EBC22 | Moving from Web2 to Web3

three two one [Music] okay guys so are you now ready we're moving from web 2 to web3 so alex this page is yours hello hello everyone well thank you for joining us uh first of all please give a round of applause to our panelists um hopefully together we're going to decipher what um web 3 is for all of us and what the future potentially holds and how are we finally going to transition from website to web 3. um some alex managing editor of cointelegraph uh hopefully it's your go to uh go to source for all your crypto news um and now i would like to pass it on to you and perhaps he could introduce yourself each one of you and then explain what web 3 is for all of you one by one well please one thing so my name is monty metzger i'm founder and ceo at ltx.com we're regulated fintech company out of liechtenstein we're leveraging the blockchain laws over there and got eight registrations blockchain related licenses who are giving us opportunity to do a variety of services including a crypto exchange a token issuance platform we have a dex aggregator and we've recently launched time ends as a tokenized diamonds platform for within nft marketplace so that's all about ltx go sign up we launched a mobile app today big milestone for us congrats uh so yeah um so i guess we'll just introduce ourselves first before answering the question um yeah so i'm my name is toya toyajiang i'm the cmo of bit.com biz.com is a cryptocurrency exchange we're specialized in crypto options trading uh you may wonder why like in crypto exchange talking about web3 because we are we're from matrix port family which has different business unit including crypto bank ventures asset management well of course exchange business we're quite deep rooted in this space and uh yeah i look forward to exploring the frontier of the space as well hi everyone my name is dietrich van wersch i'm a sales manager at chain analysis chain analysis is the leading blockchain analytics firm in this space so basically you were able to decipher who is who on the blockchain which addresses belong to which services whether they're good or bad and we're able to offer investigatory and anti-money laundering services to law enforcement financial institutions and cryptocurrency businesses like a lot of the fine people in the room today hi i'm robert ellison i work for figment figment is an institutional staking provider so we support about 60 proof of stake protocols one of the interesting things about figment is we have a protocol research team so we're very knowledge driven in terms of educating the space thank you everyone and uh i guess we can come back to you monty uh forgotten the first question can you like give us an overview what is web3 for you yes so i mean we've been through the cycles of the internet so the first generation promised to be a decentralized web where we get access to the information so it was the age of information we've now entering the age of um value the internet of value and so web 3 for us is really this third generation of the internet which combines three key elements um so one is really a decentralized ownership you have a stake in the company or in the project third is rewards so you're rewarding actions within the network and third is the governance structures so that you actually control it in a decentralized manner thank you mountain um yeah so i would like to describe uh the evolution of wipe one web to webstery in comparison with the evolution of media so when we are going through the newspaper television and internet so the evolution of media is not merely the evolution of the medium is also the evolution of the business model so think about the fact that when when music is digitalized um it's it affects how we sell the music same as the film a good example would be how netflix has been transforming their business from physical delivering cassettes into a like stream media content producer so in terms of business model change web one was about monetizing the traffic web 2 was about monetizing of course the traffic but also users data some of them also monetize on their service as well so for web 3 it will be everyone monetizing their contributions to the internet to put that into a very simple way um one tangible example um because we're still in the very early stages so kind of limit my imagination of how things could be but one example could be like the tick tock video producers uh getting rewards from the pre-written protocols instead of from tick tock the the platform so just one examples around here yeah perfect thank you yes so for me web 3 is about taking the centralized internet as we know it and moving over to the centralized network of services in which individual participants own part of the network and what i see it is about is also taking the principles and philosophy that's been driving bitcoin and cryptocurrency generally over the past decade or so and applying it to the internet at large when satoshi wrote his initial white paper it was taken for granted that the money supply how it's distributed how transactions are processed who holds it that that would be done in a centralized manner but satoshi came along and said no it doesn't