By Eric E. Cohen
Before I left PwC, we were making a difficult transition from Lotus Notes to the Google Suite. Certainly, all of the “i”s were dotted and the “t”s crossed, but our correspondence, spreadsheets and documents moved from our control to a third party, a “centralized” service, Google, on our behalf. While my own business email is conducted separately from Amazon, Google, or Facebook, and much of my personal life, is on their services and sometimes it seems like it is being used at my expense. Would some kind of a decentralized, secure social operating system help me?
The evolutionary path of technologies affecting financial professionals is littered with trends and fads. Some were just hyped before their time and may yet gain traction. Some were marketing terms rebranding what’s already in place with new clothes. Some are signposts announcing possible destinations, where the actual path may or may not reach the destination as described. In this entry, I’d like to introduce one of the terms that has caught on over the last year, although the term goes back much further than that. The term is Web 3.0, or Web3.
In an upcoming issue of Think Twenty 20, I will delve more into the background and distinctives of Web 3.0. At a very high level, however, it is generally thought of as the natural evolution of the World Wide Web, given other technical advancements, with blockchain technology as a foundation. It is not yet in place; there is no official standards organization defining it or developing the architecture authoritatively; there is little agreement to what will bring us from Web 2.0 to Web 3.0, but many try to plot the course.
In this post, I’d like to introduce the background of the term, illustrate how the market has grabbed and stretched it in different directions, and speak about some potential impact on financial professionals.
The Genesis of Web 3.0
My involvement in the “World Wide Web” spans back almost 30 years. I developed my first web pages on a university Unix system, using the vi text editor, and looked at the pages using the Lynx web browser, a text-only tool. My website, Computercpa.com, is little changed from the lovingly handcrafted site I first put up, first on that university computer and later on my own domain. I wrote the first article about the Internet and the World Wide Web for the Journal of Accountancy back in August 1995.
From those early days of static text-only pages, there have been many evolutionary stages of the Web. Chatting with colleagues, I learned about the Mosaic browser, which permitted display of images inline with text. Other changes included:
- Javascript and CSS (cascading style sheets), for a more dynamic and interactive web.
- Peer-to-peer file sharing.
- Mobile browsing.
- Blogs, social media and much more.
So, there is little agreement on when Web 2.0 emerged, although some people say the change was from the “read only” Web to the “read write” Web, or the change to centralized sites (social media) and the information (intellectual property) grab that came with it. As a reaction to the rise of these new powerhouses, Web 3.0 was introduced. Well, one could posit that Web 3.0 has been introduced a number of different times.
In 2006, there is reference in The New York Times from reporter John Markoff, and which appeared in IEEE Internet Computing in May/June 2007 as a return to common sense, based on Semantic Web technologies, leading to a “machine-facilitated understanding of information in order to provide a more productive and intuitive user experience.” As we will see, the blockchain-era Web 3.0 was the idea of Ethereum/Polkadot pioneer, Dr. Gavin Wood in 2014.
It was originally aimed at a decentralized web, although, as we will see, that vision has been pulled into a number of different directions.
There is, fittingly, a group known as the “web3 foundation,” which brings visibility to this space and funds research and development teams building the foundation of the “decentralized web.” Dr. Gavin Wood is the Founder of the web3 foundation, and is often cited as the person who coined the phrase “Web 3.0” back in 2014, with a vision expressed in a post called “DApps: What Web 3.0 Looks Like.” The four major components of the vision were focused on more control over personal information, using:
- Static content publication
- Dynamic messages
- Trustless transactions
- Integrated user-interface.
This 2014 interview in Bitcoin Magazine is also helpful for understanding the original vision, freeing users from having their email and pictures and identifiers and movements and social media content from being conscripted by Facebook, Google, Twitter (not my list, his) and other large organizations and governments. This would revolutionize the model for interactions between parties into a “decentralized, encrypted information publication system” where we own and control our information using a zero-trust interaction system: a “Secure Social Operating System.”
Where Has the Web 3.0 Story Gone?
In the eight years since Wood’s vision was first proposed, there has been a lot of reuse of the term, but not always to the same end, much as Bitcoin changed from a “peer-to-peer payment” mechanism designed to disintermediate financial organizations to an investment asset highly reliance on intermediaries such as Coinbase, Binance or Gemini.
While there is broad agreement that Web 3.0 is the evolution of the current Web to one that is decentralized, driven by the user with cryptographic privacy and confidentiality, open and of greater utility, with blockchain and sovereign self-identity as foundations, the purpose has broadened to the metaverse (more on that in the upcoming article), to both meta and physical space with the so-called “Spatial Web”, to self-execution/autonomous activity and intelligence leveraging Artificial Intelligence (the read-write-execute Web).
What Is the Impact on The Financial Professional?
As Web 3.0 is ambiguous in vision and not really instantiated, it is difficult to say with authority what the impact is on financial professionals. From a security aspect, I have been working for more than 20 years on how digital signatures, encryptions and private keys work together at individual, role-based and organizational-based levels for authorization and authentication. Likewise, data standardization – or the “Semantic Web,” which some say is a foundation to Web 3.0 – has been sporadic in development and take up.
The vision of greater control of information with greater reliability of that information and automation of its processing can lead to new operational, business and accounting systems, and new methods of interactions between businesses, governments and individuals. The potential merging of physical and digital objects and space can mean completely new business models and new methods of tracking and control.
The flip side is the potential introduction of new risks. We are already seeing challenges with securities laws (related to crypto tokens in particular), money laundering, sanctions avoidance, challenges with developing internal controls (let alone when the walls between organizations blur and the line between internal and external becomes difficult to see), and the need for new types of third party service organization controls and assurance, when the services are decentralized and there is no centralized management to make assertions and hire auditors.
Web 3.0 is a fragmented vision, highly aspirational, and offering promises to solutions that have eluded us for 30 years. The financial community can, however, work together to craft the vision of the future for the Web and encourage development in those areas.