If you listen to the hype, the age of web3 is upon us. Or Web3. Or web 3.0. Or the spatial web. Or the decentralised internet… There are multiple names for the concept of Web3, and that is part of the challenge.
It’s hard to write a guide on something that hasn’t been defined, especially a topic that is somewhat polarising and contentious. Regardless, you’ll likely be seeing a lot more talk about it in coming months and years, so consider this a 101 on the beginnings of a concept – we’ll update as it firms up.
Web 1.0 and Web 2.0
When folks first got onto the internet en masse in the 90s, it was a very different place than it is today. Those writing about Web3 will describe this first phase, now commonly referred to as Web 1.0, as a decentralised place where no mega-companies ruled, open protocols allowed access to the inner workings of the web, people could be anonymous and, sites were static and consumption passive – we read all the websites!* This was a time, as put by Recode, where the focus was on getting people online via service providers like AoL and Yahoo and socialised to using web browsers.1 Generally Web 1.0 is defined as being from the 90s to 2000s (or mid-noughts).
The Web 2.0 phase, which we are currently in, is all about user-generated content and active participation. Social media (spurred on by smartphones and cloud) emerged to make the internet more immersive and accessible. People began spending a lot more time online, creating their own content and sharing their data in return for access to platforms. The business implications became more obvious, and we saw a move towards centralisation, with some of today’s most well known web companies – like, Amazon, Facebook, Google, eBay and Twitter– coming into being. With data turning into a commodity, privacy got a bit more fuzzy and targeted advertising tied a good portion of that commerce together.
Web3 (or whatever you want to call it)
If Web 1.0 was the ‘read’ phase and Web 2.0 the ‘read/write’ phase, Web3, the tech experts say, will be the ‘read/write/own’ phase of the net.2 Web3 reimagines the internet on completely new infrastructure alongside a move back to decentralisation and independence.
In this proposed next phase of the internet, so the zeitgeist has it, the web, its platforms, apps and organisations, will be built on distributed technologies, such as blockchains and associated cryptocurrencies and NFTs.3 The open and communal nature of public blockchains means that, in theory, these use cases will be transparent, democratic and collectively owned by the people, not by monopolies or intermediaries such as banks, newspapers, social media platforms and so on. Data will be owned by the user, and flow through blockchains, not companies. Platforms and applications will be run collectively via smart contracts and allow users to own stakes in, govern and create Web3 businesses, or DAOs.
The nature of blockchain would mean the web would be trustless (that is, inherently trusted) due to its tamper-proof nature, transparency and network validation. Web3 could not be taken down or censored. Its decentralised economy would run via cryptocurrencies and NFTs.
If you think this sounds tech-utopian, you’re not wrong. At its heart, Web3 is a vision driven by ideals for a fairer web future. As such, there are a lot of people who feel very passionately about its promise, what it is and what it will do. There are also a lot of people who don’t believe any of this will come about. There is likely not a single sentence in this article that could not be disputed, argued or ridiculed by various Web3 evangelists or naysayers.** Remember the caveat on writing an article on something so new? Early days.
In an attempt to clear up a bit of confusion around some of the concepts being thrown around in the news media and comment sections these days, here are a few of the buzzwords du jour and how they fit into a Web3 landscape.
The metaverse (a web3 use case) – The metaverse refers to a new world experience. Real-time and always-on, it merges the physical and digital, is imbued with VR and AR, and is for everyone. Events will be held in the metaverse, shops will have stores, corporations conduct business, governments interacted with, games played, property bought and digital avatars constructed. In many of these visions, the metaverse will be interoperable (no locked brand ecosystems) and built on Web3 infrastructure. See our metaverse 101.
Blockchain (an underlying architecture) – A distributed ledger system, a blockchain is a chain of data ‘blocks’ that are cryptographically linked to each other and arranged in chronological order. The chain is stored as multiple copies across a network, and any addition or change to the chain’s data has to be verified and agreed upon by each node in the network – making it very difficult to tamper with.
Cryptocurrencies (web3 currency) – Any currency that exists digitally on a blockchain. The blockchain typically records transactions, and controls new coins being ‘minted’. Bitcoin is the most well-known example of this, but is not the only one (Ether, for example, runs on the Ethereum blockchain). Users can access their crypto currency in a virtual wallet.
DeFi (a web3 financial system) – Decentralised finance, or open finance, is a financial concept based on decentralised technology like blockchains and associated cryptocurrencies. DeFi promises a financial system without intermediaries such as banking institutions or digital payment services, meaning that all transactions are direct between payer and payee. DeFi use cases could be as simple as online transactions or as complex as loans, insurance or trading stocks.
NFTs (web3 value exchange) – Items (digital, or digital versions of physical objects) that are represented by data on a smart-contract enabled blockchain. These items are non-fungible, which means they are unique. Putting an item (artwork, video, music, wine, article, etc) on a blockchain means that it can have property rights recorded, a traceable ownership and monetary value. Copies may exist but only one person can claim the original is theirs. See our NFTs 101.
DAO (a web3-enabled businesses) – Decentralised Anonymous Organisations (also seen as DACs for corporations) are organisations with no central leadership, owned by a collective of members who own tokens in the company (think of these like digital shares). They operate autonomously via smart contracts on a blockchain. Governance is written into the smart contract, and decisions are made via member agreement.
DApp (to add functionality to web3) – Apps that run autonomously through smart contracts on a blockchain. DApps, like DAOs, work like normal apps – and can be anything from games to financial wallets – but don’t require humans to own or make them go. The apps run per the coding in their smart contract, and are verified by the nodes on the blockchain network.
As you might have guessed, things are far too ambiguous at this stage to suggest how businesses should strategise for a future internet that is far from a sure thing. For the time being, keep an eye on what’s going on, and be ready in case there is a move to decentralised infrastructure (it won’t be overnight). Big picture, like planning for any future change, pay attention to your current capabilities. Are your current digital goals bedded down? If you needed to adapt, could you?
At the same time there are more than a few caveats. Despite the dream for decentralised equality, money has a tendency to find a way to consolidate in the hands of the few, and there’s no hard guarantee this couldn’t happen for Web3.4 Being in control of one’s own data, content or cryptocurrency could democratise the web for people currently locked out of full participation, but equally, we know that Web 1.0 and 2.0 – indeed, the internet itself – has failed in similar laudable goals. And while Web3 espouses personal freedom and self-regulation, no doubt governments and regulatory bodies will be uncomfortable with such a concept, and indeed, regulation initiatives (and legal challenges) are already in their sights.5 Finally, a huge obstacle not even mentioned yet? Currently, Web3, like crypto, is really not user friendly. For the tech savvy, Web3 could be a grand new era without constraints. For the rest of us, however, what this future looks like is less clear.