Tokens, Tech, and Transformation: The Rise of Web3 in Business

Against the background of tepid market price activity across digital assets, the Web3 space continues to build. Developers who have become accustomed to building on Web2 rails are signaling a growing fascination with the paradigm-shifting potential of Web3. In particular, projects designed to make Web3 more accessible for builders and end-users continue to gain traction.

Welcome to Web3

Web3 is a catch-all term used to describe a new vision for the World Wide Web which gives power back to users in the form of ownership.

In Web2, the current form of the Internet, there is an exchange of assets between users and companies. If a user creates or earns assets within a game or social media platform, these assets are tied to an account that is owned by a centralized entity that has created the platform. If the centralized entity shuts down or closes, then the users lose access to their assets which they never owned in the first place.

Web3 is designed to enable direct ownership of assets through fungible and Non-Fungible digital assets. Web3 shifts the paradigm because users own their assets outside of the apps they are created within. These assets can also have multiple utilities and have few restrictions. For example, created content can be resold multiple times or be used as collateral for financing.

Users are signaling that they are curious and have latent demand in Web3 as evidenced by recent booms in the Decentralized Finance (DeFi) and the Non-Fungible Token (NFT) sectors, which respectively gave back ownership to users during the Banking and content creation process.

This gave the internet a taste of how much extra money they could be generating for themselves if Web3 was allowed to flourish and middlemen were removed. They are ready for more and brands and large enterprises are beginning to notice. While Web3 may mean giving some control back to users, some giant brands and Web2 natives are sensing this shift and are setting up for the next evolution of the internet.

While Web3 can be extremely beneficial for end-users, it also has significant benefits for the merchants and brands offering products.

Early Web3 Experiments Show Promise

Brave New Coin spoke to the co-founders of Bastion, Nass Eddequiouaq and Riyaz Faizullabhoy about their enterprise-focused web3 solutions. Bastion is building products to allow companies to seamlessly integrate web3 infrastructure into enterprise technologies through a compliant, white-label platform.

They told BNC — “No one is talking about how Web3 tools, like wallets, can uniquely solve the problems businesses have in their Web2 operations today. Take the cookie problem, for example. Third-party cookies are going away in late 2024, meaning that they will lose access to the data they use to market to, connect with, and build for their consumer base.”

Browser cookies are the small files of information that a web server generates and sends to a web browser. They help to inform websites about users when the users give them permission to do so. Google has said it will remove third-party cookies from its Chrome browser and other products before the end of 2024.

The Bastion co-founders explain that their custodial wallet, combined with their on and off-chain smart routing transaction system “will enable companies to rebuild business-critical touchpoints with users, at both point of purchase and post-primary moments in time.” This gives merchants and brands from Web2 an opportunity to reconnect with users in Web3.

Coffeeshop giant Starbucks launched Starbucks Odyssey in December 2022 as a Web3 evolution of their existing Starbucks Rewards program. The Odyssey experience involves users participating in a number of interactive journeys, once a journey is completed they earn Odyssey points and Journey Stamps (NFTs), unlocking further rewards and benefits. Starbucks taps into another benefit of Web3, enhanced user participation.

Another example of progress being made on the front of bringing Web3 to the masses is Ready Games. Web3 games have often struggled to access users because of friction deploying on popular shopfronts like the Apple Appstore and the Google PlayStore. In a press release, Ready Games writes “incentivizing Web2 game programmers to explore and switch to Web3, while distributing games ‘as normal’ through traditional app stores,” will be a focus of the project.

Part of this solution will be the dApp store kit. Because of a necessity to tap into external wallets like Metamask to make in-game transactions, the user experience in Web3 is often cumbersome, with slow turn-based games the only ones that work well, as gameplay is constantly disrupted. The Dapp Kit is a turnkey solution to enter Web3 on mobile devices and offers integrated wallets, on-chain user profiles, on-chain interaction, and a full dApp Store frontend stack so users can stay in one app during a gaming session.

Another startup called XPLA (formerly called C2X) raised US$25 million in March 2022 offering similar turnkey Web3 integration developer-friendly solutions. A difference between Ready Games and XPLA, however, is that XPLA is creating solutions through its own native blockchain, built using the Cosmos SDK.

