Web3 is the future of the internet, but, in many cases, that future is happening now. Pockets of freedom exist online, allowing consumers to control their data and finances outside of centralized systems. Instead of acting solely as customers and handing data over to large corporations, people are becoming shareholders and active participants.
Indeed, individuals can tokenize anything, from artwork to a meme, allowing them to monetize their creations without involving a third party. They hold digital wallets and complete cryptocurrency transactions without repeatedly sharing personally identifiable information.
Enterprise use of Web3 hasn’t yet occurred, however. According to a Gartner report: “Web3 won’t overtake Web 2.0 in the enterprise before the end of the decade.” Nonetheless, your financial institution shouldn’t delay preparation. With Web3 on the horizon, it is essential to address its security.
Below, we break down the meaning of Web3. We analyze how it differs from previous versions and what your organization can do to future-proof its operations.
Web3: What It Is and How It Works
Web3 is a new version of the internet, offering increased functionality based on privacy, decentralization, machine learning and security principles. The term refers to many technologies founded on decentralized blockchains.
In 2014, Gavin Wood invented the term Web3 (originally Web 3.0). Wood also played a role in developing Ethereum, a blockchain that supports decentralized apps (dApps). Web3 includes blockchain-based decentralized finance (DeFi), non-fungible tokens (NFTs), cryptocurrencies and decentralized autonomous organizations (DAOs).
Web3 gives power and control back to its participants by enabling “peer-to-peer interactions without centralized platforms and intermediaries.” The idea is that individuals own their identity, data and content, a format that contrasts sharply with the existing system where governments and big tech companies manage these elements.
Web1 vs. Web2 vs. Web3
Web1, Web2 and Web3 are different stages of the internet. Experts differentiate the versions into read-only, read-write and read-write-own.
Web1 existed from 1994 to 2004. It provided static content without much interactivity for users.
Web2 created gatekeepers and central authorities, including search engines, social media platforms and mobile apps. Currently, Web2 leans on centralized software, services and servers. Enterprises and consumers must trust the companies requesting data during onboarding processes.
Web2 has resulted in digital giants holding power and consumer data. It has also engendered a reliance on passwords and user IDs.
Web3 puts consumers in the driver’s seat. Without a central authority, users trust the protocols rather than the enterprises. Applications include dApps and centralized services or marketplaces. Web3 does away with credentials and keeps user records on a blockchain, accessible via private keys.
Web3 Security Challenges and Risks
Experts are warning consumers and enterprises about Web3’s increased attack surface. For instance, malicious actors have hacked smart contracts stored on blockchains like Ethereum. In some cases, individuals have lacked the know-how or willingness to manage their own data, resulting in lost private keys and inaccessible wallets.
These risks affect consumers and enterprises involved in crypto banking. While all companies must adopt a multi-layered cybersecurity policy, the first step towards Web3 security is to improve your identity verification processes using a portable KYC blockchain solution.
Portable KYC and Web3 Security
Today, banks and financial institutions use the Web2 model when performing Know Your Customer (KYC) processes for identity verification. Your clients and potential customers must trust your organization and hand over sensitive information, such as photo IDs and social security numbers. In return, your financial institution takes ownership of this data, becoming responsible for safeguarding the information. Decentralized identity management services, leveraged by customer acceptance platforms like Insnt, allow users to take ownership of this sensitive information. With Instnt AccessTM, the first portable KYC SaaS solution allowing customers a one-time sign-up for products and services, businesses can eliminate data breaches, improve acceptance outcomes, and fight fraud, all with just one click.
Instnt AccessTM confirms user identity once through a frictionless onboarding experience. After that, users can log into multiple fintech products or services with a single click. With Instnt, individuals permit banks and financial institutions to view their data without ceding control, meaning if your institution is involved in a data breach, you’re not holding onto sensitive customer information. Instnt Access™uses a hyperledger blockchain to help organizations comply with KYC and Anti-Money-Laundering (AML) regulations while providing a safer experience for consumers.
Adopt a Secure Approach to Navigate the Web3 Landscape
Web3 security isn’t infallible, and organizations must act now to protect their data. Instnt provides a future-proof customer acceptance platform designed to reduce fraud and improve user experiences. Unlike the Ethereum blockchain, Instnt’s hyperledger blockchain doesn’t use smart contracts. Additionally, the information remains publicly available. Both of these differences improve Web2 and Web3 security.
Request a demo today to explore how Instnt can help your institution mitigate security risks.