Do you believe that one in two e-commerce transactions will be settled on the blockchain in five years? No? Well, that’s how people thought of plastic credit cards versus cash a few decades ago when it came to brick-and-mortar stores.
There is no doubt that Web3 will fundamentally transform the way e-commerce works. Using cryptocurrency payments in e-commerce stores will become as common as accepting PayPal, Klarna, Visa, or Mastercard. Stores that don’t adapt their ecommerce platforms to accept cryptocurrencies will soon find themselves bankrupt.
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Thanks to the converging forces of Web3 – blockchain, decentralized finance (DeFi), AI and machine learning – new intelligent algorithms can analyze and adapt to deliver user-centric experiences. Furthermore, Web3 will be much more inclusive than previous versions of the Web. The decentralized nature of Web3 creates the ideal platform for a fast and transparent flow of information that is not subject to censorship by a central authority.
Furthermore, Web3 excludes intermediaries like Facebook who take part of users’ money (and personal data) when they buy something online. At the same time, all the details of our transactions are public, for better or for worse. Improving the security and convenience of online transactions will increase the volume of e-commerce transactions and encourage businesses to adopt crypto payments.
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As more and more businesses move from Web2 to Web3, many merchants and consumers have started using crypto payment solutions.
In Web2, most online payment platforms like PayPal and Stripe charge transaction fees of around 4%. This, of course, makes it difficult for companies to stay competitive without raising prices. Not only are crypto payments frictionless, they are also becoming increasingly popular as a payment method. With stablecoins today, people no longer have to worry about converting to fiat and the hassle of withdrawing funds to their bank accounts.
The power of blockchain in old and new business models
Similar to the adoption of Web2 ecommerce, there is still a long way to go before Web3 can offer the full range of benefits mentioned earlier. However, the introduction of smart contracts and Web3 platforms like Hyperledger has fundamentally changed the value exchange landscape. Hyperledger Fabric was developed by companies such as IBM for specific business cases that optimize supply chain operations. Log access through Fabric allows companies to view the same immutable data, ensuring accountability and minimizing the risk of forgery.
Consumers can follow the progress of their orders and trace each item back to its origin. At the same time, supply chain operators can monitor inventory levels and shipments, take appropriate action to troubleshoot and detect fraud. This allows the consumer and business to expect delivery at a certain time. All packages can be easily monitored via Blockchain Explorer protecting customer privacy.
Furthermore, with the blockchain, it is possible to create and own a global whitelist of genuine or trusted customers and suppliers, which Unstoppable Domains does with its identity verification for Web3. This whitelist reduces false positives and helps detect true fraud. Unlike traditional e-commerce payments, Web3 makes it easy for people to place orders by eliminating intermediaries and chargebacks.
A new regulatory environment
The advent of Web3 in e-commerce will change compliance requirements relating to personal data, including the European Union’s General Data Protection Regulation, by raising important issues such as identity authentication without revealing personal and sensitive information.
However, Web3 developers are already experimenting with using zero-knowledge evidence as a solution to prove to the other party that they have certain information (such as nationality or age above the limit) without disclosing the details.
It is not necessarily up to customers to decide how much personal data to provide. This will only happen if companies adopt the applicable technology and regulators allow it. However, that may not happen unless someone is willing to sue.
Related: PayPal allows the transfer of digital currencies to external wallets
With such vast possibilities, more companies should consider jumping on the Web3 bandwagon. After all, they can improve transparency, reputation, and cost management in the ecommerce game to keep up with the game by moving digital data safely and freely across borders. For this to happen, clear regulations need to be designed to support the broader adoption of blockchain technology in this space.
Businesses would also have a key role to play in the world of the Web3: making sure they are equipped with the latest security solutions to prevent them from becoming the target of cybercriminals. Recent cybercrime cases have seen hackers seize funds, as well as personal and private customer information, which inevitably leads to reputational damage to the organization.
Having the latest tools and systems in place would mean little without a large enough team of information security professionals to ensure that key system vulnerabilities are addressed in a timely manner and that key controls are subject to regular testing. Adequate resources and attention should certainly be devoted by Web3 companies to address these risk areas in their operations.
Raymond Hsu is co-founder and CEO of Cabital, a cryptocurrency asset management platform. Prior to co-founding Cabital in 2020, Raymond worked for fintech and traditional banking institutions including Citibank, Standard Chartered, eBay and Airwallex.
This article is for general information purposes and is not intended to be and should not be considered legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.