What is Web3 and Why it Matters
By now, you’ve probably heard the term “Web3” plenty of times. Maybe it came up at work, or school, or at dinner while a friend explains why Dogecoin is going to moon.
All this talk about Web3 may feel a little disconcerting. After all, most people are still adjusting to the modern socio-political arena that social media has created. Therefore, merely the thought of a new version of the internet can be a lot to take in.
But we’re here to unpack Web3 by exploring its fundamental concepts and understanding the importance of a decentralized ecosystem.
Before we dive in, it’s important to note that Web3 is still in its earliest stages. As such, it’s rapidly evolving, and will continue to mature for quite some time. Although the primary use cases of Web3 won’t be realized or mastered anytime soon, we do have a thorough understanding of its foundational principles. Namely, it’s centered on an ecosystem of Blockchain projects that are:
In order to break down exactly what these concepts mean and why they’re so important to Web3, it helps to understand the previous versions of the internet and their shortcomings. Discussing Web 1.0 and Web 2.0 will shed light on why Web 3.0 is a necessary innovation for humanity to live in a more equal world.
What was Web 1.0?
Web 1.0 was basically the dinosaur age of the internet. It spanned from 1989 to the early 2000s; born out of work that began in the early 70s when the U.S. Government began research on protocols that would allow computers to communicate across a distributed network. Protocols can best be defined as standardized, predetermined rules that specify how data is shared between computers.
The earliest version of the internet was decentralized, meaning that it was constructed on top of a series of free, open protocols. Dissimilar to proprietary protocols, open protocols are not owned by any centralized authority or limited to a singular company’s products. Majority of these early web protocols, such as HTTP (web), TCP (transmission), and FTP (file transfer), serve as the foundational tools of the internet we’ve become so familiar with today.
At the time of Web 1.0, the internet primarily consisted of a separate pages joined together by hyperlinks. There were no additional graphics or comment sections, like what we see when using the internet today. Internet users were essentially nothing more than passive recipients of the information online. They didn’t have the ability to interact or respond to what they encountered.
Hence, it was named “read-only” era.
What was Web 2.0?
Since the early 2000s, we’ve been utilizing Web 2.0. It can best be described as a version of the internet that enables everyday users to create, share, and publish content across the internet. The average individual is no longer a passive observer, rather they play an active role in contributing to the ecosystem.
To illustrate what this means, let’s use an e-commerce website as an example. The website in Web 1.0 was just a very long list of product names and prices. Readers would scan through them, and then they went to the physical store to make their purchases.
In contrast, Web 2.0 allows users can use an e-commerce site to make payments, request service, track their orders, post reviews and more. In fact, Web 2.0 sites strongly encourage users to participate and increase their engagement. Consider Instagrams’s like button or their notification system. Both are aimed at enticing users to like, comment, or otherwise engage.
Unfortunately, Web 2.0 is largely characterized and defined by large intermediaries. Major platforms such as Google, Spotify, Amazon, Facebook, and other big names in Web 2.0 tech serve as centralized data aggregators. They are the ultimate intermediaries between creators and consumers, capturing nearly all the value — in the form of data and revenue — in the process. For instance, Tik Tok generated just South of $5B in revenue in 2021. Less than 5% of that revenue went towards creators on the platform; when it should very well be the other way around.
These centralized platforms, which primarily create value by enabling direct interactions between groups, greatly rose in popularity with Web 2.0. Currently, they dominate the global economy and are some of the most profitable and influential companies to exist.
The Problems in Web 2.0
At some point it actually became profitable for these platforms to make it more difficult for groups to interact with one another. Thus, intermediaries have become more of a roadblock than an open ecosystem. Let’s use Instagram as an example.
At first, Instagram provided a valuable service. Go to Instagram, connect with your friends, influencers and customers, and share your media, opninion and even goods with them. As more people flocked to Instagram to see what friends and companies they followed were up to, Instagram’s trove of user data grew exponentially. Every click, scroll, comment and like became a financially valuable data point. And Instagram quickly recognized that businesses would be willing to pay a premium to get their products/services in front of new (and existing) followers. So they began selling our attention in the form of ad space which generates billions in revenue.
