Is decentralized finance the ultimate web3 opportunity?
Rawnet’s James Cooke takes a close at what’s going on in the world of decentralized finance, and what it says about the development of the web3 space.
What can marketers learn from how decentralized finance is pushing forward web3? / Fabio via Unsplash
With the end of the web2 age drawing closer, we’ve progressed beyond the dot-com era. Now, we’re seeing a web populated by websites that use user-generated content emphasizing ease of use. The increasing shift toward web3 will fundamentally change how the internet operates and will see decentralization becoming a mainstay of new web architecture.
Open and mobile banking have both helped to open up the world of financial services and improve competition, but they are no substitute for building trust. The new web3 era will bring with it many opportunities, but is decentralized finance (DeFi) the one that we should be talking about?
Blockchain, web3 and the crypto trust challenge
One of the crucial differences between web3 and the current iteration of the web will be the use of blockchain. Blockchain technology will transform how information is shared and verified on the internet, which takes away responsibility from central actors and hands it to members of a group. Group members agree on a single record of events and the information is cryptographically secured in the process.
While both blockchain and web3 are both in their early stages of development, understanding these technologies today could pave the way for a new economic and digital revolution in the years to come.
DeFi could be one of the most lucrative of these opportunities. Despite the popularity of cryptocurrencies, the early use of them by some for financial gain alone has led to controversy and trust issues for the ‘cryptocurrency’ brand. Other issues risking trust include the instability of cryptocurrency lenders, market uncertainty, and security vulnerabilities affecting some leading cryptocurrencies.
These problems indicate that we are currently living in the age before the one where crypto achieves widespread adoption and legitimacy from governments, organizations and individuals. But let’s look beyond the current bumps in the road to see what will exist in the future and the benefits DeFi can provide.
Democratizing and decentralizing finance
While some markets have stabilized their financial ecosystems following recent challenges, others remain affected by a lack of stable currencies, financial institutions, regulators and governments. Financial services is one of the least trusted sectors today; as a result, people remain wary of cryptocurrency too. The 2008 banking crisis and global pandemic haven’t done much to improve trust in the industry.
Cryptocurrency and DeFi could be just what’s needed to build bridges between FS and consumers in the future.
DeFi could change financial services by taking power from large organizations and placing it in the hands of consumers who want to directly benefit from their assets. This could be hugely beneficial to those around the world who still lack access to traditional financial services and have seen their currencies suffer from extreme inflation.
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Cryptocurrencies and decentralized assets are also being used by consumers globally as alternative methods of wealth storage to protect and own assets. Cryptocurrency isn’t always recognized for the benefits it can offer, such as being used during the current war in Ukraine to channel donations directly to initiatives and charities, so that centralized banks and unclear transactional processes are avoided.
The idea that DeFi and cryptocurrency could help to build trust in the future of the web is controversial, especially when current debates lead many to come to different conclusions. But fortune favors the brave and those who are willing to see DeFi as the ultimate web3 opportunity could reap the rewards by seeing its implementation as the ultimate opportunity.
Content by The Drum Network member:
Rawnet is a digital agency that defines, designs, delivers and drives strategic products and services that create a long-term positive impact.
By combining customer engagement with business efficiencies, creating a justified return on investment for its clients. The agency’s fast-paced yet detailed immersion into its client’s business allows the team to understand key objectives.
Equipped with this knowledge, they can provide quality, scalable digital solutions to develop a customer-centric experience, whilst diving into internal systems to innovate and future proof client’s digital products.