There are many different paths that the future development of Web 3.0 could take. Here are a few of the Web3 technologies we’re starting to see deployed today:
DeFi: Decentralized Finance
One of the most intriguing sectors is DeFi, which is short for decentralised finance.
DeFi aims to revolutionize the financial sector, removing the need for central authorities such as banks, payment processors and other intermediaries. In their place would be a peer-to-peer financial system that lives on the blockchain.
Advocates argue that this approach would reduce fees, boost transaction speeds and allocate capital more efficiently.
As with most Web3 applications, there would also be enhanced transparency, given all loan amounts, collateral and other data are available for anyone to see on publicly accessible blockchains.
Importantly for certain jurisdictions, accessibility is also enhanced. DeFi would be accessible to anyone with an internet connection, without the need for paperwork or a third-party verification.
Most of what banks and other financial intermediaries offer can be achieved through DeFi, argue its proponents. This includes bank deposits, lending and borrowing, asset trading and insurance, among others.
A few examples of popular DeFi protocols include Uniswap (UNI), Aave (AAVE) and Chainlink (LINK), which are designed to carry out financial transactions.
NFTs: Non-Fungible Tokens
Non-fungible tokens (NFTs) are a class of digital assets that live on the blockchain.
Each NFT is unique (non-fungible), and no two NFTs are identical. This is in contrast to, say, dollars, which are fungible—one dollar is exactly the same as any other dollar.
Advocates see a wide variety of potential use cases for NFTs, but to date the only widespread use has been for digital artworks. As the crypto market accelerated moonwards in 2021, multimillion-dollar sales of digital art NFTs were commonplace.
But as crypto winter set in in 2020, the NFT market crashed. Professional investors and art world critics derided NFTs as little more than a speculative bubble.
Crypto world has not given up on NFTs, and Web3 proponents see them as useful for verifying intellectual property, authenticating documents and various crypto gaming features.
“NFTs could change multiple different aspects of our daily lives, such as tamper-proof identification, concert ticket sales, and much more,” says Giorgi Khazaradze, CEO of crypto trading platform Aurox.
“For now, though, NFTs remain extremely speculative.”
Many types of traded cryptocurrencies support NFTs on their blockchains. A few examples include Ethereum (ETH), Solana (SOL) and Avalanche (AVAX).
DAOs: Decentralised Autonomous Organisation
Decentralised autonomous organisations (DAOs) may sound complicated, but the underlying concept is simple. A DAO is a group formed for a common purpose, with its rules, plans and objectives all encoded on the blockchain.
DAOs are controlled by their members. Proponents claim that a DAO has no hierarchy, no bureaucracy and no red tape. Most commonly they operate based on a democratic structure, where votes are cast in connection to how many crypto tokens users hold.
“What makes a DAO attractive to many users is that all financial transactions are recorded on a blockchain, which eliminates any third-party involvement,” says Felice Gorordo, CEO of eMerge Americas.
“Instead, the transactions go through uneditable, transparent smart contracts. Breaking away from the traditional vertical company structure of executives, board of directors, and investors, a DAO allows all members to be involved and vote if any changes need to be made,” Gorordo says.