The future of finance: Web 3.0
The requirement for Web 3.0 decentralised finance was planted during the year 2008 when the world experienced a financial meltdown that lasted nearly two years. The financial crisis resulted in an increase in unemployment, a decrease in institutional trust, suicides, and much more. It started with the collapse of the US housing market that was caused due to insufficient regulation, low-interest rates, toxic subprime mortgages, and easy credit was the reason for the economic crisis. At the end of the day, it was the public who suffered the most. Hence, it raised the need for a Web 3.0 based decentralised financial system where banks aren’t required to manage the user’s money.
Now, how Web 3.0 will enhance the current finance system?
The involvement of Web 3.0 in traditional financial systems will contribute to the emergence of artificial intelligence and machine learning, an increase in decentralised finance platforms, and more use of cryptocurrencies. The involvement of artificial intelligence can be seen already in the banking systems, for instance, the Royal Bank of Canada is leveraging millions of data points to train their AI for increasing the speed of application delivery. Also, BNY Mellon which is the world’s largest cross-border payment service provider enhanced their fraud prediction accuracy by twenty percent. They were able to process real-time market data within nanoseconds by combining AI and high-performance computing. Further, as the number of decentralised finance platforms are increasing, they offer a permissionless system in which the transactions will be transparent and in real-time. Hence, the new financial system will provide several advantages to the user as compared to the current traditional banking system.
The following is a brief comparison between traditional finance and decentralised finance.
With all the advantages there are few challenges also. For instance, it will be challenging to apply rules and regulations to the new financial system as it will be global. In the traditional banking system, performing KYC is mandatory but it won’t be applicable in the new emerging system. Another challenge will be that blockchain technology is regularly evolving. This signifies that the platforms and protocols that facilitate financial services can update quickly.
The next generation of finance will be developed on a safe distributed ledger similar to the one utilised by cryptocurrencies. The new system will eliminate the finance ecosystem authority over money, financial services, and financial goods. With these changes, it will also provide many advantages, such as removing the user fees that financial institutes take, the user can store money in their digital wallets instead of banks, everyone can access it using the internet connection, and transactions will be more rapid and convenient. So, it will be interesting to see how the new finance system will overcome all challenges and provide its services to the user.
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