Web3 eCommerce is a concept of increasing prominence and is an interesting example of how blockchain could impact an already established, not to mention extremely successful, industry
Over the past couple of decades, the online retail industry has become a juggernaut and now constitutes the primary way of shopping for many people. In recent years, the Covid pandemic has played a significant role in accelerating the shift to online retail, but the trend was already underway well before that.
With blockchain technology evolving at a steady pace, there’s a real opportunity for Web3 innovation to bolster the online retail industry. And it’s not hard to see the rationale behind Web3 eCommerce – after all, it’s adjacent to the original vision for blockchain technology, to be an electronic payment system. And the technology has since evolved past that original vision and is now capable of much more. Let’s take a closer look at some of the benefits of a blockchain-driven Web3 eCommerce.
How can Web3 impact eCommerce?
Web3 eCommerce could benefit the online retail industry in a number of ways. In fact, we hinted at one way in which Web3 can make a pretty immediate impact – by providing the sector with access to new, blockchain-driven payment solutions.
Better payment solutions
Payment solutions today are effective at what they are supposed to do, but they are far from perfect, with limitations stemming from the broader financial system underpinning them. Part of the problem is that that system relies on a complex web of financial institutions and intermediaries for verifying and processing money transfers and payments. Things get even more complicated when it comes to cross-border payments that are handled via a global financial messaging system (SWIFT) that carries the messages containing the payment instructions between financial institutions involved in a transaction.
In contrast, crypto payments are facilitated by decentralized computer networks, governed by robust protocols and consensus mechanisms that require little to no human intervention, and backed by immutable ledgers. This is why with crypto we can have fast, or even instant, transaction settlements, whereas with traditional methods it may take up to several days for a payment to be finalized.
Blockchain consensus mechanisms like Proof of Work and Proof of Stake are specifically designed to solve the double-spending problem, a common flaw of electronic payment systems. The traditional approach is heavily reliant on financial institutions like banks to ensure that the same digital money cannot be spent more than once. This makes it slower, more centralized, and creates “single point of failure” weaknesses. It also means that you have to trust that those institutions are capable – and willing – to perform these duties in the best way possible.
The Web3 approach ensures that those can be executed in a completely trustless manner.
In Web3 eCommerce, the decentralized nature of blockchain networks can be brought to the forefront and leveraged to create better online retail platforms. Because both the processing and the verification of transactions are handled by the underlying blockchain networks, you can dramatically reduce, if not completely eliminate, the reliance on intermediaries who typically perform those duties. This can be additionally improved with the use of smart contracts in networks like Ethereum, which can further ensure the integrity of transactions in a trustless way.
NFTs-based loyalty programs
Web3 eCommerce could also introduce a new wave of loyalty programs built around non-fungible tokens (NFTs) that provide their holders with unique perks, discounts, access to digital collectables and more. NFTs are highly programmable, which affords developers greater flexibility for implementing advanced features.More importantly, NFTs are backed by immutable blockchain ledgers, which is a game changer when it comes to account security and verification.
Challenges that Web3 eCommerce faces today
While We3 eCommerce holds great promise, there are some challenges that need to be solved for its potential to be fully realized. Chief among them are blockchain’s current limitations in terms of scalability. In other words, in their current state, blockchain networks are not yet capable of matching the transaction throughput of traditional payment processors such as Visa. Fortunately, the development of a number of Web3 scaling solutions is well underway, with rollups, in particular, emerging as an early favorite.
Another challenge stems from the fact that Web3 is a relatively new concept and, as such, is largely unfamiliar to the general public. Naturally, these types of problems are bound to dissipate as the technology matures and becomes more mainstream.
Despite the above mentioned challenges, it is clear that the potential of Web3 eCommerce is immense. By leveraging the power of blockchain technology, we can create a more secure, transparent, and community-driven online retail experience that benefits both buyers and sellers.