actually have to be this way we can have a decentralized mechanism to distribute the money supply that can be open for the world to see we can have a decentralized mechanism to process the transactions and individual users can own part of the network individual users can be their own banks what web 3 is about is taking those same fundamental principles and applying it to different use cases like in the world of art with nfts in the world of businesses with dows or in the worlds of tokenization with taking physical assets like cars and real estate so that's what's exciting about it to me taking things like censorship resistance taking things like ownership peer-to-peer and most importantly decentralization applying it to the world at large that that's what web3 is really about thank you yeah so i agree with most of my colleagues i think a lot of us are in it for the same reasons um but maybe if we take a step back and think like at least for for older people uh who are a part of web one uh how did we diverge into web two like how did this happen um i think there's a sort of feeling that things went sideways um and and web 2 came along like a bulldozer in some ways and got taken over from the fundamentals of how the internet was imagined um and so i think web 3's a lot about that there's a social component to that um is there an uneasiness with how we use the internet now it seems strange sometimes it seems out of our control it seems like a vague uneasiness of of what exactly are we doing um and so if we look at the information right being processed and at a protocol level we're we have no attachment to that some some protocols even people are using them right now as i look around on their phones and cameras some of them are proprietary we don't really have any sense of how they work or how they operate and then if we look at a layer above that at applications being built on these protocols they've been centralized again out of our control and so how do how do we make more sense of this how do we look at these layers and look at these protocols and be more involved uh and so yeah that's part of governance but that's a part of ownership too because the honest truth is people don't get involved unless there's value attached to it and so web 3 is a very much about attaching value there's sort of a saying of you know data is the new oil so is that is that going to be a real thing that it sounds interesting we could harvest all the data that everyone's using and actually get value out of it and then be a part of that you know we could be active participants we could be passive participants um i don't know if it's better but it's probably sounds better than what we're currently doing actually catching on to the point that you're raised you think there's like a an extra philosophical edge for example in comparison to transition from one one to web two because now basically web3 is all about sort of the blockchain cryptocurrency powered economies that give people the power right do you think that basically like what's behind the idea behind it gives it an extra kick yeah definitely i think it's it's an interesting case study to see how we went from pre-browser internet which was very social like you know if anyone was on the internet back then it was really just about communicating with people you know you couldn't browse or buy anything and so how did web 2 usher in it was really about consumption right and and big players start to control the marketplace um without holding those fundamentals true so there's like really founding principles i would say with web3 with consensus mechanism with the decentralization with how they're built and how they're governed that is really drastically different and maybe like moving on the thought do you think others outside of the or the crypto ecosystem are going to be enticed to join this kind of community driven effort yeah i can take that i mean one really interesting area has been in the world of nfts because what that's really done is open up crypto2a or web3 to a much broader base i mean it used to be that you know cryptocurrency web3 the fact that we're discussing it at all actually shows how much more prevalent it is it used to be that to be quite a narrow group of people that wasn't something that was known in everyday parlance even nfts were something that was just a handful of esoterics were we're dealing with now if you look at it just about everyone is talking about nfts constantly i mean was it cristiano ronaldo is now partnering with binance it's really entered into the mainstream and that's exciting because you know people might have felt okay bitcoin d5 this is all a little bit too confident a bit too niche for me but we have so many other use cases right now that are so much more applicable i think there's still a lot of work to be done before it can fully take over web3 before we really see it fully enter the mainstream and be part of our day to day's life but i think we're still in the infancy stage but uh it'll be i'm very optimistic about the directory just just share a little bit about my thought which which may be a little bit of different then on this panel may stream uh the the drive of web 3.

