What is Web3?
A new buzzword has sneaked into the crypto conversation: Web3 (also known as Web 3.0).
Some people see this new vision of the internet as a new world of possibilities to fight the Big Tech oligopoly, while many remain sceptical and think it may encourage more energy consumption and cybercrime.
If you haven't delved into this nerdy concept, you probably have a lot of questions: where does it come from, what is it for, how can I access it or should I invest in it?
Let's dive deeper into this novel ecosystem.
What's new about Web3?
The term Web3 is not new. Gavin Wood, co-founder of Ethereum and founder of Polkadot, introduced it in 2014 to define a "decentralised online ecosystem based on blockchain". However, it was not until 2021 that this idea became widespread in the crypto community, tech companies and investment funds.
In order to see what new features Web3 would bring to the internet as we know it, let's take a quick look at its two predecessors.
Web1 is the internet that was in use between approximately 1991 and 2004. I'm sure you still remember that strange electronic noise when you connected and the static web pages, with very little interaction with users. It was a decentralised internet, developed in open source software. In order to have your own platform to communicate with the world you had to build your own site and have a domain, but few people had the knowledge to create a website, so the readers outnumbered the creators by far.
The Web2 model took off in 2004 when social media, blogs, wikis and networking services emerged. On these platforms, anyone can have their space for free to produce content and give feedback in a simple way, without having direct access to a server or any specific knowledge.
The problems of this model are well known. In exchange for free services, we accept certain conditions. When publishing their content, creators cede the rights to their work and the income generated by the platform through advertising. On top of that, users become the product, as the big data generated by their activity is sold to create personalised advertising.
A few companies - Google, Facebook, Twitter, Amazon, etc. - dominate this huge market, turning the system into a corporate oligarchy that keeps the antitrust authorities on their toes.
Web3 seeks to return to the original decentralised concept of the internet, in which users own what they publish. Thanks to blockchain technology, the data, instead of being centralised on huge servers owned by big tech, would be copied onto nodes in a network around the world.
Is Web3 already working?
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In reality, Web3 still needs to be built. Developing the necessary infrastructure to have functional platforms running on Web3 could take decades, although some projects are already running based on its applications. Examples include Uniswap, which is a decentralised cryptocurrency exchange, and Steemit, a blockchain-based blogging and social platform.
Web3 uses the technology and concepts of the crypto universe to create a new ecosystem:
- Blockchain. Web3 relies on the blockchain to operate in a decentralised and secure way: encryption protects access to information, while distributed computing hosts it in a decentralised network, independent from large servers.
- Crypto tokens. These financial assets are the incentives used to reward users who contribute to the functioning of the network.
- Open source software. Decentralised applications facilitate interactions without the need for intermediaries. The use of decentralised finance (DeFi), for example, eliminates the mediation of banks or financial institutions to manage transactions on the blockchain, and allows one person to send a bitcoin to another without the need for an exchange.
- NFTs. Certificates backing digital assets are used to trade goods as diverse as art or shoes in digital marketplaces.
- DAOs. One of the most innovative ideas proposed by Web3 are decentralised autonomous organisations, which aim to transform the concept of corporations as we know them. Instead of hierarchical structures, with centralised management, the organisations are distributed in networks in which different people contribute their work and are rewarded for it.
Web3 is also commonly linked to the metaverse, but do they really belong together? Well, not really. The metaverse is a front-end, the interface to an immersive internet. Some applications might set it up as the way users interact, but the metaverse does not necessarily need to be part of the Web3.
Risks and criticisms
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Critics of Web3, like Elon Musk, argue that it could lead to less control over the content available on the internet and gaps in security and legality.
The internet infrastructure we now use depends on corporations that are under the scrutiny of governments and regulators. In the decentralised ecosystem of the Web3, it would not be so easy to control what is published, which could open the door to fake news, hate speech, harassment and cybercrime.
It could also end up becoming centralised in the same way that Bitcoin mining has – five pools mine three quarters of this cryptocurrency worldwide.
Could Web3 push Big Tech out of the game?
Will we see Web3 applications proliferate soon, or will they remain reduced to a niche of crypto investors? Will the day come when they replace Facebook, Google or AWS servers?
Most likely, Web2 and Web3 will continue to coexist - and Web1 to a lesser extent. The blockchain is a very slow database if it is completely decentralised, so it is not suitable to use it to host an interface. Operationally, it makes more sense for applications to remain hosted on a main server and have certain parts of them decentralised on the blockchain.
A number of companies are investing in this technology. Twitter is exploring adding some Web3 features to its platform, such as community tokens or NFTs. So it looks like the original idea of a decentralised, open and liberal Web3 could become blurred, and end up being just a bunch of extras added to the internet we have today.