Web3 Explained: What Business Owners Need to Know About Decentralized Technology
The world of online business is experiencing a fundamental shift. Traditional internet infrastructure, where large platforms manage data and transactions, is evolving toward a more decentralized model that gives users and businesses greater control. This evolution, known as Web3, represents a phase of internet development that’s built on blockchain technology and cryptocurrency.
Some business leaders are already exploring how decentralized technologies can streamline operations, reduce costs, and create new revenue streams. From accepting cryptocurrency payments to leveraging smart contracts for automated processes, Web3 can offer practical applications that extend far beyond digital collectibles and speculative trading.
In this guide, we’ll explain how Web3 works, its impact on transactions and banking, its challenges, and how business owners can use it to their advantage. We’ll also look at modern banking platforms like Slash that have embraced Web3, providing built in cryptocurrency on/off ramps and native stablecoin support that can transform the ways companies do business.¹, ⁴
What is Web3 and How Does it Work?
Web3 is a term that refers to a new, decentralized internet that widely utilizes blockchains, cryptocurrency, and token-driven economics. On our current internet, sometimes referred to as Web2, many internet applications are controlled by corporate entities that determine how much end-user data they save and what they do with it.
One of the goals of Web3 is to change the way internet ownership works by introducing technologies with mechanisms that regulate how users interact with each other. This allows data use and transactions to be controlled by community-run networks instead of the entities from Web2’s centralized model.
There are a few different technologies that make up the Web3 ecosystem, including:
Cryptocurrencies and Digital Assets
Cryptocurrency is a type of digital currency that’s secured by cryptography and operates independently of central banks or governments. Digital assets like crypto enable new forms of value transfer and ownership representation. Unlike traditional payment systems that require bank accounts and credit checks, cryptocurrency transactions can occur directly between parties anywhere in the world. These transactions often execute at higher speeds, with fewer restrictions, and at a lower price than standard wire payments with fiat currency.
Web3 includes other types of digital assets like non-fungible tokens (NFTs) and stablecoins. While NFTs have had an inconsistent history, stablecoins are a reliable asset that’s becoming more popular among modern businesses. Stablecoins are cryptocurrencies pegged to fiat currencies like the US dollar and other stores of value, providing the benefits of digital currency without the price volatility that makes Bitcoin difficult for routine business transactions. Neobanks like Slash have integrated stablecoins into modern banking operations, enabling businesses to seamlessly utilize digital assets alongside their traditional currencies.
Blockchains
Blockchains are distributed ledgers that record transactions across multiple computers simultaneously. Instead of relying on a single database controlled by one organization, a blockchain creates an immutable record that no single party can alter or manipulate. It also comes with built-in mechanisms that prevent unauthorized transaction entries. This architecture reduces the need for trusted intermediaries in many business processes.
Any time new data is added to a network, a new “block” is created, and all nodes on the blockchain are updated to reflect the addition. Just like a real chain, the system is not vulnerable to a single point of control. Bitcoin is an example of a blockchain, but the concept isn’t limited to crypto – IBM Food Trust is a blockchain that’s used to track the shipping of food products, and certain companies use blockchains for identity verification.
Smart Contracts
Smart contracts are self-executing contracts that automatically enforce agreements when predetermined conditions are met, such as terms agreed upon by buyers and sellers. This means human intervention and third-party verification aren’t required, enabling automation that isn’t possible with Web2 technology. Ethereum is a popular blockchain platform that uses smart contracts to automate decentralized applications (dApps), NFTs, and blockchain-based finance platforms.
Web3 Business Applications and Use Cases
The secure, quick processes behind transactions with Web3 offer many practical solutions for modern businesses. Here are some use cases we’re seeing with Web3 and digital assets:
Supply Chain Transparency and Traceability
Blockchain technology creates immutable records of product journeys from manufacturing to end consumer. Each step in the supply chain can be recorded on-chain, creating a transparent history that customers and regulators can verify independently.
For instance, some luxury brands have started to use the blockchain to combat counterfeiting by assigning each item a unique digital identity. Customers can verify product authenticity by scanning QR codes that reference blockchain records or using a near-field communication (NFC) chip embedded in the product. Food companies can track when and where their products have travelled, react to changes, minimise risk, and improve distribution and restaurant operations.
