Exploring the frontier of Web3, we’ve gathered five transformative use cases from Co-Founders and finance experts that challenge the status quo of the financial industry. From the democratization of investment decisions through DAOs to the potential risks Web3 poses to traditional financial regulation, these thought leaders provide a glimpse into the future of decentralized finance.
- DAOs: Democratizing Investment Decisions
- DeFi: Emerging Tech Challenges Intermediaries
- Uncollateralized Lending: Empowering the Unbanked
- Fractional Ownership: Accessible High-Value Investing
- Web3: Risks in Traditional Financial Regulation
DAOs: Democratizing Investment Decisions
One transformative use case of Web3 in the realm of decentralized finance (DeFi) is the development and adoption of decentralized autonomous organizations (DAOs) for managing and distributing capital in investment funds. Unlike traditional investment structures, which are heavily centralized with decision-making powers residing with a select few managers or board members, DAOs distribute governance across a network of stakeholders who use tokens to vote on key decisions such as fund allocation, investment choices, and strategic direction.
Imagine a scenario where, instead of a traditional venture capital or private equity fund managed by a firm, you have a decentralized fund where all token holders can propose and vote on potential investments.
Each stakeholder has a say proportional to their token holdings, and decisions are made based on collective agreement rather than top-down directives. This democratizes investment opportunities and potentially lowers barriers to entry, allowing a wider range of individuals to participate in ventures that were traditionally limited to wealthy individuals or institutional investors.
Niclas Schlopsna
Managing Consultant and CEO, spectup
DeFi: Emerging Tech Challenges Intermediaries
In today’s rapidly innovating world, it’s no surprise that blockchain technology is gradually creeping into our everyday lives. One such advancement in blockchain has allowed us to get acquainted with Web3.
Although it is in its initial phase and still in its infancy, it promises to dramatically change the experience of being online, just as PCs and smartphones did. In layman’s terms, Web3 offers a read/write/own version of the web, in which users have a financial stake in and more control over the web communities they belong to.
Talking more in detail about Decentralized Finance, or DeFi, it uses emerging technology to remove third parties and centralized institutions from financial transactions, making it easier and cheaper by removing the “middle man.”
There are many challenges to this, especially since this is still a fairly new and unregulated market; it is prone to many security risks. Since the technology is still in its introductory stage, I would imagine that a few years down the line, with perhaps a more robust security system and worldwide recognition, it could definitely set out to fulfill the promise it has made.
Bilal Lakhani
Senior Finance Analyst, Multimatic
Uncollateralized Lending: Empowering the Unbanked
One game-changer is uncollateralized lending. The idea is to borrow funds without putting up any assets—that’s the power of DeFi protocols. This cuts out traditional banks to empower those who lack the collateral for loans. It challenges the status quo by democratizing access to finance. Traditional banks will need to adapt and offer more competitive rates and services to stay relevant.
Syed Balkhi
Co-Founder, WPBeginner
Fractional Ownership: Accessible High-Value Investing
One transformative use case of Web3 in the realm of decentralized finance is the growing popularity of fractional ownership of real-world assets. Investing in certain assets that have high value generally requires significant capital.
So, the situation is ideal only for high-net-worth individuals or organizations. DeFi, through Web3 technology, makes it possible for you to tokenize real-world assets. This means creating digital tokens on a blockchain that represent ownership fractions of a physical asset.
It promotes accessibility, as tokenization allows anyone to invest in real-world assets with negligible capital. This makes it easier for people or organizations to invest in or acquire high-value assets, demolishing the idea that opportunities are open to a select few with high capital.
Jared Atchison
Co-Founder, WPForms
Web3: Risks in Traditional Financial Regulation
As a mortgage broker, I can’t help but look at the risks that Web3 presents to the finance industry. DeFi is still in its infancy as a concept and industry, but its relationship with traditional finance systems won’t be a smooth one—in my opinion.
If you work in finance, you’ll know how regulated the industry is. With our lending cases, there’s a huge amount of red tape: tick box after tick box of anti-money laundering, fraud, and financial crime checks. And this is a good thing.
But Web3 could be a threat to that, simply because of how much freedom it gives to creators on the internet—everyday users need to be protected, especially when it comes to their finances, so I envision a patchy relationship between Web3 and traditional and mainstream financial institutions, such as the mortgage lending space.
Luther Yeates
Head of Mortgages, UK Expat Mortgage
Related Articles
Credit: Source link