media, blogs, apps, podcasts, and e-commerce were highlights of this version. While content was user-generated, the control of the content was vested with a few large corporations. This centralized control led to a few corporations capturing billions of dollars in value.
While Web 2.0 is powered by centralized data storage and ownership, Web 3.0 reimagines the fundamental concept of data sovereignty, storing information using distributed ledger technology (DLT) across decentralized networks. The value proposition of Web 3.0 is its democratised approach, community-focus, and user empowerment, which distinguishes it from Web 2.0. The hallmarks of this emerging phase are Metaverse, non-fungible tokens (NFTs), Decentralized Finance (DeFi), and cryptocurrencies that redefine the ways businesses and finances can be managed.
The metaverse is a new world that integrates both the physical and digital/virtual worlds in the user's experience. In many ways, we are already living in the metaverse, increasingly leveraging our digital identities to interact with the world around us. A substantial change that will emerge is that in 5-10 years, the metaverse will have a native economy built on digitally native assets and possibly see a significant, if not total, migration of today's Internet into a more immersive world for business, education, and entertainment.
Similarly, NFTs can change the way business is done. 'Non-fungible', as the name suggests, it's unique and can't be replaced. They hit the headlines in 2021 and early 2022 for the astronomical price they were sold for - from gifs to memes, tweets to precious arts. But NFTs are more than collectables or digital identity. Their potential business applications can be problem-solving tools — document storage and validation, IP distribution, access tokens, issuing collectables, and more. They also have the potential to serve as an easily tradable asset class for those who understand the market and have the ability to take the risk.
Another emerging key aspect of Web 3.0 is DeFI, which utilizes decentralized applications (DAapps), a blockchain-based infrastructure, and an open and permissionless protocol built on public smart contract platforms to provide financial services. DeFi can provide services similar to those offered by existing financial services institutions, whether it is asset management, lending, payment, insurance, custody, etc. However, DeFI has far more advantages and allows transactions to be executed securely and transparently. Defi unlocks value from centralized intermediaries and allows many more users to take part in this financial ecosystem. Along with being inclusive, DeFi can provide transparency and real-time transactions.
Though the opportunities are vast, the current DeFi services are still immature and do not provide critical retail financial tools, a problem that needs attention to make it suitable for mass adoption. Some studies suggest DeFi has grown from $112 billion in 2020 to $229 billion recently in the total value of cryptocurrency locked in a smart contract. The industry might see 10X growth by 2030.
According to industry estimates, India's digital economy is expected to be a $800 billion market in 2030. With all the above opportunities Web 3.0 promises to bring, it will further accelerate the growth of the digital economy. The promise of a decentralized and trust-based future, where communities take the center stage, will enable technology to touch the lives of people in every corner of India. For India to stay on top of global mega trends and at the forefront of cutting-edge technology, entrepreneurs and private enterprises will have to chime in to contribute to the help shape the workforce for the evolving phase of internet. A culture of growth and innovation is critical for India to truly unlock its Web 3.0 ambitions.
The author is Senior Vice President, CoinDCX Pro.
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