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Web3 is not only informing entire verticals and industries but automating the core technology stack of enterprises, including those once deemed as the disruptors.
Blockchain skepticism has turned to curiosity. Those who’ve been at the frontlines dismissing blockchain technology, longing for viable use cases, now accept they’ve been wrong. One of them is Nigel Morris, the Managing Partner at FinTech firm QED Investors and Capital One co-founder. In a recent blog post, Morris admits he’s been a crypto skeptic and that “this time two years ago, I didn’t understand it. I didn’t grasp the use cases for it and I truthfully never knew whether it would gather global adoption. I was wrong.” He leans in further, saying, “We believe that all of our portfolio companies will have to affirmatively develop a view on crypto and Web3 for both defensive and offensive reasons in short order.”
In a letter to shareholders, JPMorgan CEO Jamie Dimon praised blockchain technology and DeFi, a striking contrast to his previous crypto statements. Dimon now believes there are “many uses where a blockchain can replace or improve contracts, data ownership and other enhancements.” Barclays Corporate & Investment Bank’s Ramsey El-Assal said at its March summit meeting:
“We see blockchain technology’s potential as being on a similar scale to the transformative, decades-long IT shifts from mainframes to PCs to the web to mobile. We further believe the move from “centralized” to “decentralized” technology will be the dominant theme in FinTech for the next couple of decades.”
Gartner estimates that blockchain could generate as much as $3.1 trillion in new business value by 2030 – this could come in the form of the launch of new products/services across B2B and B2C verticals around the world. Currently, blockchain technologies have impacted the financial sector the most as its obvious use case is being applied – enabling a more secure, transparent, and efficient global economy. However, on top of this infrastructure is how blockchain technology will permeate throughout business functions to re-platform the processes and operations today. For enterprises, harnessing the power of decentralized technologies by understanding how it compares to today’s systems will be mission-critical.
Enterprises, especially FinTechs, are looking to be at the forefront of finance and want to deliver comprehensive capabilities digitally in one place. 40% of FinTechs’ current customers are likely to trade crypto next year (Activate Consulting). As crypto popularity continues to rise among their users, so does the need to adapt their platform to be “Crypto Ready” quickly. Enterprises focus on retaining current users by delivering top user experience and increasing active users. To continue to be innovative leaders, they must have a marketplace for users to discover all types of financial products, including crypto.
In Web2, consumers increasingly see banking-as-a-service solutions embedded in consumer goods. Target partners with the digital payment service PayPal, as well as with the Buy Now, Pay Later service Affirm to provide point-of-sale financing. Uber Cash is home to the Uber Visa Debit Card through a partnership with Go2Bank. The Web3 stack combines technologies, usually connected via APIs, consisting of every blockchain network and the apps and tools built to interact with it. The Web3 stack spans multiple layers: Access, Use Case, Infrastructure, and Protocol. Regardless of industry or where they are positioned in the market, enterprises will be able to drive innovation, revenue streams, and enhanced customer experiences on the blockchain because of Web3 enablers.
Web3 is only partially in existence within enterprises but is already making an incredible impact and altering strategies. Cross River Bank, which just raised $620 million at a $3 billion valuation, powers embedded payments, cards, lending, and crypto solutions for over 80 leading technology partners. Cross River CEO Giles Gade’s plan is to start offering more crypto-related products and services, gearing towards a crypto-first strategy. Investors are excited by the opportunity. “As Web3 continues to gain mindshare of consumers and businesses alike, we believe Cross River sits in a unique position to serve as the infrastructure and interconnective tissue between the traditional and regulated centralized financial system, as it transitions slowly to a decentralized one,” said Lior Prosor, General Partner and Co-founder of Hanaco Ventures in the Cross River press release.
In many ways, this time is no different than when financial institutions and VCs saw the disruptive potential by investing in FinTech innovation – analog to digital – years prior. If FinTech is the blending of technology and finance, Web3 is the merging of crypto with the web. This is a step-function better than the current financial system we operate in today, which is one reason why enterprises are now integrating Web3 via robust API solutions from the bottom up.
Below are a few examples of how the Web3 stack is automating the enterprise from our standpoint:
Cryptocurrencies are more than assets that are being traded; they’re used to interact with blockchain networks and their app ecosystems. Cryptocurrencies serve a variety of purposes. Most people know that cryptocurrencies can be traded on exchanges, used to pay for transactions, purchase products, or staked to generate yield. Few also know that you can use cryptocurrencies to vote on code changes, staked to secure a network, or function as an access key to permissioned communities. Earning rewards on your digital assets shouldn’t require an engineering team. Sometimes, the economics just make sense to launch your own node and stake your crypto. Spin up a node in just a few steps — no coding required.
Trading & custody
For enterprises to adopt blockchain technologies, being able to store, manage and transact with cryptocurrencies securely will be a major consideration. There are integrated solutions that provide secure custody, advanced trading platforms, and prime services so you can manage your crypto assets in one place.
A truly data-driven enterprise has yet to exist due to the limitation of data access. Despite data being a core component of business processes, data access has remained bottlenecked by technical inefficiencies and the lack of interoperability and trust. Solutions focused on decentralized storage or enabling data indexing, querying, and transacting will be vital to unlocking new value across many business functions. This, and the use of smart contracts, will have enormous implications for secure enterprise automation and decision-making. AML is the backbone of these key product offerings. With analytics, enterprises can connect crypto transactions to real-world entities using public blockchain attribution data, monitoring risk, and investigating fraudulent activity.
Commerce & payments
There is increasing consumer demand for online and retail payment acceptance in digital assets. Legacy payment systems have embedded transaction costs which are also passed on to consumers. Corporates and consumers alike are tuning into the economics of digital assets as an alternative medium of exchange. Turnkey APIs for merchants like accepting multiple cryptocurrencies or ways for consumers to purchase crypto from a crypto wallet will make the process more seamless for all parties involved.
Currently, Web3 APIs can be leveraged by enterprises to begin exploring the implementation of blockchain technologies to execute accounting functions, enhance IoT connectivity, access real-time and verifiable data to automate decision making, and participate in different networks. With read/write nodes, enterprises can quickly access business-critical data and insights from blockchains. A single API can help save your engineering team from having to build and maintain proprietary Indexers in-house, access data faster, and reduce development timelines.
Enterprises will need blockchain protocol specialists to truly understand how blockchain can help improve upon their current processes/operations and offer insight into how participating in different networks can add value to their business. In the same way that we saw a ‘mobile app’ version of a website, we will see a Web3-version of a Web2 platform – that will range from Google and Salesforce to Facebook and Tiktok.
Some pieces to consider when evaluating your Web3 stack to automate your enterprise:
- Leverage a third party’s combined crypto native and traditional finance experience.
- Get your crypto offerings to market faster with flexible, mature, robust APIs and infrastructure.
- Securely scale with standardized APIs to power and own the crypto experience via a range of fully integrated, white-labeled solutions.
Although there’s a general need for more regulatory guidance, crypto-first companies are working to best offer their partners a regulatory compliant framework while expanding their reach. Web3 products have generated mainstream adoption and will not be dismissed this time. “As the FinTech sector continues to grow in tandem with cryptocurrency and blockchain popularity, businesses will continue to adopt digital asset technologies,” according to The Block Research.
There will be a Web3 version of every Web2 service provider that enables enterprises, and that’s just the beginning.
Harry Alford manages institutional sales for Coinbase Cloud.