Bloomberg Línea Ideas — After creating new paradigms for relationships, communication, consumption, teaching and work, the Internet is on its way to a new phase: Web3. Theorists and developers created a network that adopts decentralized technologies, which is the basis for cryptocurrencies.
The transition from Web2 to Web3 is a change underway with, for example, the metaverse or NFTs – non-fungible tokens. In practice, Web3 makes it possible to create applications that are changing arts, sports and the world of finance, for example. The metaverse will impact work, entertainment and social relationships, among others.
It would be more accurate to say that Web3, which principles were born almost a decade ago, will not completely replace Web2, but will create an extra layer on top of Web2.
In sum, the Internet went from the phase in which the user only read content (the so-called Web1) to Web2 in the late 1990s – this time, the user could read and write, i.e., interact. Now, on Web3, a third possibility is added: the user also owns content, which generates more incentives to use the network.
Foundations of the new Web
As I said above, Web3 is born from the adoption of decentralized technologies. This makes browsing safer, faster and enables the creation of new digital economies, where users are able to share a blockchain without being connected to the internet, in a P2P (peer-to-peer) operation, and choose where to store their data.
A Goldman Sachs (GS) report from December last year points out precisely that the blockchain (described in the document as one of the most disruptive technologies since the emergence of the internet) is key to this process for being the only tool that can “identify any virtual object independently of a central authority”.
In the world of finance, one of the major contributions of Web3 is the increased reach of some products that were previously limited to a single sales channel, such as an investment fund or investment agent, or a region. For example, a token backed by specific national assets such as public debt becomes a global product, reaching new liquidity pools.
This process also involves interoperability between cryptocurrency exchanges.
While the mechanism for listing a share and its share receipts – American Depositary Receipts for instance – is complex, expensive and time-consuming, the tokenization of an asset can be done in a very simplified way so it is listed globally.
The new processes, such as the connection between exchanges, wallets and marketplaces, will still evolve a lot, making the user experience more intuitive and with less obstacles. Crypto native companies have a huge asset in their hands: last year they received a record $33 billion in investments from venture capital funds, they are capitalized to invest in these creations and make improvements.
There is another interesting point, which is the possibility of splitting up assets, expanding access to some investments hitherto inaccessible to non-institutional investors. An apartment in front of Central Park, in New York, is an item practically impossible to buy due to its high value. But if you tokenize the property, hundreds (or thousands) of people can own a piece of it.
Art in the age of Web3
Splitting up assets also largely affects the arts. Priceless paintings by established artists can be tokenized, with property rights passing into the hands of thousands of investors.
The dream of owning a Gauguin, a Dalí or a Picasso becomes feasible.
In the world of the arts, it is not just the public that benefits from the possibilities created by Web3. Artist will have unprecedented advantages. Whoever creates content on Web2 depends on an advertising model that goes through an intermediary. On Web3, the creator does not necessarily have to go through such intermediary, which increases income and helps them create more engaged communities.
NFTs are precisely the instruments with the greatest power of engagement on the Web3, both for arts and sports. In addition to being an art or a collectible item from a sporting moment, NFTs are also a channel of relationship between the issuer, whether it is a rock band or a basketball team, and the fan who bought the asset.
In March last year, the band Kings of Leon released the album ‘When You See Yourself’ in NFT. The band now has a communication channel with the fan who owns the NFT, both current and future fans who purchase the asset in the secondary market. In addition to this benefit, the NFT will provide its owner new rights, such as, for example, the pre-sale of tickets for a new show.
This direct relationship allows the artist to focus on the quality of his fans, on more frequent and permanent engagement, while on Web2 the focus was more restricted to quantity. One of the opportunities that artists of the most varied slopes will have is to convert a fan from Web2 into a fan from Web3.
And NFTs are perfect for it.
This column does not necessarily reflect the opinion of the editorial boards of Bloomberg Línea, Falic Media or Bloomberg LP and their owners.
--This story was translated by Bianca Carlos, localization specialist at Bloomberg Línea.