Software is eating the world, Marc Andreessen famously said in 2011. Eleven years on, is there an even bigger predator coming for the software industry?
Web3, a new iteration of the internet, promises a decentralized utopia. But can that vision become a reality and, if so, what does it mean for today’s flourishing SaaS industry?
Let’s dive in and find out.
What is Web3?
Web3 is an idea for the next iteration of the internet. Andreas Fauler, a founding member of the decentralized autonomous organization Rocketstar Foundation, calls Web3 a no-cloud web and the “logical evolution” of web 2.0 dominated by platforms and SaaS brands. By combining the open nature of web 1.0 and the power of web 2.0, it offers a “fairer and value-enabled internet” —one that removes the problems of monopolistic dominance.
Joydeep Bhattacharya, owner of the SEO Sandwitch blog, says Web3 has three defining features: decentralization, openness and incredible user utility. It also uses different technologies than the current version of web 2.0, namely edge computing, decentralized data networks, artificial intelligence and blockchain.
Together, those elements create a web owned by everyone, not just big tech corporations, says Charles Silver, chairman and CEO at Permission.io, a provider of permission advertising for eCommerce. “The rise of technologies such as distributed ledgers and storage on blockchain will allow for data decentralization and create a transparent and secure environment, overtaking Web 2.0’s centralization, surveillance and exploitative advertising.”
How Could Web3 Impact the SaaS Industry?
It’s far too early to accurately predict all of the ways Web3 could impact or replace the SaaS industry. But one area where decentralized networks are already having an impact is the matter of trust.
Trust is a major issue at the moment, both for consumers and business owners alike. Major tech brands have the power to act in almost any way they want, writes blockchain developer and founder of NFT platform RMRK Bruno Skvorc. He gives the examples of PayPal and Transferwise, both of which have been known to close customer accounts without reason.
The lack of privacy and control over personal data is another problem, he adds. “It’s…the fact that third parties get access to this information and are then free to do whatever they want with it, no matter how nefarious it may be.”
The SaaS industry is no stranger to trust issues, either. While SaaS is now one of the most common software delivery forms and businesses in the world, the industry initially suffered from a lack of trust, says Stephen Cummins, founder and CEO at SaaS and media consultancy AppSelekt. It’s why Salesforce created Trust Status, a website that provides live updates on uptime issues and security incidents regarding its products.
As such, Cummins says governance is one area where Web3 will disrupt SaaS. “Auditing, compliance, distributing benefits, tax collection and government borrowing could all be revolutionized by blockchain,” he writes.
Decentralized applications will develop anywhere businesses need a “shared trusted database,” writes Tomasz Tunguz, a venture capitalist at Redpoint Ventures. Consumer applications are the focus of many blockchain companies at the moment, he adds, but the SaaS industry will undergo similar change eventually.
Could SaaS and Web3 Work Together?
Because a decentralized web will still be home to private businesses, there’s every chance that SaaS and Web3 could have a harmonious existence. In some situations, they may even complement each other.
Back-end operations could almost certainly be improved using blockchain technology, for instance. Onboarding and payment functions can be streamlined and improved using blockchain technology, writes Tata Consulting Services’ Nilima Kulkarni. “Processes like payment management, metering functionality, validation, verification, and authentication would be automated, removing the dependency on human intervention, thereby eliminating delays and making the transaction more trustworthy and secure,” Kulkarni explains.
Adopting this kind of Web3 technology would theoretically reduce costs for SaaS brands, too. “As no central authority or third-party mediator is involved, middle men costs are eliminated,” Kulkarni writes. “Every record in the distributed ledger has a timestamp and unique cryptographic signature, with immutable history of all transactions in the network.”
Blockchains could also be used by SaaS brands to increase security, according to digital marketing agency Augurian. “To keep data secure, blockchains use cryptography hashing. In other words, they use a specific type of algorithm to encrypt the data,” they explain. “What’s special about hashing algorithms is that they can take varying amounts of data and package them into blocks of the same size. Each equally sized block of data links to the blocks before and after it through the hashing functions.”
“Because these connected chains are decentralized and available on different networks simultaneously, someone would have to alter all or most of them at exactly the same time in order to effectively hack the blockchain. This also means that the more blocks you have, the more secure your data becomes.”
Is Web3 Really the Future?
Before we get carried away thinking about a decentralized future, it’s important to point out that the concept isn’t without flaws or detractors.
Software engineer Stephen Diehl is particularly scathing, writing: “At its core web3 is a vapid marketing campaign that attempts to reframe the public’s negative associations of crypto assets into a false narrative about disruption of legacy tech company hegemony. It is a distraction in the pursuit of selling more coins and continuing the gravy train of evading securities regulation. We see this manifest in the circularity in which the crypto and web3 movement talks about itself. It’s not about solving real consumer problems. The only problem to be solved by web3 is how to post-hoc rationalize its own existence.”
Richard Dulude and Abbey Titcomb at Underscore VC are “constantly surprised at how useless blockchains are despite all the hype they seem to cause.” Blockchains do have one great feature, they concede: the ability to “maintain ‘state’ incredibly well.” But otherwise they are too slow and don’t have enough computing power to deliver real-world utility.
A decentralized web is not certainly imminent. In fact, Web3 is still some way from becoming a major tech force, writes economics researcher Karan Bhasin, and that’s if it overcomes “valid concerns that its complexity will daunt consumers and regulators. However, our research indicated that the investment landscape is growing increasingly competitive as venture capitalists become more educated and less skeptical.”
Your average business simply isn’t ready for this new technology, either, writes Tom Krazit, Protocol’s enterprise editor. “There are still loads of businesses that are just getting started with cloud computing, and the people in charge of information technology for the world’s largest companies tend to move conservatively when it comes to new technologies.”
Web3 may still be some way off, but decentralized networks are coming. To what extent they change the internet remains to be seen, but SaaS brands would be well advised to identify how to harness the power of Web3 or otherwise protect their business from the threat of decentralization.
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