um well it sounds very good about everything decentralized everything going back to what internet was was designed about peer-to-peer communication but it's also driven by financial rewards um social fi game fight x to earn so it this is the simple idea that i can actually drive participants of of of the next round of evolution right so it's it also fits the nature of human being like they were they like users or participants used to be the consumer of internet and now they're an owner internet of internet but that's actually not the essence of what drives them to participate it's actually the reward um actually um like gravitate them into this in this this world um but it's it doesn't that it doesn't mean it's less fancy or less ideological it almost means it's real um it's so uh human nature right yep well the ideology is sorry just before i go to the ideologies taken from the big guy and allowing the little guy i don't know some nft like artist in brazil to create an nft and for him to go like public and you know become famous and to be able to earn and spread his art so like for me that's what it looks to be about so um yeah maybe you have kind of thoughts based on that i mean if you if you look at the key players of web 2 you see that we failed on so many levels in making this vision true of a decentralized internet because we now have a lot of monopolies like we have monopolies in social networking in payment services which are centralized entities and now with web 3 and blockchain technology and cryptos and tokens we're actually making this vision a reality and on top of that what we've seen from the development right now until like the next 10 years is that we will probably have a 10x 100x or a larger growth opportunity there because we can tokenize underlying assets we can tokenize financial assets or even going into other industries where we tokenize things like using like healthcare your health data data things or even assets like real estate diamonds what we are doing with timeans.com and so everything that can be tokenized will be tokenized and web 3 is enabling this next growth wave of the crypto industry okay so talking about the next wave obviously the name of the panel is the like the move from web 3 to web web 2 to web 3. how do you think this move will happen will it be a revolution is it going to be an integration is there going to be a transition and perhaps can you theorize how dramatic it's going to be i'll start with you yeah it will be dramatic that's for sure we're still at the beginning so every technology movement has these like life cycles so it's a it's a curve where um you basically start until you reach a mass market and then it drops down into attention or goes into kind of a mainstream adoption really and we are still early i mean with a few hundred million wallets which are active currently we have not seen the billion dollar uh the billion um user market yet so i think that the adoption will happen and the impact will be tremendous because it will enable access to monetary systems for people who have not a bank account or who are unbanked meaning that they don't have access to loans or like global payment infrastructure so this will be revolutionary uh also having access to new asset classes investing in um all different kind of financial products on a global level because at the moment it's still all locked up in these different silos so we will overcome this with a fully decentralized um network and then most importantly i think for everybody involved it's a big change because with the rewards what you also mentioned with like handing out uh rewards or gratitude like saying thanks for contributing to the networks by giving them a token where they can use and do something with it or just swap it into currency again this is incredibly powerful so i i have to disagree with what you said is the data is the new oil because that's web 2 thinking like oil won't be a topic in the future at all and data will go back to the users so everybody will be empowered all users who are in web 3 will be their own bank their own data controller they will be rewarded if they contribute so i think for me it's a very exciting promising future yep but users are going to be able to sell their own data so in a way data is still going to be well oiled if we use that terminology but the power to sell that or distribute that information is going to go back to the person not the you know the website company exactly that's the vision what we see right like as a pragmatic approach is that currently in web 2 you have all these logins you have a log into twitter facebook linkedin like all services you use in web 3 your wallet will be your one identifier you see that if you log in to timeas.com or openc or like any nft platform the the wallet connect is already making you uh the wallet the one id you will be using and this will be in the future even more a key element where you see how web 3 plays out yeah moving from back to the question moving from what two two to web three um it's going to take process in my point of view it's not going to be a drastic change first of all there will be experiments like like what we observe nowadays there are the experiment of web3 applications there's productly some social fi projects coming up uh game file x to earn projects so they're testing the market is there a market demand in this it doesn't really make sense does the economy model make sense so this is the testing period of time well first of all it doesn't have to happen um in the sequence it can happen simultaneously so the second step is infrastructure level so the infrastructure needs to be ready there are so many protocols nowadays um it's as annoying as so many logins of facebook or google logins because they can't communicate with each other so so the protocol war needs to have a winner and then we have the winners of the bridges because there's also a competition field and then the third period third step would be we go out of the bear market hopefully and then money pumping into this field again helping the projects for development acquiring users penetrate the market and then the web 2 giants also developing into the web 3 area we've probably already seen some some of that so they're going to accelerate the user acquisition and then web 2 and web 3 is going to co-exist that they're