Decentralized. Blockchain. Web3. These three words are on so many people’s lips today. But few claim to have a total grasp of what they mean for the world. As history demonstrates, we tend to overestimate a new technology’s effect in the short term and underestimate it in the long term. The World Wide Web is a case in point. Little did Tim Berners-Lee know what was going to happen when he came up with what he saw as a way to help physicists communicate.
So where are we with Web3 and the metaverse? It’s early days in getting away from the privacy-destroying era of Web2, the social-media-driven environment regarded as the second version of the web. However, the foundations are clicking into place. The evolution can be described as moving from an information economy to a social economy, and now towards a cryptographic token economy.
A new industry has already been created – NFTs. Has it really been only two years since Mike ‘Beeple’ Winkelmann’s artwork, Everydays, sold for $70 million as a digital-only non-fungible token? The usefulness of NFTs is growing by the day, particularly in gaming, a global industry estimated by Statista to be worth $347bn in 2022, which was more than double the film industry.
Gaming
Here, the new terms include ‘game finance’ – GameFi – for blockchain-based video games. In these games, people can take digital assets, such as crypto and NFTs that they earn from playing and trade them or use them elsewhere. Part of this GameFi niche includes ‘play-to-earn’ (P2E) games where people can receive crypto token rewards. Developers are exploring this as an alternative to their ‘pay-to-play’ business model.
NFTs
Each NFT is unique and, in Cardano at least, sits directly on the blockchain (other blockchains have to use smart contracts). These tokens give proof of ownership of a virtual or real object and have many purposes in Web3. For example, NFTs can verify ownership of land in a virtual world or objects bought or won in a video game. NFTs can also prove membership of a particular group, or give access to an account, whether it be for gaming or email.
Decentralized cloud storage
Another aspect of Web3 is a decentralized version of cloud storage. This decentralization is familiar to people who use the InterPlanetary File System (IPFS) – a peer-to-peer system used to store files. The approach saves costs with large media files stored on a blockchain.
In essence, only the NFT is on the blockchain with metadata that points to the actual media file stored on IPFS. In this system, files are broken up into smaller pieces, distributed across the network, and stored on many nodes. The pieces are reassembled when someone requests the original file. A similar process happens on the internet, where files and messages are broken up into data packets so they can be moved around more efficiently.
Decentralized finance (DeFi)
Blockchain ecosystems are building decentralized infrastructure through smart contracts. DeFi creates an alternative to the centralized banking world.
Even though a purely digital Web3 is still being created, traditional finance (TradFi) companies are busy adopting blockchain technologies for their own systems. These companies aim to cut costs by removing the need for any centralized system.
The tokenization of securities – company shares, bonds, and other financial assets – to make trading faster and more automated is being implemented by leading asset managers such as BlackRock and investment banks including JPMorgan and Morgan Stanley. The value being managed is huge; BlackRock alone manages traditional assets worth $9.4tn for companies.
Standards are vital for this work, especially agreeing on the basics, such as the terminology for global markets. That’s why IOG has implemented the Actus system as part of the Marlowe smart contract system on Cardano.
Even central banks are getting in on the act. The Old Lady of Threadneedle Street, as the Bank of England has been nicknamed for 250 years, is working on a digital pound, a ‘central bank digital currency’. Such a CBDC would use the technology of a cryptocurrency but be issued by the Bank of England.
Disruptive engineering
And it’s not just banks and gaming companies that are interested in Web3. Since its founding in 2015, Input Output Global has been bringing ‘cascading disruption’ to the world. This is similar to the ‘butterfly effect’, the idea that small changes build up and can result in tremendous changes for a marketplace, an industry, or society.
‘Disruptive engineering’ is merging digital systems with operational technology – the hardware and software that monitors and controls devices, processes, and infrastructure. This strategy enables virtual planning and commissioning production systems and whole factories through the creation of metaverse models – digital twins. From smart buildings and products to infrastructure and production, imagine all the sectors that need automated processes.
Decentralized identity
Electronic identities have been around for decades. Estonia started issuing electronic identities – eIDs – at birth to its citizens 20 years ago. An 11-digit number unlocks access to 600 services in the Baltic state, including passports, signing official documents, medical records, and paying utility bills. Online voting began in 2005. Elsewhere, Brazil is basing its national identity card project on a blockchain platform called b-Cadastros. IOG has been working with the Ethiopian government to put the education records of five million pupils on the blockchain using Atala PRISM software.
The World Wide Web Consortium announced decentralized identifiers (DIDs) as an official web standard in 2022. This new type of identifier can refer to a person, organization or business, or any digital or physical object. Each DID is globally unique, similar to a fingerprint.
What makes this technology so interesting is that no identifiable information is transferred within the data that identifies who a person is. And because the system is decentralized, no central registry is involved. So you, the controller of your personal DID, can move between service providers, and the DID can last for as long as you want. This feature is similar to moving your mobile phone number between service providers. In contrast, most people do not own their email and social network addresses and have to change them when they switch to another provider.
Moving to Web3 and blockchain-based DIDs will put you in control.
And more
So, there’s a lot going on. In fact, blockchain technology has been described as a trust machine, a truth machine, and even an everything machine. Such is the speed of change and the growth of decentralized applications (DApps) that Cardano alone has some 1,300 projects in development. Almost half of these projects are focused on NFTs, gaming, and the metaverse.
Sites like Built on Cardano , Building on Cardano , Cardano Cube, the Cardano Foundation’s Developers portal, and Essential Cardano map the Cardano ecosystem, and several have dedicated metaverse sections.
Two years ago, a crypto wallet was used just for accessing and spending crypto coins, and, in Cardano’s case, the staking process. But wallets are evolving to become the key to Web3 and access a new world of DApps, services, and entertainment. A Web3 wallet holds not just coins but all sorts of other tokens, including NFTs that may be used to prove ownership of digital and physical assets or give access to services.
Ultimately, a good wallet can be a one-stop shop, a portal on your phone or laptop to everything Web3 has to offer. IOG’s web-based wallet, Lace, is designed to connect to DApps easily and grow with Web3. It can be added as a plug-in to browsers based on Google’s Chromium – the open-source code that powers Chrome, Opera, and Microsoft Edge.
Lace supports stake delegation across up to 10 Cardano pools at a time, a capability that encourages even more decentralization as well as rewarding users for helping run the network. The next addition will be the ability to support voting in Voltaire, Cardano’s governance system. You can download Lace now , and sign up for news and updates in the footer below.
See more…
The Investment Association: Tokenized funds: What, why and how (PDF report)
IOG chief Charles Hoskinson on blockchain and cascading disruption
Digital identity explained
Edinburgh index: starting to measure decentralization
Cardano Summit 2023 in November