This history of Integrating Web2 with Web3

Empowering enterprises to tap into the potential of decentralized information systems has been a key puzzle piece for the industry since the inception of Bitcoin. While Bitcoin and other blockchain networks were inherently attractive to cypherpunks and those with a background in Austrian economics, many observers wondered whether there was a way to fashion them so that they could work within the boxes that institutions need to operate within.

2014 to 2017- The permissioned blockchain era

During conferences in the mid-2010s, there was a great deal of buzz around uses for blockchains beyond public cryptocurrencies. The question of how to take the blockchain from a technology that powers fringe financial markets to one that powers our everyday lives began to be asked.

This presentation by Ken Kappler (Ethereum) and Patrick Salami (HitFin) in September 2015, states — “What is coming will be attempts to replace certain key financial decisions in which intelligent decision-making is not required.”

Early players in the private blockchain space, or, blockchains supported by enterprises began to emerge. Private or permissioned blockchains are blockchain networks where in order to participate — read, validate, or write transactions — requires some form of invitation or permission by the head of the network or network starter. These are different from standard blockchains which are open and permissionless.

Chief amongst them was R3, which was built by a consortium of major companies. Their first product was Corda, a private blockchain for secure financial transactions. Corda has since been adapted for multiple use cases. It can now support decentralized applications and is interoperable with Ethereum.

Also built around this time was HyperLedger by the Linux Foundation. Hyperledger was built as an umbrella project of open-source tools for Blockchain development. A specific tool, Hyperledger Fabric, gained some traction.

Other examples of permissioned blockchain projects from this period, included Eris, a company that built a private blockchain product for banks. The Eris private blockchains were forks of Ethereum.

2017-2019: Pilots and use cases

Following an explosion of mainstream interest in blockchain during the 2017 bull market, big names within big industries began to announce pilot blockchain implementations.

• Supply Chain – Mega corporations including Walmart and Maersk announced pilots and trials where the blockchain was used to track shipments, verify invoices, and cut costs. After successful Proof-of-concepts in 2016, Walmart announced that they would be working with IBM and Unilever on a blockchain-based food trust. The Food Trust was used to trace food shipped internationally to the US so that origin and time could be accurately tracked.
• Finance – Banking giant JPMorgan announced Quorum, a modified private version of Ethereum to explore the use of a distributed ledger for more efficient operations. The bank even launched its own currency, the JPM coin for internal settlement.
• Remittances – Recruited by companies like Ripple, institutions explored how blockchain systems could be utilized for cross-border transaction settlement. Partners of Ripplelabs include American Express, Standard Chartered, Bank of America Merrill Lynch, Barclays, and HSBC.

Challenges and Skepticism (circa 2018-2020)

It is an unfortunate and unavoidable fact that, within the blockchain space, price cycles drive development and building. While earlier in the article we noted that there continues to be interest in the transition from Web2 to Web3 despite a tepid price market of 2023, this is a trickle compared to the gushing stream waiting to emerge once price begins to pick up again.

During these two years of bear market, issues and criticisms of enterprise blockchains began to emerge which were perhaps masked during the 2017 era because of price gains and excitement.

• An inability to scale – A problem that also exists with traditional permissionless blockchains too. Scaling in the context of blockchains is the ability of a network to handle a growing number of transactions without performance degradation. There is a cost of adding new nodes that can be particularly challenging for permissioned blockchains which are not easily accessible.
• Isolated islands – Developer and often brand interest during this period was directed toward larger well-established chains like Bitcoin and Ethereum. This is what often occurs during bear markets, wealth consolidates toward safe havens. Most private blockchains were not interoperable with incumbent blockchains and as such died a slow death.
• Were they practical – After the intoxicating cloud of the bull market dissipated most of the market questioned the value proposition of private blockchains. They added layers of complexity and cost to systems that were already functioning. For most, the costs outweigh the benefits. Enterprises seeing value dribbled away from the blockchain space during the bear markets parked their decentralized concepts for another day.

Evolution and the Emergence of Web3 (2020-2023)

In recent years, the enterprise blockchain concept has re-emerged. While there are still remnants of its old visage, a new Web3-focused version of enterprise blockchain is coming into focus. Nass Eddequiouaq and Faizullabhoy told BNC — “Rather than force companies to adopt a new tech stack, or rely exclusively on the blockchain to deliver user experiences we know it cannot, the answer lies somewhere in the middle, a mixed stack of web2 and web3.”

