Know the pros and cons of new technologies

Web 3 has brought with it many innovations and solutions to real-world problems, but its true potential will not be realized until new technologies are fully integrated into the web infrastructure.

“We are now entering the third era of the internet, also referred to in tech terms as Web 3. This is primarily possible because of its decentralized nature, community-driven aspect, and because the data is owned by people rather than a few companies. It will be a combination of four technologies: IoT (internet of things), artificial intelligence/machine learning, data science and blockchain, and 5G communication capabilities,” said Dileep Sainberg, founder and CEO of MuffinPay, a crypto fintech platform.

India has been one of the early promoters of Web3 technology. According to a July 2022 survey by global research platform Finder, India also ranked first in global cryptocurrency adoption. Moreover, according to the “Indian Crypto Industry 2021” report by NASSCOM and WazirX, India is already home to over 230 Web3 startups.

“India has been a pioneer in IT and software and investors from around the world are currently pumping huge amounts of money into made in India cryptocurrency and blockchain ventures. While some caution is needed on the policy front, I believe India will play a key role in shaping the future of the internet. India's Web3 can thrive with the right talent (founders), investment and policies in place,” Sainberg said.

However, new technologies have pros and cons.

Faster and fairer: As more people invest in cryptocurrencies, they will want to use them for any transaction currently allowed with fiat currency, including borrowing and lending, investing in assets, and making payments.

In June 2022, blockchain data company Chainalysis released the “Chainalysis State of Web 3” report, which noted that Web 3 will make transactions faster and more convenient. For example, in today's world, borrowers must go through a time-consuming mortgage application process that relies heavily on human judgment. In the Web 3 world, this process will be faster and fairer. Borrowers simply need to link their wallet and algorithms can instantly determine a “yes” or “no” based solely on their financial profile and transaction history represented on the blockchain.

Direct seller-customer relationship: Web 3 technologies cut out the middleman and allow sellers and customers to interact directly. For example, consumers can easily connect with artists and creators through social media platforms.

NFTs already make a lot of this possible, primarily in static digital art, but the arrangement could easily be replicated in music, film, and other mediums.

Decentralization: Web 3 has the potential to decentralize the business world by allowing community ownership of companies, as opposed to the current standard of hierarchical corporate control. This is currently realized with decentralized autonomous organizations, also known as DAOs, where all purchasers have a stake in decision-making.

Kavya Prasad, founder of innovation management firm Lumos Labs, said, “Decentralized structure is fundamental to Web 3 technologies. It allows users, innovators, and others exploring this space to avoid middlemen, bureaucracy, tedious documentation, and other administrative processes. It also allows for direct channels of communication, learning, revenue, and even governance. We are moving steadily towards a DAO infrastructure where users in the community will have voting, decision-making, and other governing power over Web 3 companies.”

Increase in cybercrime: Some experts say that Web 3 will be difficult to regulate. They also argue that decentralization could give rise to new types of cybercrime. Decentralization could lead to an increase in cybercrime, online fraud, and more.

Cryptocurrency-based crime remains a significant issue to address, especially given that increased overall trading volume means increased value for illicit transactions. DeFi in particular appears to be experiencing similar growing pains.

Regulatory ambiguity: The Web3 and cryptocurrency industry is still exploring areas where regulations are not yet solidified. Prasad said that the Indian government has recognised the industry as a mainstream sector with the introduction of tax reforms, which is a positive development for the sector, but a clear regulatory framework is still awaited. Globally, many countries are still interested in the sector and do not have clearly defined protocols.

Requirements for a more powerful platform: Web 3 will not be accessible on less advanced gadgets. “Web 3 will require faster processing units. Web 3 will not be compatible with older devices; it will require upgraded devices with above-average specs. Existing businesses based on apps and websites will have to adapt to Web 3 and will require appropriate investments in a competitive market. For new entrants, understanding and using Web 3 can be difficult,” says Seinberg.