How Web 3.0 Will Change The Way Traditional Financial Systems Operate

We are at the cusp of another internet revolution. Web 3.0 momentum has gained significant traction and is inching closer to reality with each passing day. Industry experts claim that Web3 will transform the internet as we know it.

But what exactly is Web 3.0? And how will it disrupt existing processes?

To understand that, we need to review the fundamentals of the worldwide web first. Think of it this way: the early days of the internet were called Web 1.0. This was the first iteration of the world wide web – a period where most users were simply content consumers. Web1 shaped itself as a massive content delivery network. 

Then came Web 2.0, bringing in a paradigm shift in how digitized information is created, stored, distributed, and manipulated. The larger part of Web 2.0 is represented by user-generated content, increased interoperability, and usability for end users. Web 2.0 led to the rise of social media platforms, search engine giants, and other similar platforms. 

Besides setting the foundation for an interactive and collaborative internet, Web 2.0 also paved the path for a massive change in our banking habits. The world gradually pivoted towards online banking, eCommerce, and other internet-powered options, delivering both convenience and flexibility for users.

Understanding The Concept Of Web 3.0

Web 3.0 takes this a step further. Unlike the current version of the internet, where centralized authorities have taken over almost everything, Web3 aims to restore control to consumers. By design, Web3 will allow people to interact using open, permissionless, and trustless networks without the need for any intermediaries or third parties. 

In this context, cryptocurrencies and blockchain technology are the key drivers of Web 3.0. Since Web 3.0 is decentralized and leverages the power of blockchain, the evolving DeFi (decentralized finance) ecosystem will play a much bigger role than what it is doing today.

The worlds of CeFi (centralized finance) and DeFi will merge eventually. Multiple blockchain-based projects are actively working towards bridging the gap between CeFi and DeFi ecosystems, thus creating a novel ecosystem that is more inclusive, fair, and transparent. 

The new approach ensures that the data and power of the internet will not be controlled by just large companies but by communities, bringing about community-centered economies of scale. The decentralized world of Web 3.0 is based on participation open to everybody, and the more participants, the more benefits everyone receives.

Bridging Real-World Assets To Web 3.0

There are several promising use cases of DeFi and projects lined up for Web 3.0. Centrifuge is one such project that aims to bring the massive liquidity of real-world assets to Web3. Built on a two-layer approach, Centrifuge connects lenders and borrowers through its fully decentralized platform, free from intermediaries and the constraints of TradFi.

By unlocking the value of real-world assets (RWA) and bringing it to DeFi, Centrifuge bridges the gap between TradFi and Web 3.0. The platform enables users to tokenize their real-world assets like invoices, royalty, and real estate and use them as collateral to access funding. As a result, Centrifuge has been able to bring down the cost of capital for small and medium-sized enterprises (SMEs) and offer DeFi investors a stable source of yield that has no connection with the volatility of cryptocurrencies.

The platform leverages the best attributes of Web 3.0 and DeFi to facilitate tokenization, securitization, and underwriting of a diverse range of real-world assets to unlock financial opportunities for both borrowers and lenders. It overcomes the limitations of TradFi while serving as the gateway for all off-chain real-world assets to enter the Web 3.0 ecosystem.

The DeFi ecosystem, due to its very nature, has ongoing liquidity problems. But with the multi-trillion-dollar real-world assets market linked to Web 3.0, the DeFi ecosystem will eventually expand its footprint even further. 

In the coming days and months, larger-than-life concepts of the Metaverse and Web 3.0 will ultimately merge with DeFi 2.0. As such, real-world assets will play a critical role in helping shape the financial economy of the future. To that extent, Centrifuge has already positioned itself as the go-to platform for tapping into the yet untapped potential of real-world assets.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.