Smart Contracts For Automated Processes
Smart contracts are able to automatically trigger actions based on pre-coded agreements. This means they can be used to automate recurring payments like vendor disbursements and employee salaries based on predefined conditions. A software company might automatically distribute revenue shares to partners when monthly targets are met, or a construction firm could release milestone payments when project stages are verified on-chain.
Outside of payment processes, some insurance companies use smart contracts to strengthen claim processing through error checks and automated fraud detection. They can also work as legal contracts, executing transactions or agreements when certain conditions are met. Companies across industries are constantly discovering new ways to implement automation with smart contracts - the possibilities are nearly endless.
Digital Identity and Authentication
One of the troubles with centralized systems like Web2 is that they can be prone to theft, fraud, and an excessive reliance on personal data sharing. Web3 technology can reduce the complexity of user authentication while improving security and privacy.
Instead of managing separate username/password login credentials for each service, businesses can implement wallet-based authentication that works across all Web3 applications. Digital wallets can actually verify user identities cryptographically, which means their information is secure and they won’t have to deal with as many annoying two-factor authentication codes.
This user-centric digital identity model is known as self-sovereign identity (SSI). Not only is this model important for a person’s control over their personal data, but it also makes identification easier for businesses operating across multiple jurisdictions. SSI provides consistent identity verification without relying on country-specific systems that may not be accessible to certain international customers.
Business Lending Through Decentralized Finance
Decentralized Finance (DeFi) is a blockchain-based financial system that enables the lending, borrowing and trading of funds without intermediaries like banks or brokers. This system is powered by smart contracts, and can be used to exchange large amounts of currency without the delays and fees sometimes found with traditional methods.
Businesses can use DeFi to access new funding sources like crypto assets without going through bank credit lines or manual underwriting. In exchange, many DeFi loans require assets to be overcollateralized, meaning borrowers must lock up crypto assets worth more than the borrowed amount. Given DeFi’s lack of regulation and occasional volatility, it’s not necessarily a solution businesses can consistently rely on just yet, but it may be worth considering for some nimble startups.
The standard in finance
Slash goes above with better controls, better rewards, and better support for your business.
Web3’s Impact on Business Banking and Finance
The proliferation of cryptocurrencies and digital assets has directly disrupted traditional banking. Here are some of the ways crypto has changed the landscape of finance:
Stablecoins for Business Transfers
While many cryptocurrencies are too volatile to be considered for business use, the fact that stablecoins are tethered to fiat currencies like the US dollar makes them ideal for reliable trade. Given their capability for fast, 24/7 transactions, forward-thinking companies are beginning to turn to them for quick transfers.
The two most commonly used stablecoins are USDC (USD Coin) and USDT (USD Tether). The main difference between the two is that USDC is compliant with the European Union’s MiCA regulations, while USDT is not. The Slash platform supports both stablecoins, and offers built-in on/off ramps that allow users to automatically convert them to USD. Slash allows users to send and receive stablecoins with fees below 1% and settlement times in minutes
Cross-Border Payments and International Operations
Cryptocurrency enables businesses to make cross-border payments without going through international wire or ACH avenues. This is particularly valuable for companies working with overseas contractors or vendors in regions with limited banking infrastructure.
Settlement times for international cryptocurrency transactions typically range from minutes to hours rather than the days required for traditional wire transfers, and often carry lower fees. This improves cash flow management and enables more flexible payment terms with international partners. It’s important to note that compliance requirements vary by jurisdiction, as regions like the EU have their own regulations.
Another advantage for cross-border B2B is broader access to the U.S. dollar worldwide. With the Slash Global USD account, business owners outside the U.S. can open a U.S. business account without forming a domestic entity.³ Built on stablecoin-backed infrastructure, it allows you to hold, send, and receive USD payments just like you would with a traditional bank account via ACH, wires, or the blockchain.
Payment Processing and Treasury Management
While treasury management can become more complex when dealing with digital assets, it can also offer real benefits. Companies that often do business with cryptocurrency can hold it in their treasury as both working capital and a hedge against inflation. With the help of regulated institutional custodians and private keys, crypto can be stored just as securely as fiat.
Businesses can actually earn yield on cryptocurrency holdings through decentralized finance protocols, sometimes achieving higher returns than traditional corporate savings accounts. However, this is a Web3 process that’s in its infancy, so it’s smart to be careful when exchanging large amounts of money in a DeFi environment.
