By Andrew McGill, Analyst at the Warwick Commercial Awareness Society
Modern economists argue that there has been more than one Industrial Revolution; the first being the mechanisation of manual labour, followed by the mass production of manufactured goods. However, the Third Industrial Revolution has brought about digitisation and ushered in the age of the Internet, paving the way for more efficient business systems, and giving rise to the modern cultural interactions of contemporary society. However, within this revolution, there is an ongoing paradigm shift in the way the Internet is structured – a movement towards smarter, more decentralised software, focused entirely on integrity and user privacy. This new paradigm is known as Web3.0, and it has become an increasingly popular topic since the start of the Covid-19 pandemic.
Losing Trust in the System; Big Data, Big Tech, and Consumers
When schools and universities reverted to online learning, and governments around the world established a ‘work from home where possible’ policy in early 2020, it was essential that there was a private, online space for collaboration. However, whilst the demand for both professional and leisure-orientated online services has increased, and is set to continue growing at a rate of 46.7% CAGR, it appears as though universal sentiment towards firms and data protection has soured. One study by KPMG from August 2021 found that 86% of the US population say data privacy is a growing concern, with 68% being concerned about the level of data being collected by businesses. Furthermore, 70% of business leaders have confessed to increasing the collection of consumer data in the past year. Logically, as trust in the data-privacy abilities of big tech companies dwindles, Internet users will turn towards more decentralised and secure software and technologies. This was already seen before the pandemic, as the popularity of encrypted technology increased, such as messaging service WhatsApp, which had amassed more than 2 billion active users in 2020.
However, in a post-Covid world, encrypted technology may not be sufficient to ease the worries of consumers; WhatsApp is owned by tech giant Facebook (now Meta), which has been involved in multiple data-security scandals – most notably in 2019 with personal data collection misuse with political consulting firm Cambridge Analytica, resulting in the distribution of 87 million users’ personally identifiable information. Furthermore, third-party cookies have permitted advertising firms to continue to collect personal and private information on users, sometimes even allowing the collection of wider browser history and searching habits. Attempts to subvert these privacy abuses online with the implementation of GDPR globally have been sidestepped by the use of misleading and ineffective third-party cookie consent forms, which are intentionally poorly designed or confusing. Moreover, whilst major browsers such as Chrome, Firefox, and Safari have banned or are planning on banning third-party cookies on their platforms, these are likely to be replaced with other, smarter forms of data collection using artificial intelligence, such as ‘fingerprinting’, which allows advertisers to create individual profiles based on the probabilities involved with physical device characteristics and browsing patterns. Arguably, many people have now realised that data privacy will only be protected if more decentralised and secure services are provided, cutting out the middle-man. This has already been seen in the privacy-based search engine DuckDuckGo, which has seen a 425% increase in market share since 2016, and an upward trend in the user traffic in decentralised and anonymous browser Tor since the start of the Covid pandemic.
The Rise of Blockchain Technology for Consumers
It cannot be denied that the most popular form of Web3.0, blockchain, has gained widespread attention during the Covid-19 pandemic; especially in the rise in popularity of cryptocurrencies such as Bitcoin and Ethereum among less experienced traders and younger generations. Blockchain is a technology that allows for decentralised payments and transactions between parties via an intricate network of individual, independent ledgers. The number of Blockchain wallets for Bitcoin (the software needed to hold crypto) has increased by 31% from November 2020 to November 2021, and increased 155% since 2018. Furthermore, the total market for Blockchain technologies is forecasted to grow at a rate of 68.4% CAGR, likely due to increasing business integration of blockchain in systems operations. I believe this increase in attention towards these technologies, especially for consumers, is a direct response to volatility in traditional financial markets around the world in response to demand shocks and supply chain crises, brought about by Covid-19 uncertainty and restrictions. One study from November 2021 found that, during the first wave of Covid-19, cryptocurrencies such as Bitcoin acted as diversifiers to the volatility seen in the S&P500; this is similar to how commodities such as gold and silver are traditionally used. Furthermore, taking into account spill-over from the S&P500 at the time, there was no statistically significant effect of the first wave of Covid-19 on crypto markets. Stablecoins – cryptocurrencies that are pegged to real-life currency – have also provided a less volatile way for users to transact on blockchain platforms. The best example of this is the use of Tether on the Ethereum blockchain, where the market capitalisation of Tether has increased 1581% to $77.99bn from February 2020 to February 2022. This likely provided incentives for investors to introduce crypto into their portfolios, and made blockchain technology more familiar for day-to-day traders.
Will Web3.0 Catch On Post-Covid?
It is clear that there is increasing demand for Web3.0 services and software, especially in response to data privacy and volatility in real money markets. However, although rises in the popularity of instruments such as cryptocurrencies and decentralised browsers are not a new phenomenon, it is certain that the rate of growth has increased massively since the start of the Covid-19 pandemic, along with attitudes towards these products. It is difficult to distinguish whether or not this is due to increasing business integration of blockchain technologies, or a consumer-side cultural revolution. Regardless, Web3.0 is becoming more normalised in contemporary society, and as demand increases, we slowly move towards the core ideals of the Internet described by the inventor of the World Wide Web, Tim Berners-Lee; decentralisation, openness, and a bottom-up design.