What is Web3? How might it change online spaces? And what obstacles stand in its way? Here’s what you need to know about Web 3.0
The term Web3 has been around for longer than some realize.
First coined in 2014 by Ethereum co-founder Gavin Wood, Web3 is hailed as the next stage of the world wide web. But, as with any new technology, it has as many detractors as it does advocates.
Before we delve into the details of Web3, let’s examine how the web has evolved since its inception.
Spearheaded by internet pioneer Tim Berners Lee, Web 1.0 and 2.0 can be understood as developmental stages of the web.
The first generation, from the early 90s to the mid-2000s, was a one-way medium where internet users primarily accessed and read websites without a significant level of interaction. Web 1.0 can be described as a static information provider, with few content creators and a majority of content consumers.
Web 2.0, also called the participative social web, is a more dynamic, interactive, and collaborative digital space, characterized by user-generated content, usability, and interoperability. Rather than a read-only experience, there is now a two-way dialogue where users are encouraged to comment and engage with websites.
This ‘social’ web has seen the emergence of myriad online tools and platforms that facilitate communication between users and content creation, such as blogging, social media, and podcasting. Other technologies – most notably smartphones – have fuelled the rapid growth of Web 2.0.
What is Web3?
The answer is as varied as any web search result, and the definition of Web3 depends on the writer.
Some say Web3 is interchangeable with the terms ‘semantic web‘ or Web 3.0, while others stridently disagree.
Web 3.0 is considered to be an extension of Berners Lee’s vision, but it is Wood’s conceptualization that most people think of when they refer to Web3 today.
Along with cryptocurrency and NFTs, Web3 refers to a digital space in which the fundamentals of data creation, access, and storage have shifted.
If interactivity was the main distinction between the first and second generations of the web, then decentralization is the big differentiator between the second and third generations.
What is a decentralized web?
There are three different types of network systems: centralized, distributed, and decentralized.
A network system consists of two or more connected computer systems that communicate and share data, using network nodes as connection points to create, send, receive, and store data within that same network. A node can be a computer device, for example, or a router or switch.
In a centralized system, individual nodes access data through one central server that owns all the resources. In a distributed system, the processing power and resources are evenly spread across multiple, connected data centers.
Most organizations or businesses will have their own central server or system. Cloud computing is an example of a distributed system.
Web3 is to run on decentralized systems, more specifically, blockchain, a type of distributed database where there is no single, central server, and where each node acts as an individual and independent processing point.
What is a blockchain?
A blockchain is a shared, immutable ledger where all data, transactions, and actions – such as orders, payments, accounts, production, and more – are recorded.
Each node has the power to update a blockchain and, in theory, promises an immediate, shared, and transparent history of all online activity.
Each node also has its own copy of this history, which ensures transparency and accountability.
According to McKinsey, a blockchain has three key attributes:
- It must be cryptographically secure: a public key (a cryptographic key that users can share with others, usually an address in the database) enables someone to receive a transaction. This is paired with a specific private key, which is used as proof of ID, to unlock the transaction. The key must correspond to, and be authenticated by, the used network.
- It must be fully digital and online.
- As a peer-to-peer network, blockchain must be shared across either a public network, such as bitcoin blockchain – the best-known cryptocurrency, for which blockchain technology as we know it was created – or a private network, more often used in banking and fintech. Some blockchains, such as consortium or private blockchains, combine different aspects of both.
Smart contracts are programs written in code on a blockchain. Once predetermined conditions are met – stipulations that have to be decided by participants – these contracts execute activities, workflows, and actions – in short, any process that can be automated.
Examples in everyday life
A number of blockchain-based technologies and services are already in use:
● Digital currencies, commonly referred to as cryptocurrencies, such as Bitcoin, Litecoin, and Ethereum. Different currencies may work with different algorithms and at differing speeds. These transactions do not need a central authority (such as a bank) to facilitate them.
● Non-fungible tokens (NFTs): NFTs can represent digital or real-world items such as artwork, certifications, real estate, or memberships, and are often used to sell and trade digital art. They are stored in a blockchain and a cryptographic hash makes the NFT unique. ‘Non-fungible’ simply means non-interchangeable or irreplaceable.
● Decentralized applications, or dApps, allow users to exchange, borrow, lend, play to earn, and more. Right now, most dApps are geared towards decentralized finance (DeFi) and serve as financial platforms. dApp value is distributed to its participants rather than a CEO.
● Decentralized autonomous organizations (DAOs) refer to community-led entities, networks, or business structures. They can be compared to a cooperative where users can invest or exchange cryptocurrencies, carry out legal services, or even find like-minded individuals to collaborate with.
DAOs run on crypto tokens rather than data. Tokens can be used as currency to buy accessories in a game, for example, or even ad inventory, and can even be seen as the equivalent of a share. By investing, contributing, providing content, or adding to the code, users receive tokens that grant them voting rights in relation to the direction and management of a project.
Automation and predetermined code (or rules) govern the organization rather than an executive board, and token holders decide on key activities such as capital and asset management. Those with more tokens have greater voting power.
Key features of Web 3.0
Decentralized, trustless, and permissionless
Information is not stored on unique web addresses attached to a fixed location or server. Instead, it is found based on its content, and stored in multiple locations simultaneously.
Open-source software facilitates access and participation, and users have full control over their data and their actions. There is no need for permission from, or management by, a trusted intermediary or governing body, effectively making the system trustless.
Blockchain-based and cryptocurrency-enabled
Through blockchain technology, data and connections will be distributed across computing resources, including mobile phones, desktops, appliances, vehicles, and sensors.
A permanent and unchangeable record of all transactions and activity ensures authenticity and transparency, preventing attempts at counterfeiting or double-spending. Blockchain provides the technological building block for a fully digital cryptocurrency system, with no single point of failure that might cause it to collapse.
