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Web3 is more than metaverse, cryptocurrencies and NFTs. It represents the next chapter in the evolution of the internet.
Using technology such as blockchain, web3 introduces new ownership, incentives and community models.
New products, services and business relationships will arise from web3.
Business leaders should begin to formulate a web3 strategy and begin experimenting with the framework.
There is an emerging tech ecosystem that promises to revolutionize physical and digital business models: web3.
Web3 is more than a singular technology. It’s more than a convergence of technologies. It’s an ethos that has the potential to empower consumers while strengthening the relationship consumers have with brands that are willing to operate with them in the space. Web3 fundamentally changes the way business takes place and how we connect to one another on a personal level. In fact, web3 is expected to fundamentally alter the way we think about our presence online over the next few years.
The original web (1) simply connected computers and users worldwide (hence the name World Wide Web) and is often called the “read only” internet. Web2, often called the read-write internet, broadened content and connections to encompass things like social media, real-time content/news, online shopping and more elaborate web applications. This is where we are now, where we’re all creating and sharing content on social media. But most of this data is owned and controlled by the platform companies.
Web3, often called read-write-own, represents the next big step in the evolution of online interactions. It enables a bridge between the physical and virtual worlds by introducing new ownership and transactional models that stretch across and blend digital and physical realms.
PwC sees web3 as a fundamental shift that results in a truly decentralized ecosystem where users have ownership and control of their assets, enabled by emerging technologies.
At the heart of web3 is the concept of decentralized ownership, currently facilitated by blockchain technology. The distributed ledger establishes a verifiable and traceable way to ensure that items and assets are authentic. It also introduces a way to compensate individuals for their time, data and input — while permitting them to retain control of their personal data. An advertiser, for example, might offer consumers some form of currency if they’re willing to share income information.
Suddenly, it’s possible to pay or reward customers and brand devotees for helping to collaborate on a new product or service, whether it’s a clothing line or an eye-catching label for a soft drink bottle. It’s also possible to buy, sell and exchange digital NFTs, as well as tokens representing a “deed” of property in the physical world or digital sports cards in a virtual NFT gallery.
There are three primary components to web3.
Ownership: Until web3, tokenization was available only at the point of contact for a specific transaction or an ongoing interaction. This imposed limits on what’s possible online. However, blockchain allows for an entirely new ownership model. In this new world, digital assets become more like physical assets. People can take their digital assets wherever they go and transfer those assets to others at any time. A movie or book bought online can suddenly be sold to a friend, a transaction that has to be done physically at the moment.
Say an individual becomes an ambassador for a prominent athletic shoe company. This shoe manufacturer produces a unique, limited edition shoe NFT that’s available only to its community members.The NFT can be purchased and worn on an avatar. But that’s only a starting point. The same NFT can represent a purchase order for a physical pair of the same shoe. So, when this person walks down Main Street or Metaverse Street, fellow community members give him or her a nod. These “likes” could even translate into discounts for future purchases.
Consider the loyalty programs of today. Customers are limited to using their loyalty rewards on an existing platform. They have the ability to spend their rewards for additional services or products only from that brand. A web3-based loyalty program opens up the possibilities for what can be done with loyalty rewards enabling direct ownership, and the ability to sell to other users in exchange for a currency. This is mutually beneficial for all parties involved — the brand, the seller and the buyer. This invites new users into the marketing funnel and drives additional revenue and demand for the brand through the collection of secondary sales revenue.
In web3, it’s possible to hold objects in both physical and virtual spaces. It’s also possible to transfer digital assets, including NFTs, to create new, enhanced and reinvented types of ownership — and new business models. Trust is built into the system through technologies like blockchain.
Inserting this type of ownership model into the internet has the potential to change the way consumers and brands interact. Suddenly, online spaces more closely parallel the physical world. Web3 also has the potential to alter business-to-business (B2B) partnerships by linking goods and services in ways that weren’t possible in the past.
Web3 is in its infancy. Over the next few years, we expect a company's online presence to become heavily dependent on digital ownership and transactions — for everything from one’s digital identity and virtual real estate to supply chain and social networks.
Although the foundations of web3 technology already exist, it will take time for individuals and organizations to put it into motion. Here are a few things to consider.
Web3 is coming fast, so become familiar with it. Web3 innovation is taking place rapidly. Once organizations understand how to use it and see success in test projects, adoption is expected to accelerate. Companies that understand the technology and use it effectively can gain an advantage in much the same way that certain brands have tapped influencers and social media to achieve big gains. For now, business and technology leaders can benefit from familiarizing themselves with web3 and developing a strategy to capitalize on the opportunity it presents.
Web3 can change how governance and oversight occur. By its decentralized nature, the need of a third party to oversee operations is gone. Much like how cryptocurrency works today, web3 has the potential to be self-regulating and self-monitoring just by virtue of how the protocols are created. Regardless of what level of involvement your company is considering, you should get to know how the infrastructure of a web3 world could work and what you should do to get comfortable with it.
There’s a need to rethink and rewire brands and relationships. Web3 represents more than an incremental change in the way brands and consumers interact. Business leaders should rethink and expand how they view relationships and prioritize authenticity. Among other things, web3 introduces a true two-way channel with each customer, providing several avenues to participate with the company. This makes it possible to buy things from them while also selling things to them. Companies have the opportunity to view brand advocates as partners rather than consumers or subscribers.
Web3 introduces new income sources and new business models. While there’s an opportunity for increased revenue streams through the initial sale of digital goods and services, this is just part of the picture. There’s also an opportunity to realize residual value in perpetuity as NFTs and other assets are bought and sold downstream. The most obvious examples revolve around art or music, where a creator is compensated every time one of his or her creations changes hands. In some cases, this can produce a perpetual source of revenue. Other concepts to keep an eye on are token-based loyalty programs that allow individuals to buy and sell their points or currency; NFTs that serve as access tokens for products, services or value-added components; and blockchain-enabled supply chains that introduce a single source of truth among multiple firms.
Partner, Governance Insights Center & National FinTech Trust Services Co-Leader, Washington, PwC US