THE PROMISE OF A DECENTRALIZED INTERNET; WHAT YOU NEED TO KNOW
Author: O. M. Atoyebi S.A.N FCIArb. (U.K.)., Contributor: John Oladipo
One of the legs of the industrial revolution is the rise of digital technology, and as the years pass by with interesting technological and scientific advancements, it can be said that one of the greatest discoveries/innovations is the Internet. Life without the internet is inconceivable. As it currently stands, the internet has permeated every level or sphere of human existence, for example, the internet has aided in the creation of businesses across the world. You can read this article because the internet has provided a platform to increase learning, thus, education is not left out. Vendors sell a variety of goods and services – create a platform to connect buyers to the seller- commerce is not also left out. These examples go on and on.
As established above, the internet has created a platform to grow businesses and develop life in general. In the same vein, the internet is developing to make sure that it is decentralized, more accessible, and guarantees users certain rights. This article seeks to demystify the myth of a new era of the internet called the web3, its relevance, and possible legal issues.
WHAT IS WEB 3.0
Before exploring the meaning of Web3, it is expedient to understand the internet journey so far. The internet as we know it began as a means of retrieving information simpliciter. It was regarded as a static web. In other words, the web pages did not offer interactive features which are capable of changing due to the user’s set of previous websites behaviour. This period is regarded as the era of Web 1.0.
Furthermore, as technology advances, it became obvious that the internet needed an upgrade, to cover the defects of web 1.0. This led to the development of web 2.0 which birthed interactivity. The emergence of social media is an example of web 2.0.
Web 3.0 is the next step in the evolution of the internet. It emphasizes a decentralized internet, ownership, openness, interoperability, and reliability. Web 3.0 gives you complete control over your data and eliminates social network censorship, making the internet more intelligent. Its interoperability also allows content creators and businesses to move their audience from one platform to another. Web3 also features a process, in which websites and apps will be able to process information in a smart human-like manner using technologies such as Machine Learning (ML), Big Data, Decentralized Ledger Technology (DLT), and so on. It is aimed to be a more autonomous, intelligent, and open internet.[1] [1]
It is evident that Web3 is the “next stage” of the internet and perhaps no other Web3 term is as important or widespread as “decentralization.” Although cryptocurrencies are at the forefront of the movement, some in the tech industry believe that decentralization is an unavoidable evolutionary step for the internet that will impact businesses across the board.[2] [2]
The major component of Web 3 is Blockchain. This is evident in the features and prominent keys of the Web3 environment. Blockchain is by far the most important invention that powers the majority of Web3. It is a digital ledger in which all Web3 transactions, both financial and non-financial, are recorded. The primary benefit of recording a transaction in a blockchain is that it is open, making the entire blockchain visible to all users who have been granted access. Also, once a transaction is recorded on the blockchain, it cannot be changed, not even by the original author. This makes the ledger tamper-proof, which is a very useful feature for proving the authenticity of transactions. Also, Cryptocurrencies serve as a medium of exchange for all financial transactions conducted within Web3. Cryptocurrencies are used instead of fiat currencies because they are easier to transfer, have a complete audit trail of transactions, and can be programmed. These three cryptocurrency capabilities allow transfer, complete audit trail of transactions, and are programmable. Others include Defi, NFTs, etc[3] [3].
HOW CAN BUSINESSES PREPARE?
Online businesses/ or businesses with an online presence anchored on Web 2.0 rely on second-party and third-party data to reach out to their customers or clients, through advertisements or by looking for target audiences online. For instance, if a person searches online for a particular product, the next thing they would see on social media sites and other websites are advertisements for that particular product. All of that, though, may not be possible anymore. Platforms may not be able to mine user data, thanks to Web 3.0. Now the question is, how can businesses get ready so they will not negatively be impacted?
So as not to be impacted negatively, businesses must transition away from depending on rental data and third-party data, and toward zero-party data. You can rely on data that website visitors expressly and voluntarily give you when they visit your website instead of information from third-party data sources.[4] [4] Also, giving rewards to users to encourage them to willingly give consent to the use of their data.
LEGAL ISSUES
- Data Autonomy, Privacy, and Protection
Data privacy and protection are one of the most basic fundamental rights in the digital era. Importantly, there are legislations such as Nigeria’s NDPR (Data Protection Regulation), 2019, the Constitution of the Federal Republic of Nigeria (1999)[5] [1], as amended, the European Union, General Data Protection Regulation, 2018, the United Kingdom, Data Protection Act, Federal Trade Commission Act (FTC Act), Children’s Online Privacy Protection Rule (COPPA), etc. which provides for the adequate protection of data and compliance with the privacy policy adopted by the organization.Web3 offers an opportunity where users will own their data and digital footprints, which can only be shared upon the permission and express consent of the user. One of the features of Web 3.0 is that it gives complete control over your data which gives privacy and enables you to separate your digital life from your personal life.