Bastion, for example, has a core focus on smart transaction routing and using on and off-chain transaction processing to speed up and reduce costs.

Tokenization and DeFi – Concepts like a self-contained token economy and decentralized finance have been taken from public blockchains and are now being deployed within private projects. An example of this trend is offered by social media giant Meta (formerly known as Facebook). As part of its rebranding to Meta, it has been revealed that the mega-corporation’s product suite will now be shifted towards the metaverse – a virtual reality social network where users interact with avatars of each other.

It has been reported that Meta’s metaverse will be powered by a digital currency that will settle transactions across the parent company’s suite of apps and services, which include Facebook, Instagram, WhatsApp, and the Meta Quest. Staff is said to be internally calling the token project ‘Zuck bucks’.

Hybrid models and a focus on interoperability – Models that allow enterprises to tap into public blockchains through a simplified, secure funnel are becoming increasingly popular. An example of this is a recent partnership between Axelar and IT giant Microsoft.

Axelar, another blockchain infrastructure start-up focused on allowing companies to more easily connect with Web3 is backed by heavyweights like Coinbase Ventures, Binance, and Galaxy. Its core product is a network that allows for secure cross-chain communication in Web3. In July the company announced its partnership with Microsoft.

The partnership is intended to allow developers to access tools and services built by Axelar AxelarJS SDX, and Axelar General Message Passing on Microsoft’s Azure Marketplace. This is set to increase the umbrella of customers that can use Axelar’s solutions.

In sectors like Fintech, gaming, and content distribution, interoperability is attracting new users.

Another example of this style is the partnership between Chainlink and the industry-standard SWIFT interbank messaging service. The partnership was announced in June. It is designed to allow the SWIFT network’s institution to seamlessly interoperate and shift assets around the multitude of blockchains available across the space.

Two weeks ago as part of the partnership, ANZ, one of the largest banks in Australia, used Chainlink’s CCIP infrastructure to successfully demonstrate a cross-chain purchase of tokenized assets with A$DC, an ANZ-issued stablecoin of the Australian Dollar

Remnants of earlier versions of the enterprise blockchain – While there has been a new wave of enterprises either borrowing or integrating with public blockchains, the private blockchain concept is alive and kicking. A notable leader in this space in 2023, is Consensys. Consensys is a blockchain software and technology company that is well-known for building solutions to interact with Ethereum.

In 2020, it acquired Quorum, JP Morgan’s private blockchain solution, and has gone on to sell it as a solution to enterprises. In the same year, the Covantis initiative began, which over the course of three years has evidenced the utility of private blockchains for supply chain management.

Covantis was jointly founded by supply chain giants ADM, Bunge, Cargill, COFCO, Louis Dreyfus Company, and Viterra. Its platform is focused on digitizing global trade processes to make them more simple, secure, and efficient. Targets of the project include reducing the amount of paper and emails needed to verify supply chain transactions, offering a single source of information that can be used to coordinate logistics and share documents, and giving multiple partners the ability to share real-time transaction data.

Covantis plugged into Quorum along with two other Conesensys products, Codefi, and Diligence, to create a global network for the efficient execution of bulk agricultural trade operations. Features of the network were set to include notice issuance and visualization and user productivity and management.

Covantis was launched in February 2021 and by 10th May 2021, it had streamlined collaboration between 45 legal entities and 500 users across 16 agri-groups around the world. In the 3 months, 3,850+ messages were exchanged using the service.

Conclusion

A new narrative has revitalized the blockchain-for-enterprise sector. Web3, with its promises of decentralized ownership and enhanced user agency, is becoming the linchpin of a new digital era. Giants of industry, from Starbucks to Microsoft, are aligning their strategies with this evolution, seeking innovative ways to harmonize with its ethos.

Different from previous iterations of enterprise blockchains, brands now appear more interested in plugging into public blockchains securely, than in building their own private blockchains. There are clear cost and accessibility benefits with this new approach.

The convergence of public and private blockchains, the integration of traditional enterprises into the decentralized space, and the continual innovations hint at further development integrations. Perhaps we’re at the precipice of the original dream, a world where the blockchain flows seamlessly into our everyday lives be it through our banking, entertainment, or social media.