How the next iteration of the internet will change our lives
Morva Rouhani is Executive Director of the Canadian Web3 Council.
When the internet was first created, we could never have predicted how ubiquitous it would become. We had no idea it would lead to emails, Facebook, and cat memes. Innovation on that scale doesn’t happen often, and our generation is about to experience another Internet-wide moment with the proliferation of Web3.
Web1 was the read-only Internet of the 1990s, and Web2 arrived with the collaborative social web of the mid-2000s and 2010s. Web3 refers to the third iteration of the Internet, which is based on blockchain technologies. and cryptocurrencies. When people hear “Web3”, they think of Bitcoin, but it is much more than that. Web3’s technology will eventually enable decentralized finance, give users more control over their personal data, and improve product tracking, among other things. It has the potential to be the most important innovation of our time.
Web3’s original purpose was to facilitate financial transactions without the need for banks and other intermediaries. As a result, it is largely the purview of developers, tech entrepreneurs, and cryptocurrency investors. But everyone who uses money could benefit from this new technology. Near-instantaneous and low-cost currency transfers will be possible around the world, meaning individual users could manage their personal finances entirely on the blockchain. This would reduce transaction fees and wait times. Businesses and creators could use blockchain to sell their products and content without having to sacrifice part of their profits to distributors like Amazon or Spotify.
Soon, we will also start using Web3 technology to improve identification management. Instead of keeping endless membership cards and passwords in our wallets and note apps, we could simply encrypt our digital identities on the blockchain and use them in situations that require us to present our IDs, like renting a car, for example. Imagine stopping waiting months for a physical passport to arrive in the mail, or worrying that you forgot your driver’s license at home.
Blockchain will make products easier to trace, allowing consumers to track where their purchases came from. Shoppers will be able to find out when an apple was picked before buying it, or check the provenance of a Chanel bag to make sure it’s authentic. If, in the future, we end up spending a lot of time in virtual worlds, like the metaverse, we will use blockchain technology to shop and earn money.
There’s a problem: This technology is evolving so quickly that government agencies are struggling to keep up, resulting in a piecemeal regulatory approach with blurred boundaries between federal and provincial agencies. For example, we have inconsistent oversight of crypto platforms and securities infrastructure varies across the country. We are also saddled with unwarranted restrictions on innovation and client trading: Ontario has imposed investment limits on cryptocurrencies, while BC, Alberta and Quebec have not. We are stuck in a system that confuses regulators, investors, and cryptocurrency users alike.
Canada was on its way to becoming a world leader in Web3 just a few years ago. We invented the second largest blockchain network (Ethereum), and some of the most popular NFT art markets emerged here. But we haven’t established policy fast enough, and innovators are now afraid of unknowingly violating laws they didn’t know existed. For example, how does fraud prevention work in the Web3 space? What about taxes? Lacking a legal roadmap, many of our innovators have gone to jurisdictions that have some guidelines, such as California, Florida, and Switzerland. Vitalik Buterin, who co-founded Ethereum while living in Toronto, left Canada in favor of a nomadic lifestyle.
Our governments are not used to being ahead of the world in policy innovation. (Cannabis is a notable exception.) In my work with the Canadian Web3 Council, a private sector stakeholder group, I educate federal and provincial legislators on how to move forward. This is the year to update our regulation of Web3 technology in Canada, to foster a framework for creators and better businesses here. The Bank of Canada appears to be exploring creating its own version of a digital dollar, but it’s unclear what it will be used for. A legislative review of the federal financial sector on the digitization of money is also underway, which the 2022 budget will fund over the next five years.
Even so, we may still be a few years away from normalizing decentralized banking and digital identities. Innovators around the world are going to make great technological leaps as the Internet transforms. Canada has to decide whether or not it wants to be at the forefront.
— As told to Alex Cyr
This story is part of our annual “A Year Ahead” package. Read the rest of our 2023 predictions here.
This article appears in print in the December 2022 issue of maclean’s magazine. Buy the edition for $9.99 or better yet, subscribe to the monthly print magazine for just $39.99.
