Web 3.0 or just Web3 is considered the future of the Internet. The vision for this new blockchain-based web includes cryptocurrencies, NFTs, DAOs, and more. Web3 promises to transform the online experience as dramatically as computers and smartphones did years ago. However, this technology is not without risk. And while blockchain has been offered as a solution to the problems of privacy, centralization, and financial exclusion, it has created new versions of many of these problems. Companies should consider both the risks and benefits before engaging in Web3 use.
Do you remember the first time you heard about Bitcoin? You may recall that at first the association with Bitcoin hinted at a new technology that would change everything. Today, Bitcoin seems to be everywhere. Advocates claim that Web3 will create new economies, new classes of products and new services online, that it will restore democracy to the web and that it will define the next era of the Internet. All this suggests that the entrance of Web3 into people’s lives will be inevitable.
Shortly after the advent of Web3, many companies began to test the waters of Web3 and while some have great success, others are facing major problems and difficulties. However, most people still don’t even know what Web3 is. In a survey conducted in March 2022, almost 70% of respondents declared that they did not even know what the term meant.
Well, if you are one of those who still don’t understand what Web3 actually is or you want to learn more about this new technology, in this article we will try to give you the answers to these questions.
Before you continue reading, we’ve compiled a glossary explaining certain Web3 terms:
- Blockchain – a distributed ledger that serves as a database owned by a network of computers instead of a single server. It provides users with an immutable and transparent way of storing information.
- Cryptocurrency – a form of currency that does not rely on a central bank, government or other intermediaries. It is software that runs on blockchains. There are currently thousands of cryptocurrencies, but the most common are Bitcoin and Ether.
- NFT (Non-fungible token) – a digital work that represents ownership over a unique digital object. These objects often include works of art or digital versions of collectibles.
- DAO (Decentralized autonomous organization) – a decentralized corporation that collects and spends money. All decisions are voted on by members and enforced through coded rules on the blockchain. They are often formed by people who are geographically dispersed but share a common goal.
- Web3 – a new version of the web, built on blockchains, which is decentralized, democratic and aimed at peer-to-peer development. Cryptocurrencies, NFTs and DAOs are part of Web3 and allow reading and writing their own content.
The path from Web1 to Web3
Web1
In the beginning, there was the Internet: the physical infrastructure of wires and servers that allowed computers and the people in front of them to talk to each other. The US government’s ARPANET sent its first message in 1969, but the network as we know it today did not emerge until 1991, when HTML and URLs allowed users to navigate between static pages. This is considered to be the read-only web, or more commonly known as Web1.
Web2
In the early 2000s, things began to change. First of all, the internet was becoming more and more interactive. It is known as the era of user-generated content or the read/write web. Social media is a key feature of Web2, and Facebook, Twitter, and Tumblr have taken the online experience to the next level. YouTube, Wikipedia, and Google, along with the ability to comment on content, have expanded our ability to watch, learn, search, and communicate.
The Web2 era was also an era of centralization, and it also created new ways for people to make money, such as through the sharing economy and the sometimes lucrative job of being an influencer. But this is also where the first problems with Web2 appeared, companies with concentrated or near-monopoly power often failed to use this technology responsibly, and consumers began to realize that they were the product and became increasingly aware of the use of their personal data by of the companies, which caused a big problem.
Web3
All this brings us to Web3. Advocates of this vision present it as an innovation that will solve the problems that Web2 created. Concerned about privacy? Encrypted wallets protect your online identity. About censorship? The decentralized database stores everything immutably and transparently, preventing moderators from deleting offensive content. Centralization? You get a real voice in the decisions made by the networks you spend time on. And, furthermore, you are not the product, you are the owner. This is the read/write/own-network vision that Web3 represents.
What exactly is Web3?
The seeds of Web3 were planted back in 1991, when scientists W. Scott Stornetta and Stuart Haber launched the first blockchain – a project for time-stamping digital documents. But the idea didn’t really take root until 2009, when Bitcoin was launched in the wake of the financial crisis (and at least partly in response to it) by the pseudonymous inventor Satoshi Nakamoto. It and its latest blockchain technology work as follows: Cryptocurrency ownership is tracked in a shared public ledger, and when a user wants to make a transfer, “miners” process the transaction by solving a complex mathematical problem, adding a new “block” of data to the chain with that earn new Bitcoin.
While the Bitcoin chain is only used for currencies, newer blockchains offer other options. Ethereum, which was launched in 2015, is both a cryptocurrency and a platform that can be used to build other cryptocurrencies and blockchain projects. Gavin Wood, one of its co-founders, described Ethereum as “one computer for the entire planet”, with computing power distributed around the world that is not controlled anywhere.
Let’s summarize. There are two ways to define Web3. One explains Web3 as a blockchain-integrated internet, or an internet where cryptocurrencies and NFTs are embedded in the platforms you use, and the other aims to think of Web3 as a user-owned internet.
What does Web3 development represent for companies?
Web3 will have several key differences from Web2: users will not need separate logins for each site they visit, but will instead use a centralized identity, like their cryptocurrency wallet, that holds their information. They will have more control over the web pages they visit as they earn or buy more and more tokens.
It is not yet clear how Web3 will affect companies. Predictions of what Web3 might look like at scale are just guesses, but some projects have grown quite large. Bored Ape Yacht Club (BAYC), NBA Top Shot, and Dapper Labs have built successful NFT communities, while companies like Microsoft, Overstock, and PayPal have been accepting cryptocurrencies for years. NFTs, which have recently become popular, are the primary way brands are now experimenting with Web3. Practically speaking, an NFT is a mixture of a deed, a certificate of authenticity, and a membership card. It can give “ownership” of digital art or rights or access to a group. NFTs can operate on a smaller scale than coins because they create their own ecosystems and only require a community of people who see value in a product. For example, baseball cards are only valuable to certain collectors, but that group truly believes in their value.
Consider the NBA. Top Shot was one of the first NFT projects in which the NBA offered fans the ability to buy and trade clips, called “moments,” like LeBron James’ famous dunk, that functioned as trading cards. It created a new connection to the NBA fan community, many of whom may already have been collecting basketball cards. Other leading brands, such as Nike, Adidas and Under Armour, have similarly added a digital layer to their existing collector communities. All three companies offer NFTs that can be used in the virtual world – for example, allowing the owner to design an avatar, or that grant rights to products or exclusive clothing in the real world.
Some companies have failed to create a community of their users that will support the new flow of events. So, when Discord introduced an NFT project to connect the app to cryptocurrency wallets, its users rebelled, so the company quickly sabotaged the development of this project. Underwear brand MeUndies and the UK branch of the World Wildlife Fund quickly halted NFT projects after a backlash from customers furious at their significant carbon footprint.
Finally, it’s up to companies considering joining Web3 to remember that Web3 is polarizing and there are no guarantees. In the face of many points of disagreement, the main divide is between people who believe in what Web3 could be and critics who criticize the many problems that arise in its use.
