Are Business Services Professionals Ready for Web3?

Web3 is the next evolution of the internet. Building applications and conducting business using decentralized technology such as blockchain might become the norm in the future. What does this mean for business professionals?

The internet, in the way most of us have used it, started with Web 1.0, which were static websites that posted information for viewers to read. Then, in the early 21st century, we were introduced to Web 2.0, where we all became digitally social and interacted with each other through social media platforms. In 2014, we were introduced to the term "Web 3.0” and through significant developments in recent years, many believe this is the next iteration of the internet that, just like social media platforms, will transform the way we use the internet.

This shift to Web 2.0 resulted in the massive growth of big tech companies, as well as the massive hoarding of user data into a centralized realm owned by these big tech companies. The concept behind Web3 is to decentralize the ownership of user data, such as personal information or original content you’ve created and shared. In theory, Web3 gives users more control over their data, as Web3 technologies don't use centralized servers or “middlemen” to collect information that passes through their systems. Instead, Web3 technologies rely on decentralized networks and protocols like blockchain to make direct person-to-person interactions and transactions possible. Many would argue that this makes online interactions more open, safe, and trustworthy because there isn't a central company or platform acting as the main coordinator and owner of data. Aside from blockchain, these are some of the other Web3 technologies that have been developed:

• Cryptocurrencies are the digital assets that use blockchain technology and cryptography to enable secure and decentralized financial transactions. Value is placed on the cryptocurrencies much like value is on physical currencies.

• Smart contracts are self-executing contracts with the terms of the agreement between buyer and seller being directly written into lines of code. Smart contracts utilize blockchain to record not only details of the transaction but the transactions themselves. Details can be accessed by others to verify the contract terms.

• Decentralized applications (DApps) are built on decentralized networks and protocols, rather than centralized servers. These applications currently help facilitate decentralized communication and transactions.

Current use cases

Search

There are a number of Web3 search engines created to let users look for and access decentralized content on the internet. These search engines index and look for web content using decentralized protocols like the Inter Planetary File System, or IPFS for short. IPFS is a decentralized file storage system that lets users store and share files in a way that doesn't involve a central server. Its objective is to replace the conventional centralized model of file distribution and storage with a more effective decentralized model.

Smart Contracts

A smart contract is a self-executing contract in which the terms of the agreement between the buyer and seller are directly written into lines of code. Smart contracts can be used to automate and speed up how legal agreements are processed, like contracts for the sale of goods or services or even the transfer of an estate after the death of a loved one.

One of the common questions that arises in regards to smart contracts is the security of the information. The security of the information on a smart contract depends on a number of things, such as how the contract is designed and executed, what security measures are in place, what blockchain network is being used, and what the parties to the contract can do.

The terms and conditions of a smart contract and the code that runs it are usually visible to the public on the blockchain network where the contract is deployed. Blockchains are designed to be transparent and open, which means that the information on the blockchain, including smart contracts, is publicly accessible. It's important to note that the information on a smart contract can be coded or encrypted. Additionally, there are options to set up the contract so that only certain parties or users are able to interact with it or access certain information.

NFTs

Non-fungible tokens (NFTs) took Web 3 by storm in 2022 through the development of digital artwork and assets. NFTs represent ownership of unique digital assets such as art, collectibles, or in-game items. Think of Wayne Gretzky’s rookie card or any other popular sports figure’s rookie card. They are super rare, and collectors often bid significant dollar amounts for them at auction. These cards have third-party verification, certifying that they are legitimate and original copies. Similarly, NFTs provide similar verification for digital assets and are a way to prove the ownership and authenticity of digital assets. As NFTs are stored on the blockchain, they are considered to be transparent, immutable, and resistant to tampering or counterfeiting.

Use cases for professional services firms

Web 3 isn’t quite the same as Web 2 when looking at how business service professionals use the technologies. Web 2 is about social interaction and creating content that professionals can share with their clients and the public. Web 3, in its current form, is focused more on the underlying technology to manage the data that is shared between the two parties. That being said, there are some considerations for professional service firms when looking at Web 3. 

Despite the ability to encrypt data on the blockchain, a general rule of thumb is not to store sensitive data. Even though decentralized file storage systems have security features like content hashing and encryption, the point of the blockchain is to make the information open and easy to access. Since professional firms deal with a lot of sensitive client data, it may not be completely ideal for information to be widely available. 

An example of how blockchain technology could work for a law firm:

The law society may want to set up a private blockchain network and only invite registered law firms and their lawyers to be participants in this blockchain. This network could be used to share information and documents about sensitive client files or cases. While many law firms are hesitant to store sensitive client data on the cloud, firms realize they need to utilize cloud technology to make data sharing more efficient. A private blockchain that is only accessible by registered law firms or accounting firms could be one way to do it. As a result, no outside technology firm would be needed to run the data network, and all parties, which are the firms, have a vested interest in maintaining the system's integrity. This private blockchain network would also be transparent and verifiable by any member of the network because of how blockchain technology works.

Final takeaway

It is probably safe to say that professional services firms should consider exploring and adopting Web3 technologies as part of their strategic planning and operations. Technologies, such as blockchain, decentralized applications (dApps), and non-fungible tokens (NFTs), are transforming a wide range of industries and business models as we speak. As such, business professionals will need to work with and support clients through this transformation. For example, when sensitive data is stored on decentralized file storage systems, it may be harder to follow rules and laws about data privacy and security, like the GDPR in the EU or PEPIDA here in Canada. Many of these privacy laws require user data to be deleted if the user requests it. This becomes a bit of a conundrum as data on the blockchain cannot be deleted as it would go against the whole concept of decentralization and transparency. This and many other issues, like the tax structuring of NFTs, will arise over the next few years, and professionals will need to be quick to address them.

Firms and professionals will also need to adapt to the decentralized nature of blockchain in order to use it effectively. Rather than working in silos, this may involve partnering with other competing firms to establish a working consortium to drive the collective goals of establishing a blockchain network for their network. Just like with Web2, professional service firms will need to be open to hiring or working with outside developers, technology providers, and strategic planners who have expertise in Web3 technologies. By taking Web3 seriously and exploring the opportunities it presents, professional services firms can position themselves and their clients for success in the digital future.