The promise of Web3 and blockchain technology

Web3, Blockchain, and Crypto are gradually making inroads into our lives. Financial institutions, government agencies and private organizations have either adopted or are preparing to integrate blockchain technologies in multiple aspects of their operations. Crypto assets have seen much wider adoption among retail and institutional users globally. The shift from Web2 to Web3 has started, and the complete transition will happen with time.  

While these emerging technologies and concepts are embraced for the tremendous economic and social value they offer; unfortunately, they are often viewed in silos. The fact is that Web3, blockchain technology and cryptos are inextricably intertwined. In this context, it becomes essential to understand that crypto assets play an integral role in the blockchain and Web3 ecosystems and, therefore, must be seen as a 'transformative force' in our innovation economy. Cryptos are much more than a new asset class and have an intrinsic value.

Web3 is the latest and third generation of the internet built on blockchain technology. Web1, the first version of the internet, started in the late 1980s and was confined to basic features such as static web pages that could display information. The second version, Web2, enabled users to move from 'only read' to 'read and write.' A great emphasis was laid on user-generated content and participation; however, tech giants owning social media networks and cloud-based services gradually evolved into 'data centers' and controlled the content shared by users.

Questions on data sharing and gathering, ethics and concerns about the privacy and security of data are some of the issues that have been increasingly debated and criticized. Technology has a solution to every problem. The blockchain technology underpinning Web3 has an answer to this challenge.  This emerging technology is known for its decentralized features and is based on a distributed and open ledger system, where each block stores information that can not be altered or tampered with, providing utmost transparency.

It is important to note that a blockchain operates through its own tokenomics based on incentive mechanisms. Incentives are critical for decentralized participants in a blockchain to cooperate in validating updates to the network. For instance, participants in the bitcoin blockchain expend computing power to validate transactions to earn bitcoins in the form of 'block rewards.' Similarly, each public blockchain has its native crypto, which is used to pay as rewards.

The incentive mechanism further forms the basis to maintain a chain of provenance for digital assets, which enables use cases such as decentralized finance, digital credentials and metaverses. By virtue of encryption and network-wide consensus on blockchains, the origin and transaction history of each unit of a crypto asset can be tracked. Due to the presence of this verifiable chain of titles, the value of digital infrastructure cannot be falsified or duplicated. This certainty is critical for Web3 solutions, which deploy algorithms that self-execute based on real-time data in the form of smart contracts. For instance, this may take the form of notary services, validating property records transfer.

In the context of India, blockchain technology, if adopted well, can improve public services and identity-based social development solutions. While the central government has recognized the value of developing blockchain technology, the next step is to pay closer attention to crypto's potential use cases besides digital assets which is just one of the use cases. Crypto is a powerful trend that is shaping economies around the world. The industry is confident that the policymakers will work together to formulate regulations enabling our economy to reap the full benefits the global crypto industry has to offer.

India has featured amongst the top five countries for embracing new digital assets. It can further benefit immensely if the industry and government work together to map out a regulatory framework that will enable crypto to gain legitimacy and protect users' interests. A recent report, 'The India Web3 Startup Landscape’ by NASSCOM, rightly mentions that Web3 holds greater promise in various areas, but the challenges with regulations are a critical impeding factor that will require decisive ecosystem action.

To summarize, crypto is core to the blockchain and Web3 ecosystem; therefore, in an effort to deploy and advance blockchain infrastructure to improve public services, the government must take a pragmatic approach. The journey has started. Nonetheless, the direction in which it will move will depend on how soon we create an ecosystem that embraces crypto. A more holistic approach is imperative for the growth of the industry.

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