Automated, autonomous, and artificially intelligent
Artificial intelligence, predictive analytics, natural language processing, and deep learning will power relevant results faster, without interference from external forces and unencumbered by advertising. Automated tasks and AI-enhanced processing power improve accuracy and efficiency.
The potential of Web3
For proponents of Web3, decentralization and distribution eliminate an over-dependence on large, powerful intermediaries such as Google, Meta and Amazon, or even central government.
Web3 technology breaks down monopolies and acts as an equalizer. This puts users in complete control of their personal data and assets, limiting practices of non-consensual data extraction that have come to define the internet today.
Web3 is a system that inherently recognizes individual ownership, with technologies and processes such as NFTs and tokenization baked into its foundation. This improves the conditions of content creators who, on the one hand, have more power to determine the value of their work without external intervention, and, on the other, have access to an extended marketplace, new tools, and potential collaborators.
Through the continuous development and integration of new AI technologies, Web3 delivers accelerated accuracy and accessibility to suit individual needs. Within an interconnected ecosystem, access to data and interaction between users is seamless, dissolving traditional barriers such as income, gender, sexual orientation, geographical location, or socioeconomic status.
Finally, the joint elements of decentralization, distribution, and cryptography provide more security against common data breaches. Since everything is recorded on separate independent nodes, data cannot be copied, stolen, or interfered with without detection.
Is Web3 all it promises to be?
The qualities that make Web3 appealing to some also make it inherently risky and dangerous to others.
There are certainly drawbacks to a ‘central authority’ system. Currently, a small number of powerful players largely determine the rules governing personal data, social media, e-commerce, and search engines.
This asymmetrical distribution of control, capital, and information in favor of a handful of big tech companies puts end-users, businesses, and even governments at a disadvantage. Complete deregulation, however, opens up the web to cybercrime, hate speech, and misinformation at a scale that might be even harder to police.
There are many unresolved questions concerning complete anonymity. On one hand, to what extent is it truly possible? On the others, what would occur if it was?
There is plenty of personally identifiable information traveling around online, concerning healthcare, financial and transactional data to biometric information and even that from IoT devices. Could Web3 technologies heighten and intensify current levels of surveillance instead of curbing them – especially with incorporated AI and machine learning on hand to lift the thinly veiled anonymity of everyday users?
If the data is public, there is a real danger that only those with the right resources will be able to control it. This is the reality that threatens to undermine the utopian idea of Web3; becoming crypto-literate, and having the tools and capacity to invest or develop code, requires a certain level of digital access. How can this new iteration of the web guarantee inclusion over deepening digital and financial marginalization?
Resources are already polarized, with only 0.01% of all Bitcoin holders (around 10,000 investors) owning 27% of all the 18.9 million coins in circulation, approximately $456 billion (at the time of writing). As former Twitter CEO Jack Dorsey pointed out, rather than the public, it would be the venture capitalists, their funds, and their partners pouring billions into Web3, who would end up with the most power in this virtual space – a virtual, decentralized space where matters of privacy and compliance are not a given. It remains unclear how decentralized IDs might fit into current and evolving GDPR regulations and geographical data boundaries.
It is also to be expected that as Web3 technologies develop, so too will new methods of cybercrime. Hackers might exploit the interoperability and interconnectedness of these services, for example, installing crypto-mining software onto the devices of unwitting and less technologically savvy users, or setting up venture-based money laundering or bogus cryptocurrency investment schemes. If complete anonymity is possible, it might threaten social norms around accountability, responsibility, liability, protection, and legal recourse.
On top of that, Web3, blockchain, and cryptocurrencies are still decidedly unstable. Cryptocurrencies are notoriously volatile, with the collapse of FTX only the most recent in a long line of incidents. One website that has been tallying Web3 disasters and the amount of money lost to grifts and scams since 2021 currently reports total losses at nearly $12 billion. Nearly 40% of cryptocurrencies set up in 2021 had failed by the end of 2022, and the currencies that persist have accrued different values the same way government-issued fiat money does. Inequality, then, can be as much of an issue in Web3 as in our current systems.
Web3 promises decentralization, but stability demands a certain amount of centralization and standardization. This would require all existing data and infrastructure to be migrated to a blockchain database and transferred to decentralized hosting, which in itself would necessitate more computing power to ensure content exists in multiple locations. And this process, if it does take hold, will take a long time.
Web3: Hype or reality?
A Google trends search shows global interest is decreasing in blockchain and NFTs. Enthusiasm for Web3 and its potential, however, may point to dissatisfaction with the current model, design, and policies that rule the web – especially as we see tech giants coming under more scrutiny amidst multiple anti-privacy and antitrust allegations.
However, the aspirations of Web3 as a great equalizer harks back to the utopianism of the 1990s. While Web3 might tout the disintegration of barriers, blockchain networks, crypto wallets, and private keys still need to be learned, understood, and accessed.
Web3 and the underlying blockchain technology won’t necessarily be the answer that will return data, power, and privacy back to end-users. In fact, there is a real danger it may accelerate the current tracking and surveillance practices, further entrench disenfranchisement, and put vast amounts of data at risk.
This is not to say that existing Web3 concepts such as cryptocurrencies, NFTs, and dApps will completely vanish. A world of digital currency alone is quite conceivable – and digital items are already valued in different parts of society.
It’s more likely some elements will persist and evolve while others fall away. The Treasury and the Bank of England, for example, have announced that a state-backed digital pound looks likely.
Of course, no one can predict the direction in which the web will develop, and we may see a variety of structures and databases coexisting and even overlapping. Although doubtlessly, any shape it takes will be subject to constant change.
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