However, it is important to note that there may be some likely issues associated with the data hosted on the web3. Even though, it helps achieve data autonomy privacy, can we say that web3 can safely co-exist with our laws without any friction? For instance, the data protection regulations have provided for the right to be forgotten (erasure of data), but it is a notorious fact. One of the major features of blockchain is the immutability of data, thus, once data has been entered, received and verified by the block, it cannot be changed, or deleted[6] [2].
- Anti-money laundering and combating the financing of terrorism:
Money laundering is one of the ills that financial regulators and law enforcement agencies around the world battle with daily. Money laundering, according to Investopedia, is the illegal process of making large amounts of money generated by criminal activity, such as drug trafficking or terrorist funding, appear to have come from a legitimate source. The money from criminal activity is considered dirty, and the process “launders” it to make it look clean.The Central Bank of Nigeria reported that the directive issued to banks and other financial institutions to halt their dealings with cryptocurrency, is because cryptocurrencies are susceptible and can be used to launder money[7] [3]. Also, the U.S. Financial Crimes Enforcement Network (FinCEN) noted in a June 2021 report[8] [4] that convertible virtual currencies (CVCs)—another term for cryptocurrencies—have grown to become the currency of choice in a wide range of online illicit activities. Apart from being the preferred form of payment for buying ransomware tools and services, online exploitative material, drugs, and other illegal goods online, CVCs are increasingly used to layer transactions and obfuscate the origin of money derived from criminal activity.[9] [5]
In recent times, some law enforcement agencies have identified that even though the blockchain platform can be used to launder money, it has also made the fight against money laundering easier with the aid of forensic crypto analysis. Thus, the myth that cryptocurrency cannot be monitored has been shattered (Although, it may take a long period, depending on the mode of transfer and the cryptocurrency).
Hence, the decentralized nature of web3, with assistance from relevant private firms, can afford the financial regulators and law enforcement agencies the necessary tool and skills to combat money laundering and financing of terrorism.
- Cybersecurity:
While blockchain data is generally secure, it is not completely immune to theft or other attacks. If bad actors obtain a private key, they can compromise entire accounts, causing long-term harm to the account holder and (potentially) other entities. Those who manage platforms or trade on virtual platforms should take precautions to ensure that data is not compromised.[10] [6] In any case of a data breach, the relevant data protection laws and regulations have tasked the data controllers to report such incidents to the supervisory authority.[11] [7]
CONCLUSION
The promise of Web 3.0 is that it will further democratize and open up the internet. If it is a success, this new decentralized web will provide users more control over their data, far greater transparency into the applications’ protocols, as well as greater security and dependability.
[1] Forbes technology council ’11 Ways Companies Need to prepare for Web 3 And Decentralization’ <https://www.forbes.com/sites/forbestechcouncil/2022/07/01/11-ways-companies-need-to-prepare-for-web3-and-decentralization/amp/ [8] > accessed: 13/09/2022
[2] Werner Vermaak ‘What is Web3.0?<https://coinmarketcap.com/alexandria/article/what-is-web-3-0 [9]> accessed:13/09/2022
[3] SRMTech ‘Web3.0 and the modern Consumer Businesses’ <http://www.srmtech.com/ [10] >accessed:13/09/2022
[4] Marisa Murgatroyed ‘What is Web 3.0? How to prepare business for the future of the internet: with Ryan Levesque < https://www.liveyourmessage.com/web-3-0-interview-with-ryan-levesque [11]> accessed; 14/09/2022
[5] Section 37 of the constitution. Section 37 of the constitution provides that “The Privacy of citizens, their homes, correspondence, telephone conversations, and telegraphic communications is hereby guaranteed and protected.”
[6] Art. 17 GDPR, 2018; Art 3.1(8) of the NDPR, 2019
[7] Sanya Adejokun & Chi… “Cryptocurrencies Illegal, Used For Money Laundering, Terrorism ― CBN
https://tribuneonlineng.com/cryptocurrencies-speculative-anonymous-used-for-money-laundering-terrorism-%E2%80%95-cbn/ [12] accessed 20/09/2022
[8] Financial Crimes Enforcement Network. “Anti-Money Laundering and Countering the Financing of Terrorism National Priorities,” Page 5
[9] James Chen, “Money Laundering: What It Is and How to Prevent It”, https://www.investopedia.com/terms/m/moneylaundering.asp [13] accessed 22/09/2022
[01] Hart David, ‘Legalities of Web 3.0 Investing – Challenges and Prospects’, https://www.google.com/amp/s/www.hartdavidcarson.com/news/amp/legalities-of-web-3-0-investing-challenges-and-prospects/ [14] accessed: 20/09/2022
[11] Article 33 GDPR, 2019, Art. 9 NDPR (Implementation Framework) , California Consumer Protection Act