Web3 for TradBiz — Web3 and Crypto Foundations (3 of 14)
Inevitable Web3 future
Welcome to the third major wave of internet-enabled change in which users own open, distributed networks enabled by and incentivized with crypto assets
We are transitioning to a new Web3 paradigm in which users own open, distributed networks enabled by and incentivized with cryptoassets. While there is no consensus on a single definition, Chris Dixon of venture firm Andreessen-Horowitz defines Web3 as “…an Internet owned by users and builders orchestrated by tokens.”¹ Well-known commentator Fred Wilson from Union Square Ventures provides greater detail, describing Web3 as “…the next generation of the web in which decentralized apps (dApps) operate on top of a shared data layer and users have control of their data and the ability to move between dApps with little or no switching costs.”² In this chapter, we will take a closer look at Web3, provide context on previous Web1 and Web2 phases, discuss how the transition to Web3 is already happening, and provide our perspective on why the Web3 future is inevitable.
Web3 is the third major wave of internet-enabled change impacting the economy. Over the last three decades, internet-enabled markets have evolved from the read-only Web1, to the read-write Web2, and are now transitioning to the read-write-own Web3.³
The commercialization of the internet in the 1990s brought about what we now think of as Web1. This was a time of experimentation as millions of people came online for the first time, hobbyists and businesses set up first-generation websites, and venture-funded businesses contributed to the dot com boom, bubble and then crash. While many early internet companies, such as AOL and Netscape, didn’t make it, those who did — including Amazon, Angie’s List (now Angi), eBay, Priceline (now Booking Holdings), Shutterfly, and ZipCar — paved the way for continued internet innovation and adoption.
Whereas Web1 was characterized by users consuming published content provided on static websites, Web2 users began sharing information with others via increasingly centralized websites and mobile applications. Today we’re arguably at the height of the Web2 period, dominated by companies like Alphabet (Google), Amazon, Meta Platforms (Facebook), Tencent, Alibaba, Salesforce, ServiceNow, PayPal, Netflix, Airbnb and many more. There is no question that Web2 innovation has delivered tremendous value propositions across a wide variety of use cases; however, this has come at a heavy price, including the rise of mega companies in lieu of open competition, the monetization of user data at the expense of privacy, the risk of data breaches due to centralized applications, the threat of users being de-platformed or censored, and the loss of user voice in the evolution of the applications where people spend an increasingly greater portion of their lives.
Recognizing these challenges, a growing army of entrepreneurs, software developers, creatives, investors, and users are hard at work enabling the transition from today’s dominant Web2 to the more decentralized Web3 paradigm. Enabled by trustless “Internet money” pioneered when Bitcoin was launched pseudonymously in 2009, the Web3 definition has expanded to include a vast variety of multi-directional, peer-to-peer applications where users create content in exchange for shared ownership of distributed protocols and applications. Web3 has grown far beyond Bitcoin, encompassing more than 20,000 crypto-enabled ecosystems, 500,000 developers, and thousands of businesses and investors.⁴ ⁵
We believe this Web3 transition is inevitable as attitudes and behaviors across stakeholders change. As we cover in detail throughout this series, Web3 projects increasingly utilize an open-source, robust Web3 technology stack, rather than proprietary, IP-protected technologies. Self-organizing communities of participants with ownership of distributed applications are emerging, replacing product and service consumers who are marketed and sold to by individual companies. Institutional investors increasingly recognize cryptoassets as a new asset class rather than shunning crypto and digital assets. Enterprises are becoming participants in distributed ecosystems, rather than owners of markets with centralized control. And regulators, accepting that crypto is here to stay, are focusing more on protection and compliance, rather than aversion and distrust of decentralized systems.
Yet we’re still early in the transition to Web3. Total crypto market capitalization was hovering around US$ 1 trillion when this series was published in mid 2022, down from more than US$ 3 trillion in late 2021. In contrast, the total market value of all companies in the S&P 500 index totaled US$ 31.9 trillion as of June 30, 2022, with Apple, Microsoft, and Amazon each more valued than the entire cryptoasset market.⁶
If you’re a TradBiz executive or investor, this means you still have time to understand how the Web3 read-write-own paradigm may redefine how your markets work, allowing you to identify opportunities for new value creation, and respond to potential disruptions to existing business models. The next chapter, Crypto and Web3 basics, starts you down the path of what you need to know to get started.
Monchester Macapagal and Kris Caigas of AcceleratingBiz contributed significantly to the research, writing, and production of this series.
Explore other Web3 for TradBiz insights and resources at acceleratingbiz.com.
Click on the links below to progress through the Web3 for TradBiz series:
[1] Web3 for TradBiz introduction
Web3 and crypto foundations
[2] Why embrace Web3 now
[3] Inevitable Web3 future
[4] Crypto and Web3 basics
[5] Advanced Web3 topics
[6] Using crypto wallets
Use cases and value propositions
[7] Web3 use case categories
[8] Decentralized finance (DeFi)
[9] Non-fungible tokens (NFTs) and the Metaverse
[10] Decentralized autonomous organizations (DAOs)
Web3 implications and opportunities
[11] Web3 impact on TradBiz market and business models
[12] Emerging Web3 investment opportunities
[13] Evidence of mainstream Web3 adoption
End notes:
¹ Chris Dixon (@cdixon), “Web 3 is the internet owned by the builders and users, orchestrated with tokens.,” Twitter, September 26, 2021, https://twitter.com/cdixon/status/1442201625590779909.
² Fred Wilson, “The Web3 Stack,” AVC.com, accessed April 25, 2022, https://avc.com/2018/07/the-web-3-stack/.
³ Eshita, “Web3: in a nut shell,” Eshita.Mirror.xyz, accessed April 25, 2022, https://eshita.mirror.xyz/H5bNIXATsWUv_QbbEz6lckYcgAa2rhXEPDRkecOlCOI.
⁴ CoinMarketCap, accessed July 21, 2022, https://coinmarketcap.com/.
⁵ Pushpendra Sing, “Web3 Developer Salary Soars,” C# Corner, last updated May 18, 2022, https://www.c-sharpcorner.com/article/web3-developer-salary-soar-in-2022/.
⁶ Historical crypto market capitalization can be extracted from CoinMarketCap’s Global Cryptocurrency Charts at https://coinmarketcap.com/charts/. S&P 500 market cap is the total market cap of all 500 companies within the index. Data can be extracted from YCharts at https://ycharts.com/indicators/sp_500_market_cap.
