Industry

Web3 and the future of finance

Apr 13, 2023

April is national financial literacy month in the US, and what better way to celebrate than to get down and dirty with a buzzword that has utility way beyond finance and for which no one is yet truly literate? Web3. 

Ignore Zuckerberg’s animatronic introduction to the metaverse over a year ago (and all the ominous happenings since), Web3 is more than a virtual world most of us aren’t sure we want to play in. This next iteration of the internet incorporates decentralisation, blockchain and token economics – and it’s going to fundamentally change a lot of industries; finance among them. 


The building blocks of Web3

For users, the transition from Web1 to Web2 was fairly straightforward… we signed up for an email address (remember Hotmail?!). This gave us an online identity and a means by which to open accounts, join mailing lists, and make purchases – and we’ve been happily doing so ever since. But the move from Web2 to Web3 is a whole new ballgame, thanks in no small part to the technology underpinning it:

  1. Decentralisation: This is THE key component of Web3. The internet will operate across a distributed network with each and every user responsible for their own content and data; we’ll all have complete control of where our data is and how it’s used.

  2. Blockchain: Underpinning this decentralised model is blockchain, a secure, transparent and immutable database. It’ll make data breaches and hacking of personal information a thing of the past.

  3. Token economics: Just as email addresses opened up Web2, wallets will be critical for unlocking Web3 – they will be our main means for interacting with the blockchain. We’ll each hold tokens and private keys in our wallets that relate to contracts, value and assets (both real world and digital) stored on the blockchain. As an example, take the personal data that each of us controls in Web3. It’ll be tokenized and stored in our wallet, and entities that want to access it will need to request and be granted (or sold) permission by the owner. 

  4. Intelligence: This is where the semantic element of Web3 comes in. The current internet is structured and designed for human users, but the next iteration will also make allowances for machine understanding. Ultimately, this should facilitate a more connected and intelligent experience for humans, who will be served content based on their preferences. 


Web3 and finance

Wallets, tokens, smart contracts, cryptoassets, decentralisation…these are all the architectural components of Web3, and they can be used interchangeably to create any number of tech stacks. This means Web3 is transparent and composable, which in itself creates opportunities for financial innovation that are boggling. We’ve already started to see the shift brought about by Web3 technologies within finance, with tokenization opening up private markets to individual investors and digitalisation removing the need for intermediaries. But as Web3 picks up pace, there will be an explosion of yet more new use cases and business models for investing, borrowing and sharing ownership.


Web3 and wealth management

In Web3 parlance, the tried and tested practice of entrusting capital to a wealth manager is known as custodial, since an investor transfers custody of their assets. While there are established and trusted wealth managers in traditional finance, we’ve yet to see the emergence of such in the world of Web3 – quite the opposite, actually, which has in part prompted the development of non-custodial tools, enabling asset managers to manage client funds without having custody over them. This non-custodial development is a huge unlock, and creates a host of opportunities for asset managers, potentially giving them access to a wider pool of clients and streamlining regulatory requirements. 

In a non-custodial environment, trust also becomes less important than performance. For the first time, larger, more established providers will no longer have access to the most capital, meaning higher performing, less well known asset managers will have the same opportunities for growth as today’s big players. Similarly, smart contracts will protect both parties and guarantee that profits generated from assets allocated following an asset manager’s investment strategy are automatically distributed correctly to both parties. 


The future and Web3

The level of investment in Web3 is stonking – VCs are thought to have invested upwards of $32bn in Web3 companies last year. It's a level of investment that will accelerate progress in component technologies like blockchain, metaverse and tokenization.

The opportunities for consumers and service providers are profound, and Web3 will fundamentally change how we operate as a financial services industry (as it will across many sectors). We’ve barely scratched the surface when it comes to uncovering potential use cases, so it's certainly worth keeping an eye on – especially given how fast some developments are moving – but it’s important not to get lost in the hype. There’s plenty of time to get to grips with Web3, we’re a good few years off full implementation just yet.

Want to find out more about Web3? Team Hedgehog have pulled together a selection of bedtime reading recommendations: 





Nothing in this article constitutes financial advice or guidance. The content in this article is an opinion and is for general information purposes only. This article is not intended to be relied upon to make financial decisions. It is not intended to be financial advice. The value of your investment can go up or down so you may get back less than your initial investment. The article may contain links to third-party websites or resources. Hedgehog provides these links and resources only as a convenience and is not responsible for the content, products, or services on or available from those websites or in those resources, the links displayed on such websites or the privacy practices of such websites.‍

Industry

Web3 and the future of finance

Apr 13, 2023

April is national financial literacy month in the US, and what better way to celebrate than to get down and dirty with a buzzword that has utility way beyond finance and for which no one is yet truly literate? Web3. 

