What is Web3?
The Future of the Internet
TL;DR
Web3, which represents the upcoming phase of the internet, advocates for decentralization and emphasizes the empowerment of individual users, aiming to diminish dependence on major technology giants like YouTube, Netflix, and Amazon.
In contrast to earlier iterations of the internet, Web3 grants individuals greater authority over their data and content, breaking away from the restrictive environments fostered by dominant tech corporations, often referred to as "walled gardens."
Within Web3, cryptocurrencies function as the inherent payment system, facilitating decentralized peer-to-peer transactions. Non-Fungible Tokens (NFTs) provide a means to establish ownership and exchange distinctive digital assets, aligning perfectly with Web3's core principles of user control and decentralization.
Web3, despite its merits, has faced criticism regarding issues such as unequal ownership of blockchain networks, what some describe as "decentralization theater", and significant barriers to entry for individuals looking to create their own blockchains. These barriers are often seen as tasks reserved for highly specialized engineers, which can contribute to the perceived drawbacks of Web3.
What is Web3 and how is it different from Web1 and Web2?
Web1
To comprehend the concept of Web3, it is essential to understand its predecessors. Web1, the initial version of the internet, emerged in the late 1990s and primarily consisted of static web pages and basic content. Interactivity was limited, and users could mainly read and publish simple information.
Brian Brooks, the CEO of Bitfury, provided a succinct analogy during his speech to the U.S. Congress in December 2021. He likened the experience of using an original AOL account to browsing a curated "walled garden" where non-interactive content was presented, similar to how Time Magazine used to showcase selected articles in their printed magazine, but displayed on a screen.
Web2
Following Web1, the subsequent iteration known as Web2 introduced a paradigm shift. It is often referred to as the "read/write" version of the internet, as it enabled users to not only consume content but also actively contribute by creating and publishing their own material. The advent of social media platforms like Facebook, Twitter, and Instagram further elevated the sharing of content.
While Web2 has provided remarkable free services, many individuals have become disillusioned with the "walled gardens" established by dominant tech companies. There is a growing desire among users to exert more control over their data and content. This is where Web3 steps in as a potential solution.
Web3
Web3 can be described as the "read/write/own" phase of the internet. It goes beyond the conventional model of using free tech platforms in exchange for user data. In Web3, individuals have the opportunity to actively engage in the governance and operation of the underlying protocols. This paradigm shift allows users to become participants and stakeholders, rather than mere customers or products.
In the context of Web3, ownership, and participation are facilitated through tokens or cryptocurrencies. These tokens represent ownership in decentralized networks, commonly known as blockchains. Holding a significant number of these tokens grants individuals influence over the network. Governance token holders have the ability to utilize their assets to vote on important decisions related to the future of decentralized applications, such as decentralized lending protocols.
Core ideas of Web3
Web3 is characterized by several core ideas that shape its nature and development. While providing an exact definition of Web3 can be challenging, the following principles serve as guiding concepts:
Decentralization: Unlike the centralized control exerted by large entities over significant portions of the internet, Web3 aims to distribute ownership among its builders and users, fostering a more democratic and inclusive ecosystem.
Permissionless: Web3 promotes equal access and participation for all individuals, ensuring that no one is excluded from engaging with its technologies and services.
Native Payments: Web3 embraces the use of cryptocurrencies as a means of conducting online transactions, replacing traditional banking systems and payment processors with a more efficient and decentralized payment infrastructure.
Trustless: Rather than relying on trusted intermediaries, Web3 operates based on incentivization and economic mechanisms, reducing the need for blind trust and fostering transparency and security within the network.
What activities are possible on Web3?
Web3 enables the emergence of cooperative governance structures for formerly centralized products, facilitating the tokenization of various entities. These entities can encompass a wide range of items, such as memes, artworks, an individual's social media output, or even tickets to conferences hosted by figures like Gary Vee.
The gaming industry serves as a notable example of this transformative shift. Within the gaming community, there is often discontent regarding developers' unresolved bugs or adjustments that disrupt the balance of favorite weapons due to patches. Through Web3, gamers now have the opportunity to invest in the games themselves and participate in decision-making processes.
Major Web2 companies, including Meta and Ubisoft, are actively constructing virtual realms powered by Web3 technologies. Non-fungible tokens (NFTs) also hold significant potential in reshaping the gaming sector by granting players immutable ownership over the items they accumulate.
How is Web3 related to cryptocurrency?
Cryptocurrencies play a vital role within the Web3 ecosystem. As outlined by the Ethereum Foundation, one of the fundamental principles of Web3 is the integration of native payments, utilizing cryptocurrencies as a means of online spending and money transfer. This approach aims to move away from the outdated banking and payment processing infrastructure.
Ownership of assets holds significant importance within the Web3 paradigm, and cryptocurrencies not only function as a medium of exchange but also facilitate the establishment of a "token economy." This system allows users to earn cryptocurrencies for their contributions to a platform, thereby fostering a more equitable internet.
Cryptocurrencies form the financial infrastructure and incentive mechanisms that underpin the functioning of Web3. Furthermore, they provide a direct and trustless method of payment and exchange, eliminating the need for third-party control, which aligns with Web3's objective of decentralization.
How is Web3 related to NFTs?
Non-Fungible Tokens (NFTs) are an integral part of the Web3 ecosystem. NFTs represent unique digital assets that are stored on a blockchain. Unlike cryptocurrencies, each NFT possesses a distinct value and contains specific information that distinguishes it from others.
NFTs enable the ownership and exchange of various digital goods, including digital art, music, and even virtual real estate. They provide a mechanism to verify ownership and authenticate digital content, which was not feasible in the Web2 model. By allowing creators to tokenize their work, NFTs contribute to the democratization of the digital economy, empowering creators and users and aligning with the principles of Web3. Additionally, NFTs can grant players of games full ownership of their in-game items, such as outfits, weapons, and other cosmetics. This ownership allows players to engage in direct trading with other participants, eliminating the need for third-party intervention.
Web3 and the Metaverse
The concept of the metaverse encompasses a virtual environment that is collectively shared and may or may not incorporate Web3 components. While games such as Roblox or Minecraft are commonly referred to as Web2 metaverses, the Web3 version of these digital realms distinguishes itself by incorporating NFTs and blockchain technology as integral aspects of the virtual world.
The decentralized nature of Web3 empowers users within the metaverse by granting them genuine ownership of virtual assets, identities, and data. These virtual assets, often in the form of non-fungible tokens (NFTs), can be directly bought, sold, or traded on a blockchain.
Criticisms of Web3 & Conclusion
One prominent criticism of Web3 technology is that it often fails to live up to its ideals. The distribution of ownership within blockchain networks is frequently imbalanced, with early adopters and venture capitalists holding a significant concentration of power.
Central to these criticisms is the notion of "decentralization theater," wherein blockchain projects may claim to be decentralized in name but lack substantial decentralization in practice. Instances such as private blockchains, venture capital-backed investments, or decentralized finance (DeFi) protocols where a select few individuals control vast sums of money exemplify this phenomenon of decentralization theater.
Despite its shortcomings, Web3 undeniably holds considerable potential. Whether this potential can be effectively realized or if it remains overly idealistic will be a discovery made by everyday users in the coming decade.
In conclusion, Web3 technology has garnered both praise and criticism. While it introduces promising possibilities for ownership and decentralization, concerns have been raised regarding the concentration of power and the existence of decentralization theater. The true practicality and viability of Web3 will ultimately be determined through its usage and adoption by users in the years to come.