If you are looking for your company to take the next step using cryptocurrencies (critpocurrency), such as Bitcon or Ethereum, it is necessary that you first know their advantages and disadvantages. Well, both technologies are based on Web 3.0 or Blockchain technology and offer interesting advantages for the Financial industry. A cryptocurrency-enabled system eliminates the possibility of a single point of failure, such as a large bank, triggering a cascade of crises around the world., like the one that broke out in 2008 for the bankruptcy of institutions in the United States and that many FinTechs could be saved by their integration.
Now, what is the basis of Web 3.0? Is there a Web 2.0? Web 2.0, which began at the beginning of this century, is characterized by the content and connectivity they offer within social networks. Alphabet, Amazon, Apple, Facebook and Microsoft are around $1.2 trillion, according to 2021 earnings reports, a jump of more than 25% since the start of the pandemic in 2020. Countless platforms, apps and mobile devices make it easy for us to interact with the rest of the world, stream content, shop online, work and play with a simple click or swipe.
Meanwhile, Web 3.0 is based on Blockchain technology, focuses on making personal information people's property again. It builds on a growing movement to give users control over their data ownership and monetization. And it does so by encouraging people to decide how they want to collect and store their data., and if and when they want to sell them, instead of companies collecting them for free and making a profit on it.
Such decentralized operations are secured through the use of public keys and private keys and different forms of incentive systems, such as proof-of-work or proof-of-stake. Additionally, markets have skyrocketed in value over the past decade, at one point reaching almost $2 billion dollars. From May 2022, Bitcoin was valued at over $550 billion on the crypto markets.
And, it is worth mentioning that security is paramount to avoid any further problems.
What benefits does Blockchain technology offer for companies?
Blockchain technology at its core is about a series of blocks, each of which is added to the chain and carries a strong cryptographic reference to the previous block. each block contains encrypted information that confirms the security of each transaction or movement. This reference is part of a complex mathematical problem that must be solved in order to add the next block to the network and chain. The process creates a uniquely encrypted fingerprint called a hash that is secure and highly resistant to data tampering.
This offers a transparent, immutable and decentralized nature to each movement, the technology grants greater transactional security. Unfortunately, blockchains still run on operating systems that have major vulnerabilities. To mitigate the fragile security of end users, organizations must ensure that their external data sources are secure, as they fall outside the scope of the blockchain.
Fewer Middlemen
Professionals working in the financial industry or anyone who needs a business process that requires a third party to complete a transaction can benefit from the growing adoption of blockchain. This technology replaces third-party intermediaries, favoring trust and control, as well as reducing usage costs. It allows businesses to send and receive payments through programmatic sets of rules called smart contracts.. A smart contract is an automated method of conducting business transactions online. It is like a physical one, with the difference that it can be accessed through the blockchain system.
Like all actions related to a particular smart contract that are transparent and recorded, the technology usually reduces the cost of tracking. This is a competitive advantage for global corporations, since basic administrative functions, such as payroll management, can be executed without problems in different countries.
These contracts are programmed on the blockchain, and when a predetermined condition is met, the smart contract automatically triggers the next appropriate action. This process eliminates the need for brokers, escrow agents, and other unwanted financial intermediaries.. Also, the blockchain is updated when the contract is fulfilled and the transaction cannot be modified.
By establishing irrevocable rights and responsibilities for all parties involved, smart contracts can also help facilitate employment for millions of people around the world who don't bank with a recognized financial institution. Business owners often do not monitor all links along the supply chain, but blockchain technology creates greater transparency and control.
Specific uses of the blockchain in companies
Smart contracts based on blockchain technology can do exactly the same job as a common one, but they do not require a central authority to enforce or monitor anything. Everything happens automatically according to the established rules and logic in the contract. These types of deals make it possible to provide financial services, or draft legal agreements between parties, in a much cheaper way than traditional contacts. They are also much fairer and cannot be tampered with once activated.
With decentralized applications or dApps, there is also a frontend client and a backend server. But unlike common applications, Web 3.0 eliminates the need for a centralized database and centralized web server; instead, Blockchain is used. The most used Blockchain platform to implement dApps is Ethereum. Other platforms used are Hyperledger Sawtooth, Hyperledger Fabric, EOS, etc.
Just like web 2.0 applications, the dApp interface is written with HTML, CSS, and JavaScript programming languages. Nevertheless, Web3.js – Web3.js is a Javascript library that allows your interface to interact with the Ethereum network. To connect with the Blockchain, you can connect to a no and if you don't want to, you can connect with a third party that is running the nodes, for example, Infura. The nodes you connect with to interact with the Blockchain network are often called “providers”.
As we mentioned, smart contracts are stored on the Ethereum blockchain. But storing all the dApp data on the Blockchain becomes very expensive. The user has to pay every time they want to add new data to the Blockchain and asking your users to pay extra fees for every new transaction in your dApp is not a good user experience. This problem can be solved by using a decentralized off-chain storage solution such as Interplanetary File System for short as IPFS, for its acronym in English.
Instead of storing data in a centralized database, the IPFS system distributes and stores data on a peer-to-peer network. Also, you can host your dApp's front-end code in the cloud like in Web 2.0, but that creates a centralization for your dApp. If you want to build a completely decentralized application, you can choose to host your frontend code on decentralized IPFS.
Personal Benefits of Web 3.0
Blockchain-based Web 3.0 is focused on making personal information private again. Thus, you can give users control over ownership of their data and its monetization. According to a survey of Pew Research Center, most Americans (81%) feel that they have little or no control over the data that companies collect about them, and 79% is very or somewhat concerned about how companies use it.
The decentralized web will allow users to track their data and review the source code of the platforms they choose to use. All stakeholders will always be aware of the value and trade they are associated with. You will not need to rely on an intermediary to access this data.
In Web3, you will be able to search for information more efficiently. When you search for something on a search engine, it will show you more relevant search results instead of showing you the most popular pages that people click on. The semantic web will help improve the connectivity of online data. This allows you to have a more personalized Internet browsing experience, since websites will be able to better recognize your preferencesyes Web applications analyze our use and Internet habits to be personalized and better adapted to our device, location, etc.
Lastly, the data will be stored on distributed nodes. Therefore, users will not need to think about particular account suspension or service interruptions due to technical or other reasons. Using Web3 powered by AI, sellers could better understand purchasing needs. They will show those products and services to buyers who are interested in buying. Shoppers will see more helpful and related ads.
To make a decision about adopting blockchain or Web 3.0 processes for financial transactions supported by some cryptocurrencies, it is necessary to analyze in detail the benefits and advantages that it can offer, as well as the challenges that it would represent for your team. If you are interested learn more about this, discover the solutions it offers and will offer Codster through a consultancy that can help solve all your doubts.
