Apart from Dubai being a tourist destination, it’s a haven for web 3 and the cryptocurrency community. On March 9, 2022, the city approved the first law for the regulation of operations of digital assets, such as non-fungible tokens (NFTs) and cryptocurrencies. The news was confirmed through a tweet by Sheikh Mohammed bin Rashid Al Maktoum, the prime minister of the UAE.
Under the new law, Dubai wants to establish itself as a key player in designing the global future of virtual assets. In addition, the UAE seeks to form a Virtual Assets Regulatory Authority (VARA), which will be an independent body under the Dubai World Trade Center. VARA will oversee the governance, licensing, and setting of regulations for NFTs, cryptocurrencies, and other virtual assets. As a result, the city has become an epicenter for web 3 entrepreneurs from all over the world.
Web 1.0 and Web 2.0
The World Wide Web, referred to as web 1.0, dates back to the 90s. Web 1.0 was made up of web pages connected by hyperlinks. This first generation of the web was read-only, where businesses only shared information for you to search and read it.
Then in the 20s, web 2.0 came to life, the current version of the internet. The platform created a rise in eCommerce and social media platforms like Facebook, Instagram, and Twitter. This improved version of the first worldwide web has a more friendly user-generated interface. During web 2.0, users have been able to work and earn money through various platforms.
However, in web 2.0, users are needed to give out personal information to access and use the ‘free’ services provided by tech giants like Amazon, Google, and Microsoft. The information gathered is then sold to third parties like shopping sites to offer you targeted advertisements.
Web Version 3.0 Explained
Gavin Wood, a co-founder of the Ethereum cryptocurrency, popularized the term web 3 in 2014 to describe anything involved with the changes on the internet for the next generation by making the platform a decentralized digital infrastructure. A cryptocurrency is a digital currency that does not rely on a central authority like a central bank or the government. As a result, transactions done through web 3 technologies, such as peer-to-peer payments, are free from the control of any central governing body.
Web 3 is a new version of the web built on blockchains that are peer-to-peer and decentralized. This format will allow people to control what is published, archived, and stored in secrecy.
A blockchain is a database hosted by a network of several computers instead of a single computer. This distributed ledger offers its users a transparent and unchanging way of storing information.
A blockchain-centric internet will be harder to manipulate and control since the technology used will be the same as in the cryptocurrency technology, which is built to prevent “double-spending.” This means computers will store data on a network instead of servers as it is now, making it easy to track the stored data as there will be an established record of the movement pattern.
An example of a web 3 application is the peer-to-peer payment app that works on blockchains where instead of opening a bank account, you can use the decentralized app (Dapp) to make payments. Examples of peer-to-peer apps include;
How Web 3 Will Impact Businesses
The third phase of worldwide web evolution will bring revolutionary changes to the UAE’s mode of operating its businesses. There are four main types of legal business structure in the UAE, which include:
- Individual establishment – Owned by a single person and responsible for its financial obligations
- Civil company – Established by investors from local and foreign countries to provide specialized services in the UAE. They include but are not limited to lawyers, doctors, consultants, and engineers
- Commercial company – Business arrangements between two UAE nationals where each partner is responsible for the company
- Limited Liability Company – Involves more than two but less than fifty, and each partner is responsible to the company according to the shares bought
The introduction of web 3.0 will allow companies to work efficiently by cutting out the middleman through the connection of artificially intelligent computers. As a result, businesses will experience optimum growth. Below are the benefits and challenges that web 3 will present.
1. Streamlined Business Process
With web 3 integrated into the business format, companies and sole proprietorships will find it easy to maintain their transactional ledger. As a result, continuous customers will enjoy personalized services as their previous purchase information is readily available.
2. Provides an Efficient Collaboration With all Involved Parties
Most businesses fail because there is a lack of transparency. However, web 3 will make the business more transparent to all the parties involved. This is achieved through an unchangeable chain of records visible to everyone on the blockchain.
As a result, slow-performing companies will suffer stiff competition due to the end-to-end transparency system that provides real-time transactional proof and supply chain activities to its customers.
3. No-third Parties
Blockchain technology will allow a business owner to control all their in-house operations, including directly contacting the customer. Although it will reduce cost, save time, and make the business more competitive, third-party service providers will experience a decline in their business due to the lack of demand for their services.
Web 3 might be revolutionary, but it also presents various sets of challenges. For example, if your cryptocurrencies like Bitcoin or Ethereum are stolen, you lack a way of pursuing the case due to a lack of centralized control. In addition, due to the nature of public distributed ledgers which makes transactions visible to all, making it directly opposite to privacy
Why You Should Stay Alert on Web3
Businesses will undoubtedly adapt to web 3 technology as it offers a higher competitive advantage. However, before getting involved in the space, all businesses–small or large, existing or start-ups- should know that endless legal issues can arise. This is because the space is relatively new, and laws are continuously being created to regulate the industry.
Web 3 is still at its infancy stage, and the already existing technologies prove that the future of the internet will usher new tides in businesses. As Dubai fully embraces the idea by creating regulatory bodies to control the space and attract investors, understanding this new technology and its impact on your business will benefit you and your business.
Hammad & Al-Mehdar law firm dutifully serves the legal needs of regional businesses and individuals from the five offices across the Kingdom of Saudi Arabia and the United Arab Emirates. Our firm is well-positioned and structured to handle legal issues while providing you with support to navigate through the implications of web 3 in your business or industry. Contact us for more information or legal representation.