going to compete with each other or they're going to merge so the same back to the analogy that i made the same as how news agents are tapping into the television or they're typing into the internet so they're going to adapt into web 3 as well so sorry web 2 applications are going to adapt themselves in web 3 so there will be a balancing period of time and then eventually there will be so we so-called explosion of web 3 applications and it's not going to take as long as what web 2 experience because we also have the the experience and know what users of the internet ask for so this this is uh the journey particular pretty much that in my imagination just quick follow a question when we talk about the web 2 companies getting into web 3 and then web 3 companies kind of doing their own thing do you think one particular uh has an advantage a competitive advantage over the other because on one side the website companies have the money but web3 companies have the ideas and the young people and you know the community that you know we see here well that's a very good question um i think each site has their advantage and we don't know which one has an absolute advantage on the one side the web 2 companies has the experience of the user experience like they they know the service driven approach which is very essential for user acquisition and the the web three services or the emerging ones they know the token economy is better probably um than than the existing ones so it's it's going to be a market test thank you dietrich yeah so and going from web 2 to web 3 you know what needs to happen there's a number of different ways you can answer this question i think one thing that's going to need to happen and one thing that we're more qualified to discuss is there needs to be more trust in this industry and trust in web3 in general social analysis we were started because our co-founder when he was at another cryptocurrency exchange in 2014 couldn't get a banking license and he realized that that's because this is a very low trust industry and a lot of the early stories in crypto web 3's history things like mount gawks things like silk road have have tarnished the reputation of this industry to a lot of the mainstream among the mainstream public i think a lot of people here can relate when you tell people you work in crypto it's like oh that's cool but let's be real like the reason people use bitcoin is for money laundering and if you read the channels cryptocrime report which we release every single year it's the most comprehensive study on crime in this space you'll find only 0.15 percent of all the activity on the blockchain is illicit so we have to do a lot to dispel a lot of the the myths around cryptocurrency to spell a lot of bad stories and those do comes up things like luna obviously going to shake trust in this industry and we need to empower let's say law enforcement agencies letting them know what the tools are at their disposal to catch criminals and catch illicit elements in the space and letting them know actually web 3 is really actually fantastic when it comes to let's say catching criminals when it comes to avoiding money laundering because of how public it is letting them know all the benefits and you know having people like my panelists on here today that are offering services in this space and letting them know the success stories all the potentials here and trying to do our best to dispel to dispel the negative myths here if we can get more trust in this industry and dispel all the negative stories i think a lot more people are going to be confident moving into it do you think the crypto companies will need to kind of adjust the way they do things right now to um to make it more similar in terms of maybe reporting standards or transparency um in order to well first of all somehow merge with web 2 or overtake web 2 because right now as you pointed out like not many understand what crypto is like they don't understand that it's a bad idea to siphon funds with bitcoin because everyone can see it do you think there will be kind of a need to yeah kind of change the the ways a little bit and uh adapt yeah so i mean like you alluded to right there i've always said if i was going to launder money the last thing i'd ever want to use is bitcoin or any other cryptocurrency because it's like you rob a bank and there's a gps locator of where you are at any given moment so what so i i think what we need to have is a lot more education this space because oftentimes when i explain what we do which analysis especially to people at more let's say traditional financial institutions regulators they're really shocked that this is even possible sometimes they'll say oh i thought the whole point of crypto was that it's untraceable it's like well no it couldn't be further from the truth actually but what yeah so i i actually find a lot of web 3 businesses they are very they very much want regulation they very much want to have they want to abide by the highest anti-money laundering standards it's going to require a lot of education by people like us here in this room today to let the industry know of what's actually capable and no you don't need to be worried about the type of crime and as we move into even within web3 let's say more things d5 protocols elements of that nature we end up almost in more philosophical questions of okay on a d5 protocol who's actually responsible if funds are being laundered you know we're developing solutions on there regulators are having having thinking about it but i i think i can see the industry headed in the right direction in that regard but but it's also something where you see that the evolution of the industry is is changing how products will be brought into the market and especially with like blockchain analytics for the first generation of crypto exchanges it's hard to like go back and do all the back tracing of all the transactions so for them it would be hard to comply with future regulations like mika or the ones in lichenstein for example which are quite comprehensive but still lightweight so you can get the balance right between innovation and and playing with the rules there and um so with that it's will be the chance for new players coming out a kind of a second generation of crypt exchange whether it's bit or lcx or um somebody else who are like reinventing