Now, Instagram is an intermediary that determines when and who users and businesses interact and engage with. Google does nearly the same thing with their ad platforms and Amazon with their featured products.
Evidently, these Web 2.0 intermediaries hold all the power. They exclusively own all our data and dictate what we can and cannot do online, reserving the right to shut down or ban our access to platforms whenever they please and at their discretion.
These intermediaries often determine who we can interact with and when, selling our time and attention to the highest bidder.
Lastly, most of the tools and services we use on the internet are centralized through places Alibaba Cloud, Azure and most notable AWS which supports nearly one-third of the entire internet.
Web 2.0 is a deeply flawed evolution of the internet. While we may have experienced unequivocal technology advancements, we have given up data privacy and security in the process; something we should never compromise on.
Enter the blockchain and Web3.
What is Web3
The next iteration off the internet, following Web 2.0 was known as Web 3.0 until Gavin Wood coined the term “Web3” around 2014 and the short name stuck. So, what is Web3? In essence, Web3 is about undoing all the problems that came about in Web 2.0. This next generation of the internet will focus on shifting power away from big tech and towards individual users.
As mentioned at the beginning, Web3 is centered on an ecosystem of products that are decentralized, trustless, permissionless and interoperable.
Meaning of Decentralization and Trustless
Rather than relying on a centralized server or entity, Web3 is built on of the blockchain, a ledger that enables data to be stored across distributed devices worldwide. Conveniently, these distributed devices can be anything from laptops to institutional grade servers. The devices act as the framework of the blockchain, communicating with each other to enable the storage, spread, security and preservation of data without the need for any trusted third party.
Thanks to these devices or nodes, the blockchain creates an immutable record that’s a decentralized proof of ownership.
With Web 2.0, we have had no choice but to hand our data over to the tech giants. In fact, we have been conditioned into giving away our data for free for so long, most of us don’t even think twice. All along, we’ve needed to blindly trust that these parties will use this data ethically.
These problems are why the ownership of our data and identity, also known as self-sovereign identity, is more important than ever before.
Meaning of Interoperability and Permissionless
This self-sovereign ownership can be achieved through crypto wallets like Metamask or Phantom . Similar to a wallet in the real world, a crypto wallet serves as your Web3 identity, holding both your currency and data in a highly secure fashion.
This wallet is interoperable, which means it can be seamlessly taken around the internet and work with various products and systems, therefore allowing you to choose which decentralized apps have access to your property.
Additionally, all interactions on the blockchain are permissionless, meaning they do not require approval from a trusted third party to be completed.
why is this necessary.
Today, individuals must use their Gmail or Facebook to login and access many online applications. This forces the user to hand over their data. But in Web3, individuals will maintain complete ownership of their identities. By replacing third parties with the blockchain, Web 3.0 unlocks entirely new business models and value chains. Ones where the centralized intermediaries are no longer favored and will actually struggle to compete with the decentralized communities that implement revenue sharing. Web 3.0 takes power from the intermediaries and gives it back to users.
This phenomena can already be seen through the usage of NFTs.
Numerous artists and creatives have recently started to experiment with ways in which they can monetize their content like never before and receive the lion’s share for the revenue they generated. This can be credited to the dynamic functionalities of smart contracts, which are predetermined code agreements programmed into a blockchain that will automatically execute once specified conditions are met. Smart contracts allow for a royalty on sales made in the secondary market. This enables creators to get paid out every time their work switches hands in the open marketplace.This fundamental change in the value chain has allowed creators to monetize like never before.
Web3 also includes technology such as Decentralized Autonomous Organizations (DAOs), Decentralized Finance (DeFi), Game Finance (GameFi) and so much more. Each of which deserves a thorough deep dive to understand the radical benefits. All in all, these technologies aim to make the internet a more inclusive and transparent ecosystem for everyone to work and play.
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