How is Web3 shaping the future of Finance?

Web3 is making serious waves, and changing the narrative of the internet is no longer breaking news. From Developers to investors and venture capitalists, there has been a surge in the attention of different key players of the modern world towards the potential offered by this new technology.

More than ever, we have seen the launch of new ecosystems, startups, and protocols developed around the concept of a decentralized internet that restores proprietary rights to the users. Suppose there is, however, any economic sector that will be key in the proliferation of blockchain and Web3 technologies. In that case, it will be the financial sector, especially if you keep in mind that the first implementation of blockchain tech was in the financial sector–Bitcoin.

The rapid growth of the crypto industry from a value of almost zero in 2009 to more than $1.6 trillion in 2021 is proof of the potential and explosive power of the financial sector. Also, because Finance is probably one of the most regulated and centralized sectors globally, how will Web3 shape the future of Finance and its offerings?

Financial inclusivity: Shortcomings to Opportunities.

One of the critical drivers for Web3 innovations in the finance sector is the growing dissatisfaction over the shortcomings of conventional banking systems, especially among young people. More and more people are becoming disenchanted with the limited options for accessing financial opportunities, and Web3 is coming to the rescue.

Instead of traditional banks’ waiting rooms and bureaucracy, Web3 offers a decentralized and trustless system where people can access financial products. Innovations such as Fintech, Insurtech, and Regtech have extensively promoted automation and financial accessibility to many people.

From walking into a bank and waiting their turn, many users carry out financial transactions using a smartphone from the comfort of their homes. Technological innovation is not new in the financial sector; decentralized Finance on Web3 simply builds on these precedents to open a new world of exciting possibilities.

Capital markets.

As inflation rates bite harder, Web3-powered crypto-assets and tokens will provide new forms of capital, allowing users to transact across borders without needing third-party intermediaries. As innovators continue to explore the possibilities of decentralized stablecoins, it will become possible for people in hyper-inflationary economies to access a new stock of value.

In addition, decentralized Finance via Web3 offers users access to a new range of credit facilities reserved in traditional banking for only elite investors or institutions. Users can access credit and saving facilities without the need for intermediaries, and in many cases, these products are more rewarding and profitable than conventional loans and saving platforms.

Some Web3 companies also offer options like staking, which allow users to earn rewards for holding the token for a stipulated duration. For example, Flux Titan nodes allow users to earn 6.88%- 7.68% of their staked Flux, depending on the duration. This is significant, especially compared to the average annual interest of less than 1% offered by many traditional banking institutions for saving products.

New business models.

The primary business model for many Web2 companies revolves around collecting and monetizing users’ data. The companies provide the interaction platform, make it accessible for users, and eventually profit by racking traffic and selling targeted ads. There are also models like “SAAS” (software as a service) where users can get advanced features of the software by paying a subscription fee. At the core of every business model in Web2, however, user data contributes significantly to ad revenue. The increased revenue, however, does not directly benefit the users, even though it’s their data.

On the other hand, the Web3 ideology revolves around decentralization, incentivized communities, and rewarding users directly. So we’ll be seeing more business models like curved bonding in which the price of tokens is distributed across the value growth of an asset. This model allows people to invest in the asset before the token increases in price.

There are other decentralized models like revenue and income share, with the underlying similarities of rewarding different actors in the value chain for their efforts. Web3 will open up the token economy, where users are rewarded for participating in the business community. We are already seeing models like this implemented on platforms like Steemit that rewards people with tokens for creating and curating content.

In place of a centralized management system, Web3 introduces Decentralized Autonomous Organizations (DAOs) for governance and decision making. DAOs have played a significant role in crypto-based organizations, and their introduction to the financial sector will bring a new wave of transparency and inclusivity in managerial decisions.

A new type of auditability.

Web3 will improve the security of transactions in the financial sector by leveraging the security and immutability of the blockchain. An enhanced form of auditability and transparency may help mitigate funds misappropriation, fraud, and backdoor deals. It will also provide the transaction independence to send and receive funds across different countries faster, cheaper, and more reliably. With traditional Finance, these are pain points that many banking institutions still struggle with at the moment.

The decentralized nature of Web3 offers startups and small businesses access to financial products that would otherwise be closed to them while ramping up users’ security and trust. More people will have access to banking and financial services without going through a physical bank account or living in an urban area. Financial accessibility is made possible with only a smartphone and data connection.

As Web3 moves closer to mass -adoption each day, more use cases for Web3 in Finance are gradually unveiling. Flux continues to push the boundaries of innovation in the Web3 space, redefining privacy, data ownership, and freedom on the web. Join us:



Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store
Flux Official

Flux Official

Blog source for all things Flux, officially; from the Flux Team | |