and playing with the rules trying to leverage these new technologies without there in terms of blockchain analytics and so we have built a crypto compliance suite where we integrated blockchain analytics right from start so that when every transaction is going in and out um trigger different risk rules to it so we can actually already comply with the regulation with coming up from mika and um i think that's the opportunity you know we have not we've seen that in first evolution of web 2 it been friendster in myspace but then the second generation took over like facebook for example really uh brought it to the mass market and that's where we are right now there are some players already but the next growth wave will be uh driven by by the new next generation yeah well for sure regulation is going to be a big issue and robert do you think that that's what's going to impact the transition from one two to web three or yeah i see that as uh i call it the dam right so there's a lot of institutional players especially on the financial side that simply don't have that they're simply uncertainty and risk in the market and so they're looking towards regulations and i i guess the current market trend we see that more than ever right and so you know based on what my colleagues said there's a lot of education that needs to happen so if you even look at the word staking for example which comes from proof of stake and and sort of a core concept to how it operates there's a lot of people who now use the word staking you know they could be providing lending platforms liquidity even insurance products and nfts um it's not really staking you know they'll use the word but it's not a fundamental thing they're just balancing off their books or they're just doing you know they're acting like a bank right so what's going to provide that certainty in the marketplace it's going to be regulations so there's sort of a balancing act of crypto wanting to be decentralized and and you know in the power of individuals but it doesn't you know it doesn't provide safety for human nature uh so i think you know in some ways i'm looking forward to some regulations but also being apprehensive because we want to get it right uh you know we want policymakers and politicians and anyone involved in that space to really understand what we're trying to accomplish and really you know i guess what i'm saying is education is key at this moment and and it's going to take a lot of hard work so what would you be hoping for international regulation that most of the countries would agree to or like national and then the countries would have to essentially run between countries and jurisdictions that's what we see now we see certain countries who are much more advanced regulatory wise especially when it comes to custodying digital assets frameworks so you know i won't name specific countries but you know we could you could certainly see that and and you even see the flow of of um startups moving to countries that are more crypto friendly and have you know those regulatory safeguards so it's almost competitive in some ways you even see it at the city level which which countries are more crypto friendly which which cities are more crypto friendly um so i think that's a big move that that honestly we have to think about yeah thank you well we don't have too long so i would like to ask a final question and uh what would you say is the main issue around the move to web 3 that we're currently fighting as a community and that we need to well overcome within the next next few years what's our kind of next step to make sure that we kind of get this website feature that we would like to see monthly if we can start with the union so i think it's all about trust and trusted technology um according to lichtenstein they didn't call it blockchain laws it's the trusted technology um how they call it our technology service providers are registered and i think this trust level is needed if you look at things like what's happening with celsius at the moment they're they're offering kind of staking profits but they actually as you said just rolled off from from the balance sheet or created a different way so they're acting like a financial player like a bank probably so these things are highly regulated so they're hiding between behind these words of staking so i think regulation might be something good for the industry because it might avoid these collapses and really bring clarity that the innovation is not stuck and not um and could thrive really so that innovation and all these ideas around staking could be done the right way and if there's somebody providing yield on products you can do it but then you have to just publish your prospectus get it passported across europe or other countries you can do that and i think now the knowledge is there if i look in the audience there are so many smart people we can really bring that to the next level and i think that could be the key to success thank you sorry yeah so um i think it it's like in this panel we all focus on the regulation here um so actually the the issues that web3 is facing is not more or less than cryptocurrency or blockchain technology is facing um at this moment it is unclear regulations but it can be can be more because it's not just about finance uh it also about applications and different levels of applications so you want global borderless seamless experience of of the digital world that also involves probably data sovereignty where does the data stored at and who owns that um but it takes time to evolve into kind of like self-governance thing and also it's it's not just about each jurisdiction's uh regulation it also probably involves different jurisdictions computation in this so i don't know how to mitigate i don't have the answer of that but it's very exciting because the adoption of webster e is actually propelling the overhaul change of the social or political structure worldwide because it is firstly access uh accessible globally and it's traceable globally and it's it's going to disrupt everything that we're familiar with at this moment yeah so one area i'll be uh qualified to speak on here is regards to when the risk going into web 3 is regards to crime in the space so one thing if you look at our state of web 3 report another report we're releasing shortly on the state of web 3.