Benefits and Risks of Web3 For Businesses
Web3 offers more upside than we see in almost any traditional finance tools, but it also comes with risks and volatility. For those who are considering bringing Web3 systems into their business, here are the benefits and drawbacks to consider:
Benefits:
- Reduced intermediary costs and fees: With crypto, sending funds and holding accounts carry little to no fees, while big banks may levy inconvenient charges. This is especially true in cases of cross-border payments.
- Automation through smart contracts: Businesses can automate a wide variety of actions with the help of smart contracts, including payments, legal agreements, and fraud detection.
- Strong transparency and auditability: Because crypto operates on blockchain technology, all transactions are recorded in a transparent and immutable way. With this enhanced visibility, recording cash flow can become easy.
- Speed and flexibility: Not only can crypto transfers settle in mere minutes, but they’re also available 24/7, meaning funds can be transferred at night and on weekends. This is a distinct advantage over banks that operate on strict business hours.
- Self-sovereign identity and privacy control: SSI allows individuals to verify their digital identity across multiple platforms and in multiple locations. This can make the user experience more streamlined and identity verification less complex for a business.
Risks:
- Regulatory uncertainty and compliance issues: Not only do different countries and US states have their own compliance requirements regarding crypto, but international bodies like the Financial Action Task Force (FATF) have undertaken their own initiatives to regulate digital assets. USDC, supported by Slash, is compliant with many regulations worldwide, including the EU’s MiCA.
- Technical complexity and implementation barriers: Simply put, Web3 can be tough to wrap your head around. Implementing the technology may require specialized expertise, and fully training employees can be a long process. Slash smooths over the technical complexity of using crypto for everyday payments, allowing users to simply see, “Send $100 with USDC.”
- Security vulnerabilities: While crypto and blockchains as a whole are relatively secure, certain DeFi protocols and lesser-used digital assets can be vulnerable to hacking. With decentralized systems, users bear full responsibility for the loss of their funds, so knowing the risks is important.
- Scalability limitations of blockchain: Because blockchains are decentralized and secure, it’s difficult for them to scale without intervention from external programming. For a blockchain to handle excess traffic, it may require a more dedicated infrastructure, which may end up contradicting its decentralized nature.
The standard in finance
Slash goes above with better controls, better rewards, and better support for your business.
Slash's Web3 Banking Solutions
As of now, the world of business works with a combination of standard banking operations and Web3 technologies. This means that forward-thinking companies may want a financial platform that supports both. Slash provides comprehensive business banking solutions that seamlessly integrate cryptocurrency and stablecoin transactions with traditional financial services.
Our platform enables businesses to accept cryptocurrency payments from customers while maintaining familiar banking interfaces and reporting tools. Stablecoin settlements provide the speed and global accessibility of cryptocurrency without the price volatility that can complicate business operations.
Slash accounts include built-in support for USDC and other major stablecoins, allowing businesses to hold, send, and receive digital assets alongside traditional currency. Conversion capabilities let businesses choose whether to hold cryptocurrency or automatically convert to dollars based on their treasury management strategy. With our platform, companies worldwide can utilize stablecoin payments, bypassing correspondent banking delays and high wire fees.
Recordkeeping and reconciliation don’t have to be tougher with digital assets. The Slash platform syncs two-ways with QuickBooks Online and Xero, meaning your cryptocurrencies can fit right into your typical month-end close.
Whether you believe Web3 is the future of the internet or just a handy way to move money, it may be worth considering for business use. Slash’s financial solutions are purpose-built to make cryptocurrency banking easy and secure.
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Frequently asked questions
Is Web3 safe for business use?
Web3 technologies can be very secure when implemented properly, but they require different security practices than traditional systems. Businesses should use multi-signature wallets, hardware security modules, and work with experienced service providers to minimize risks.
Can Bitcoin be a useful cryptocurrency for business?
Stablecoins are generally considered a much more reliable cryptocurrency than Bitcoin for intercompany transactions, but that doesn’t mean Bitcoin lacks any utility. Investing in Bitcoin has the potential to both hedge against inflation and provide large returns over time. It can be a risky investment, though, especially when using company funds.
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