Ignore Zuckerberg’s animatronic introduction to the metaverse over a year ago (and all the ominous happenings since), Web3 is more than a virtual world most of us aren’t sure we want to play in. This next iteration of the internet incorporates decentralisation, blockchain and token economics – and it’s going to fundamentally change a lot of industries; finance among them. 


The building blocks of Web3

For users, the transition from Web1 to Web2 was fairly straightforward… we signed up for an email address (remember Hotmail?!). This gave us an online identity and a means by which to open accounts, join mailing lists, and make purchases – and we’ve been happily doing so ever since. But the move from Web2 to Web3 is a whole new ballgame, thanks in no small part to the technology underpinning it:

  1. Decentralisation: This is THE key component of Web3. The internet will operate across a distributed network with each and every user responsible for their own content and data; we’ll all have complete control of where our data is and how it’s used.

  2. Blockchain: Underpinning this decentralised model is blockchain, a secure, transparent and immutable database. It’ll make data breaches and hacking of personal information a thing of the past.

  3. Token economics: Just as email addresses opened up Web2, wallets will be critical for unlocking Web3 – they will be our main means for interacting with the blockchain. We’ll each hold tokens and private keys in our wallets that relate to contracts, value and assets (both real world and digital) stored on the blockchain. As an example, take the personal data that each of us controls in Web3. It’ll be tokenized and stored in our wallet, and entities that want to access it will need to request and be granted (or sold) permission by the owner. 

  4. Intelligence: This is where the semantic element of Web3 comes in. The current internet is structured and designed for human users, but the next iteration will also make allowances for machine understanding. Ultimately, this should facilitate a more connected and intelligent experience for humans, who will be served content based on their preferences. 


Web3 and finance

Wallets, tokens, smart contracts, cryptoassets, decentralisation…these are all the architectural components of Web3, and they can be used interchangeably to create any number of tech stacks. This means Web3 is transparent and composable, which in itself creates opportunities for financial innovation that are boggling. We’ve already started to see the shift brought about by Web3 technologies within finance, with tokenization opening up private markets to individual investors and digitalisation removing the need for intermediaries. But as Web3 picks up pace, there will be an explosion of yet more new use cases and business models for investing, borrowing and sharing ownership.


Web3 and wealth management

In Web3 parlance, the tried and tested practice of entrusting capital to a wealth manager is known as custodial, since an investor transfers custody of their assets. While there are established and trusted wealth managers in traditional finance, we’ve yet to see the emergence of such in the world of Web3 – quite the opposite, actually, which has in part prompted the development of non-custodial tools, enabling asset managers to manage client funds without having custody over them. This non-custodial development is a huge unlock, and creates a host of opportunities for asset managers, potentially giving them access to a wider pool of clients and streamlining regulatory requirements. 

In a non-custodial environment, trust also becomes less important than performance. For the first time, larger, more established providers will no longer have access to the most capital, meaning higher performing, less well known asset managers will have the same opportunities for growth as today’s big players. Similarly, smart contracts will protect both parties and guarantee that profits generated from assets allocated following an asset manager’s investment strategy are automatically distributed correctly to both parties. 


The future and Web3

The level of investment in Web3 is stonking – VCs are thought to have invested upwards of $32bn in Web3 companies last year. It's a level of investment that will accelerate progress in component technologies like blockchain, metaverse and tokenization.

The opportunities for consumers and service providers are profound, and Web3 will fundamentally change how we operate as a financial services industry (as it will across many sectors). We’ve barely scratched the surface when it comes to uncovering potential use cases, so it's certainly worth keeping an eye on – especially given how fast some developments are moving – but it’s important not to get lost in the hype. There’s plenty of time to get to grips with Web3, we’re a good few years off full implementation just yet.

Want to find out more about Web3? Team Hedgehog have pulled together a selection of bedtime reading recommendations: 





Nothing in this article constitutes financial advice or guidance. The content in this article is an opinion and is for general information purposes only. This article is not intended to be relied upon to make financial decisions. It is not intended to be financial advice. The value of your investment can go up or down so you may get back less than your initial investment. The article may contain links to third-party websites or resources. Hedgehog provides these links and resources only as a convenience and is not responsible for the content, products, or services on or available from those websites or in those resources, the links displayed on such websites or the privacy practices of such websites.‍

Industry

Web3 and the future of finance

Apr 13, 2023

April is national financial literacy month in the US, and what better way to celebrate than to get down and dirty with a buzzword that has utility way beyond finance and for which no one is yet truly literate? Web3. 