one thing you'll see is that in q2 i think of 2020 with d5 the the volume of the the value of the volume being transmitted was negligible a few million cut to one year later and it was nearly four trillion dollars which is an enormous increase which is fantastic and really encouraging for the growth of this space however what we also saw was i think in the last year about a 2 000 increase in terms of the amount of illicit funds that were being laundered through d5 platforms on top of that what we're also seeing is hacks used to happen almost exclusively on centralized exchanges now if you look at q2 of 2020 2 you're seeing that nearly 100 of all hacks have occurred on d5 platforms so this and those hacks a lot of times they're going they're being done by lazarus group going to fund north korean operatives so what this means is that this is not to disparage defy in any way but it means that there are risks in this space that we need to counteract i think because the space is still so nascent because there is still quite a big deal of ignorance in the general public around web theory around d5 and crypto malicious actors are going to take advantage of that and we need to make sure that we have appropriate measures in place both the d5 protocols law enforcement financial institutions everyone in this industry to help curtail these negative actors and ensure that the the amount of crime stays as as minimal as possible uh i i think i echo a colleague on here is going to take user adoption so how do we figure that out right um you could build the most elegant blockchain in the world and if no one uses it who cares right it's just it's just a white paper so how do we encourage adoption we see that a lot with with nfts with with financial products with with empowering people so i think there's that really great balance of creating value so you have a stake in the game you you get financially rewarded from that and you get to participate in it but you have to sort of look at the marketplace look at all the protocols being built look at how they're curating their ecosystems right how are they encouraging entrepreneurs startups dapps how are they encouraging builders um because there's sort of a two components to consensus right there's you stake and you build and and nothing's going to work if no one builds on this so that's why these events are great too because you see even in a market downturn there's just a lot of great interest there's people building so many great things um so eventually we'll break through the wall in terms of user adoption what was that with web too it was platforms like youtube and and marketplaces like amazon so what are going to be those web 3 moments i think they're probably coming pretty soon so the first step well could be perhaps making sure that the user interface is friendly and that the people using don't even realize that it's about blockchain that it's about crypto yeah that's where education is key there's there's a lot of fun in the marketplace there's a lot of misconceptions in in the media so once you have like a light bulb moment like and i'm sure everyone here has had that moment when you really understand how it works it just starts making sense from there forward but to answer your question it has to be easy you can't be juggling wallets and worrying about losing a lot of money through through copy-pasting your keys right so the interfaces have to be really well done and just a final thought so you've all kind of touched upon education right so what do you think just a quick final thought from each one of you what do you think from your kind of personal experience it will take to uh for people or maybe the regulate regulators especially in case of chain analysis to um kind of learn this as learn like web 3 and blockchain as quickly as possible and understand what it does and what it doesn't do well i would just jump in there and say they have to keep an open mind uh and they have to encourage entrepreneurs to build in the space which is which is what they do they want people to build so you know as long as they they stick to that i think we'll be okay i mean as important as education is another factor i'll touch upon is that we kind of just need to make web three as big as possible and having entrepreneurs make as many cool projects as possible to the point that the regulators the fis everyone realize it's just not going away i think when i when i joined about four years ago at analysis when i started there was a bit of a sense among some more traditional institutions like okay i hope this thing will go away before i retire so i don't have to learn about it i think if we can show the value in web3 i think if all these different entrepreneurs all these cool projects that can come out can show the potential of it we're already starting to see more traditional institutions coming to us and realizing okay this thing isn't going away let's try and find a way to work with it instead of against it well they can start talking to their kids at home um it's it's very inspiring and occasional they know what they want they're they're the real users of web3 so what do they want why does it make sense yeah just ask their kids and probably last element is really that if you look at wi-fi for example nobody really knows how it works and you don't need to if you talk to the kids the younger generation it's just like internet everywhere and i think that's where we need to go with web3 needs to be that intuitive there needs to be education adoption and then it just works and nobody really cares if it's a distributed ledger technology a blockchain or something else it's just digital money and and kind of a new web3 experience okay fantastic well i think the key takeaway from especially that last part is that all of us are in the same boat than we need to or spread the news spread the knowledge and talk to our friends talk to our kids and uh teach them essentially and uh i think time will uh get us there by the sound of is just well it's all all of us to make it happen so thank you very much [Applause] [Music]