How does web3 create business value?
October 20, 2022
What is Web3?
Web3 is the latest technology that leverages machine learning, artificial intelligence and blockchain to achieve real-world human communication. Web3 not only allows individuals to own their data, but they are likely to be compensated for the time spent on the web and sharing of that data.
Web3 is supported by the four pillars of innovation: edge computing, decentralised networks, artificial intelligence and machine learning (AI/ML), and blockchain.
The Innovation Pillars
The edge computing is all about data storage at the source of generation to allow for near-real time analysis and response. The increased use of internet devices from Internet of Things to mobile devices and industrial equipment created the need to decentralise data computing.
Decentralised networks allow to trade generated data without losing ownership, risking privacy or relying on intermediaries. This drives expansion of data providers in our growing data economy.
AI/ML application is limitless and focussed around problem-solving and decision-making capabilities based on real data. The benefits of AI/ML among others include automation, better decision-making and customer experience.
Blockchain uses a shared and immutable ledger that can only be accessed by members with permission. It’s a trustless network because there is no need for trust between business partners.
There are five major business benefits that come with Web3: Security, Transparency, Traceability, Speed and Automation.
Security is based on the fact that blockchain records cannot be altered and are end-to-end encrypted. Personal data is anonymised and inaccessible to anyone without permission. Information is stored in a distributed manner that makes it harder to hack.
Transparency is provided by data distribution and accessible by permission, this allows all network users to see the same information at any point in time. All transactions are stamped by date/time which maintains the entire history and prevents fraud.
Traceability is based on the audit trail of each step in the digital journey. This is extremely important for certain industries where product journey must be tracked and recorded.
Speed is intrinsic to blockchain technology as all transactions are completed fast and efficiently. All information in relation to transactions is stored on the blockchain and is not prone to human error.
Automation comes in with smart contracts where meeting predetermined conditions trigger specific processes and/or transactions.
Streamlined processes, end-to-end visibility, increased trust are just some of the benefits in the supply chain. Tracing goods from source of origin to destination is often critical from a quality and ethics perspective. This helps to ensure that natural and human resources are treated with respect, fair trade arrangements, elimination of delays and disruptions. Walmart dropped invoice disputes 70 times after blockchain adoption in 2021. De Beers is using blockchain with AI and IoT to trace diamonds.
Digital assets, standardised rules, efficiencies, increased encryption and transparency promote development of faster and more liquid markets, reduce investment friction, develop trust between partners, reduce potential fraud related to human errors and paperwork, enhance security and access to data. P&G and Walgreens adopted blockchain to eliminate coupon fraud that caused over $30 mln in losses over 3 years. The new system connects manufacturers and retailers and allows them to verify coupons at point of sale eliminating fraud. Trade finance is benefitting already via a solution that allows automation of trade with smart contracts. The process that used to take 5-10 days now takes hours.
Some of the major developments in this space are around trusted media and being able to authenticate news sources, digital ticketing is the next step to eliminate related fraud, music purchase that is recorded on the blockchain, tracking of the digital rights, transparency in advertising. Sony is leading the way in redefining how digital creators rights are protected using blockchain technology. Each stakeholder of the complex copyright management system has access to a shared ledger which reduces the number of transactions required to verify the copyright. There is no need in direct communication because blockchain provides safe and secure data recording.
The World is looking forward to blockchain being a solution for global identification and credentials management. It allows for immediate audit trail and traceability. Whether it’s about personal identity, learning records or vaccination certificates, blockchain solutions allow for borderless and immediate management of identity for the parties involved while maintaining anonymity and security. Civic, the digital identity management company, created a solution where once your identity was verified either by government or 3rd party service, it is converted into cryptographic hash, stored on the blockchain and ensures that the actual personal data gets deleted. When you need to authenticate yourself the process is done via saved hash, there is no need in accessing your personal data again. The Maltese government recently completed a pilot of a blockchain managing academic credentials to improve safety, access and minimise bureaucracy.
One of the critical industries, healthcare, can benefit from blockchain technology and all of us with it. Starting with personal data security, information sharing between medical centres that can save lives, tracing medicines, connecting suppliers with buyers, fighting illegal and counterfeit drugs.
Some of the most needed interventions in government space where blockchain can provide a solution include secure data management, cybersecurity, compliance audits, reduction of frictions in citizen services. Many government organisations around the Globe are actively developing blockchain based solutions. Sweden created a blockchain based application to manage land registration and estate transactions. The Canadian government created a digital credential management system for employees. The U.S. Health and Human Services department implemented blockchain, AI/ML to manage contract billing.
The only place where anything can be digitised is blockchain. Converting any asset into digital, creation of liquid markets, ability to trade and do it at low costs. Reduced complexity and risk, new business models, tokenization, security and stability are some of the benefits in this space. While we see a lot of decentralised finance market entrants like Ripple, Coinbase, Circle, Uniswap etc., well established businesses are reacting by adopting blockchain services to stay competitive. DBS Bank offers fundraising with asset tokenization for security tokens, Visa is partnering with BlockFi to offer Bitcoin credit cards, Goldman Sachs created a trading desk to deal with Bitcoin derivatives, Fidelity Digital Assets is offering an enterprise-grade platform for custody of digital assets.
Numerous technological advances are happening in the mobility space from integration of augmented reality and metaverse to tokenization of the vehicle data. And it’s all just the beginning. Such functions like auto payments, charging, IoT connected vehicles and secure drop points for packages are just some examples. Honda India adopted an IoT system to boost safety, convenience and fun for customers, it helps creating an engaged customer experience. This was achieved via a 360-degree digital platform that is constantly connected to a customer.
Smart contracts make insurance easy, streamlined and transparent. Risk assessments, minimization of claim fraud, online targeted sales and claims, enhanced user experience, reduced friction in data sharing and better privacy. AIG partnered with IBM to create a blockchain based solution offering unprecedented levels of trust and transparency. Allowing shared view of policy data and documents in real time.
Blockchain is a great enhancer to customer loyalty programmes that are not easy to manage from a retailer's balance sheet perspective. Customers can use a single wallet for all loyalty programmes, brands can bundle offerings and target better, bigger customers reach out, more loyalty liquidity helps with balance sheets, points become traceable and impossible to fake. Starbucks has announced its new loyalty program based on Web3 technology. It will allow customers to earn and purchase digital assets that unlock exclusive experiences and rewards. Nike, one of the leaders in digital transformation, is using Web3, NFTs and Metaverse to promote fans' experiences. The first collection of 600 NFT sneakers was sold out in just six minutes. All NFTs are customisable and can be used in the Metaverse. Nike is adopting technology to create a unique customer experience that is often more valuable than the price of the products.
Web3 is critical for the future and in particular for the next decade as we will be seeing more and more adoption from all types of businesses.
It will help to evolve the internet to a state of providing more personalised experiences, reduced dependency on middle-men, superior connectivity between peers and businesses, facilitate data sharing while maintaining privacy and security.
The users will own their data through digitization of the assets, while keeping it decentralised. This in turn facilitates entrepreneurial and investment opportunities.