Ignore Zuckerberg’s animatronic introduction to the metaverse over a year ago (and all the ominous happenings since), Web3 is more than a virtual world most of us aren’t sure we want to play in. This next iteration of the internet incorporates decentralisation, blockchain and token economics – and it’s going to fundamentally change a lot of industries; finance among them. 


The building blocks of Web3

For users, the transition from Web1 to Web2 was fairly straightforward… we signed up for an email address (remember Hotmail?!). This gave us an online identity and a means by which to open accounts, join mailing lists, and make purchases – and we’ve been happily doing so ever since. But the move from Web2 to Web3 is a whole new ballgame, thanks in no small part to the technology underpinning it:

  1. Decentralisation: This is THE key component of Web3. The internet will operate across a distributed network with each and every user responsible for their own content and data; we’ll all have complete control of where our data is and how it’s used.

  2. Blockchain: Underpinning this decentralised model is blockchain, a secure, transparent and immutable database. It’ll make data breaches and hacking of personal information a thing of the past.

  3. Token economics: Just as email addresses opened up Web2, wallets will be critical for unlocking Web3 – they will be our main means for interacting with the blockchain. We’ll each hold tokens and private keys in our wallets that relate to contracts, value and assets (both real world and digital) stored on the blockchain. As an example, take the personal data that each of us controls in Web3. It’ll be tokenized and stored in our wallet, and entities that want to access it will need to request and be granted (or sold) permission by the owner. 

  4. Intelligence: This is where the semantic element of Web3 comes in. The current internet is structured and designed for human users, but the next iteration will also make allowances for machine understanding. Ultimately, this should facilitate a more connected and intelligent experience for humans, who will be served content based on their preferences. 


Web3 and finance

Wallets, tokens, smart contracts, cryptoassets, decentralisation…these are all the architectural components of Web3, and they can be used interchangeably to create any number of tech stacks. This means Web3 is transparent and composable, which in itself creates opportunities for financial innovation that are boggling. We’ve already started to see the shift brought about by Web3 technologies within finance, with tokenization opening up private markets to individual investors and digitalisation removing the need for intermediaries. But as Web3 picks up pace, there will be an explosion of yet more new use cases and business models for investing, borrowing and sharing ownership.


Web3 and wealth management

In Web3 parlance, the tried and tested practice of entrusting capital to a wealth manager is known as custodial, since an investor transfers custody of their assets. While there are established and trusted wealth managers in traditional finance, we’ve yet to see the emergence of such in the world of Web3 – quite the opposite, actually, which has in part prompted the development of non-custodial tools, enabling asset managers to manage client funds without having custody over them. This non-custodial development is a huge unlock, and creates a host of opportunities for asset managers, potentially giving them access to a wider pool of clients and streamlining regulatory requirements. 

In a non-custodial environment, trust also becomes less important than performance. For the first time, larger, more established providers will no longer have access to the most capital, meaning higher performing, less well known asset managers will have the same opportunities for growth as today’s big players. Similarly, smart contracts will protect both parties and guarantee that profits generated from assets allocated following an asset manager’s investment strategy are automatically distributed correctly to both parties. 


The future and Web3

The level of investment in Web3 is stonking – VCs are thought to have invested upwards of $32bn in Web3 companies last year. It's a level of investment that will accelerate progress in component technologies like blockchain, metaverse and tokenization.

The opportunities for consumers and service providers are profound, and Web3 will fundamentally change how we operate as a financial services industry (as it will across many sectors). We’ve barely scratched the surface when it comes to uncovering potential use cases, so it's certainly worth keeping an eye on – especially given how fast some developments are moving – but it’s important not to get lost in the hype. There’s plenty of time to get to grips with Web3, we’re a good few years off full implementation just yet.

Want to find out more about Web3? Team Hedgehog have pulled together a selection of bedtime reading recommendations: 





Nothing in this article constitutes financial advice or guidance. The content in this article is an opinion and is for general information purposes only. This article is not intended to be relied upon to make financial decisions. It is not intended to be financial advice. The value of your investment can go up or down so you may get back less than your initial investment. The article may contain links to third-party websites or resources. Hedgehog provides these links and resources only as a convenience and is not responsible for the content, products, or services on or available from those websites or in those resources, the links displayed on such websites or the privacy practices of such websites.‍

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