The odd offer, however, brought to light a fascinating possibility: a Web 3.0 bank. But is it even feasible to have a user-run, decentralised bank?
The conventional banking system has lately been under intense strain as a number of important banks experienced liquidity issues or were forced into liquidation. Many people are searching for alternatives in such setting, including cryptocurrency. One notorious cryptocurrency entrepreneur made a bid that caused controversy after the failure of a significant Swiss bank.
On Sunday, Justin Sun, the creator of Tron, made a bid to pay $1.5 billion to acquire the newly insolvent Credit Suisse. His stated goal was to build a more decentralised financial system.
We can create a more creative and decentralised financial system by incorporating Credit Suisse into a crypto-friendly banking institution, Sun tweeted.
Sun’s idea wasn’t taken seriously by many in the crypto community because of Sun’s dubious reputation. Sun used to be eager to make lofty promises in order to get attention. This included committing $5 billion to help struggling crypto companies and ending the FTX issue.
In any event, the odd offer brought attention to a promising possibility: a Web3 bank. But is a user-run, decentralised bank even feasible?
What are DAO, dApps, and DeFi: Web3?
Web3, a possible future iteration of the internet, is a term created by Ethereum co-founder Gavin Wood. Tech giants like Apple, Google, Meta, Microsoft, and Amazon now rule the internet. Web 2.0 describes this situation on the internet, where businesses have excessive control over individuals, according to Wood and others.
Web 2.0 and the existing financial system are compared by those who oppose it. Because of its strict and ambiguous restrictions, consumers are at the mercy of powerful institutions.
Web3 proponents predict that as a result of cryptocurrencies and blockchain, the internet will become much more decentralised in the future. The banking sector, among many others, might undergo a radical transformation because to these same technology.
How Would a Web3 Bank Appear?
It is essential to examine the fundamental technologies that support that shift in order to comprehend how Web3 may alter banks.
Decentralized apps (dApps) may be created on blockchain networks like Ethereum since they don’t have a single owner. These dApps instead come to life via their user, creator, or developer communities.
In order to make important choices, these communities may potentially create a decentralised autonomous organisation (DAO). They are free to establish whatever regulations they like and govern it by vote.
Users may create a decentralised social networking site, market, or bank in this method. In essence, a Web3 bank would have whatever restrictions that its consumers desired. It would expand and contract along with the community. Any gains (or losses) made by the bank would be split equally with the community.
Web3 would depend on smart contracts rather than the judgement of clerks and vague regulations. Also, this would entirely transparent a Web3 bank. Everyone can understand smart contracts since they are simply chunks of blockchain code.
Is a Web3 Bank Ever Going to Happen?
Even if the concept of a Web3 bank is appealing, there are still significant obstacles. The existing system of financial regulation involves centralised, mysterious agencies. Because of this, Web3 entities like DAOs cannot use it.
Regulations will probably need to change in the future to support Web3. But, it will be far more difficult for authorities to impose strict restrictions on Web3 if it becomes sufficiently decentralised. Regulators could then have to settle with adopting a more liberal stance.
One further problem originates from inside the Web3 community itself. Projects that purport to be Web3 but are really centralised have come under fire from prominent people in the crypto industry.
For instance, the creator of Block, Jack Dorsey, said that the true proprietors of Web3 are VC firms like Andreessen Horowitz. His comments led to a massive brawl in the neighbourhood. Nevertheless, Vitalik Buterin, the creator of Ethereum, questioned the practise of issuing governance tokens and said it favoured special interests.
Credit Suisse won’t be a Web3 bank, whether they ever exist or not. Sun’s bid was rejected by the Swiss central bank in favour of integrating Credit Suisse into UBS.