Emerging opportunities of Web 3.0

Emerging opportunities of Web 3.0 by using blockchain protocols

The internet revolutionized the way we work, collaborate, shop, and in the end, live. It all started in 1991 with Web 1.0. Back then it was largely a collection of static sites — a read-only collection of hyperlinked pages and consume-only content without much interaction. Then around 2005, we arrived in today’s Web 2.0 era. Connecting with friends? Facebook and WhatsApp. Political discussions? Twitter. Shopping? Amazon. Listen to music? Spotify. And in the background: A massive collection of data from and about each and every user.

Web 2.0 has often been described as the age of sharing and social media. Sharing for sure but not only with one’s peers but also fueling an economy based on targeted advertising. The better a platform, like Facebook, knows a user’s preferences, the better it can tailor content to that user. Creating even more opportunities for targeted advertising and by that increasing its revenue on ads. An example of this would be a dog owner who likes posts on dogs on Facebook. Facebook’s algorithm recognizes this pattern even without the user explicitly proclaiming “I like dogs”. Then more dog-related content and advertising are presented to the user, increasing the time spent on the platform and making that person more likely to click on an ad. This flywheel effect created highly centralized-controlled infrastructures with targeted advertising and the lack of privacy.

It could even feel like an end of history moment with those unprecedented oligopolies and monopolies. But nothing is further from the truth: In the emerging era of Web 3.0 , users and organizations alike could regain control over their data or at least their identities. This is enabled by a highly decentralized infrastructure based on blockchain protocols. Together with that comes a fundamental conceptual shift to the true exchange of value on the internet. This offers tremen- dous chances for investors to participate — just as those who invested early in ventures like Google or Facebook benefitted. To provide a better understanding of the opportunities, we dive deeper into the aspects of Web 3.0.

Trusted block by block

Blockchain protocols are the oil of the Web 3.0 era: Just as oil started in the 19th century to be used only in lamps, the first blockchain started with one project alone: Bitcoin. Satoshi Nakamoto’s now famous paper “Bitcoin: A Peer-to-Peer Electronic Cash System”1 from 2008 solved the double spending problem (you can also spend any Bitcoin once — just as cash) and created “a robust and secure decentralized system, without any preconditions placed on the number of system users or their identification”.

From that, blockchains or, more generally speaking, distributed ledger technologies spread — just like oil evolved into not only the most important source of energy but the cornerstone of economic development in the 20th century, including being the basis fertilizers feeding the worlds’ population.

The distributed infrastructure or ledger at the core of blockchain protocols ensures three things: First, there is no central controlling entity of a blockchain. All participants have a full copy (basically a peer-to-peer network). Second, changes or transfers of values are safeguarded from being changed by cryptographically chaining record blocks of transactions to each other (hence the name blockchain). Third, all participants find rule-based and automatically a consensus about the valid version of the ledger excluding meliaceous transaction.

Whilst Bitcoin is nothing but a ledger, the next generation of blockchain protocols works more like a giant supercomputer. Protocols like Ethereum, Cardano or Solana allow smart con- tracts and decentralized applications (DApps) to run distributed on the blockchain. Those DApps are computer programs based on the contractual “if condition X is fulfilled then pay amount Y to Z” logic. Based on this, they go further to build complex applications, such as whole digital mar- ketplaces, or even games directly on the blockchain. And how is someone incentivized to provide computing power to this distributed supercomputer? By paying a small fee for the metaphorical gas used with the currency of that blockchain protocol. To integrate external information, like the exchange rate between USD and EUR, some DApps work as oracles to provide information from outside the blockchain to the participants and contracts. This then allows smart contracts like “If the exchange rate between Euro and US Dollar as published by the ECB moves by 5%, then pay the amount of 0.01 ETH to the counterparty”.

To summarize, blockchain protocols provide a distributed supercomputer that anyone could use to run applications on decentral resources.

Internet of Value

Web 3.0 enables the direct exchange of value without relying on third parties. What does that mean? One could directly pay for an order with a cryptocurrency instead of going through a bank or credit card network.

Nearly all blockchain protocol implementations offer such a virtual currency to power itself: Bitcoin itself, Ether (ETH) for Ethereum, ADA for Cardano, SOL for Solana. Those units of account are, already today, alternative money to deposit money on a commercial bank account or central bank money like cash.

Combined with smart contracts and DApps they already provide a network of highways (connected over the blockchain) with the ability to influence traffic based on automated condition checking (like dynamic speed limits based on congestion) and paying toll fees for using the road.

This direct transfer of value is even taken one step further with non-fungible tokens (NFTs). Each NFT is unique, like a painting in the offline world, and likewise, there is a vibrant community trading digital collectibles already on sites like opensea.io or rarible.com. But there are more applications for NFTs like direct use on IoT (internet of things) devices. For example ownership of such a device can be tamperproof transferred right on the block chain. Or, when renting, a smart contract could handle all the details of invoicing, payment, activation and deac- tivation. And all of this with unprecedented security and safety. Considering the aspect of keeping record: NFTs are just another token for supporting blockchain protocols that can be transferred within their standard procedures (see also figure 1 in the appendix).

Taking back control over data

In the Web 3.0, users regain control over their data. Each user holds private keys to their wallet. And a wallet is what safeguards all values on a blockchain. With those private keys, any transaction, like a login, can be (cryptographically) signed. The best part is that each user can generate multiple private keys, so different transactions or interactions cannot be traced back to the specific individual. Having said that, blockchains are not anonymous, just pseudonymous, as each transactions’ sender and receiver is immutably stored. Nevertheless, it is a large step for- ward from Web 2.0’s era of data spreading as there is no accidental sending or transmitting of any data. It is also a safer and more reliable than using a combination of username and password to login somewhere.

Also, due to the decentralized nature, intermediaries or large data aggregators are taken out. There is no need to bring all data to just a few entities (like Google, Facebook).

Finally, it is possible to compensate the user adequately for one’s time or data. An imple- mented example is the Brave Browser. It allows the user to choose some ads to be displayed (in a browser that otherwise tries to block as many ads as possible). In exchange, he/she earns Brave Attention Token, which can then be distributed to content creators of the user’s choice.

Opportunities to participate

Web 3.0 is still in its Cambrian, its early, period. For the avid investor, there are many op- portunities waiting. Even though the technology and some procedures still seem to be only for technically minded nerds, one cannot forget that the market on cryptocurrencies alone already has a market capitalization of around 2.6 trillion US dollars (CoinMarketCap 2021). Drawing the analogy to oil again, those cryptocurrencies are only one application, just as illumination with gas lamps was only one application.

The true future potential is within the decentralization of transferring value and running apps alike. To close with an example: There might be no trusted land registry yet in some parts of sub-Saharan Africa. But there is Internet. And based on a blockchain protocol it is possible to build up a land registry that allows the direct transfer of value (money against land) whilst giving citizen’s full control over their data and their assets. From the perspective of any investor living in a country with a well-functioning bureaucracy, that might seem trivial. For those who do not have the privilege to enjoy a functioning state, Web 3.0 could be the redemption.

One final remark: There is no guarantee that Web 3.0 will take off as fast or as broadly as expected. Just looking back a bit: Some argued around the turn of the millennium that the inter- net would not prevail. Therefore, we invite you to take part in the exciting journey towards Web 3.0.

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