The Long, Winding Road to Web 3.0
The early days of the next iteration of the internet are already nearing its end — now what?
For all the buzz around “web3 technologies” in the media and tech world in recent years, many still seem confused about what the term actually means. Is it just another word for blockchain-powered networks, or is it something related to the metaverse?
A Brief History of Web 1.0 & 2.0
The internet has evolved through multiple phases over its relatively short lifespan. In order to prepare for what could come next, we are going to briefly take a look back at where we’ve been.
“Web 1.0 was about information links (web pages). Web 2.0 was about social links (likes, follows, shares). Web 3.0 is about economic links (tokens you earn, investments you make, assets you own)” — Patrick Rivera
Starting with the early days of the internet in the 1980s all the way through the early 2000s, the web was decentralized and constructed on top of a series of open protocols that anyone could utilize to create their own webpage, as long as they had the technical know-how. These protocols still exist today, including HTTP for websites, SMTP for email, SMS for messaging, IRC for chat, and FTP for file transfer. Users that had a specific URL could navigate to any webpage, without having to go through an intermediary.
In those early days of online communication, the internet had a number of characteristics that defined the era: Web 1.0 was stateless, meaning web pages did not track and store information about users as they traveled across the internet. Web 1.0 was extremely technical, so only those with programming acumen were capable of building experiences on the web. The protocols available in Web 1.0 were limited in their functions, and they did not make money for the programmers that created them because they were open-source and available for anyone to use, free of charge.
The next iteration of the internet, Web 2.0 (circa mid-2000s to the present), came into being when enterprising individuals built products to fill the gaps of Web 1.0. The companies that formed during this phase didn’t just capture state, they aggregated it, building up massive troves of valuable user data. Web 2.0 is also incredibly accessible because these tools have enabled non-programmers to build experiences by offering approachable, intuitive interface layers on top of the aforementioned Web 1.0 protocols. An internet user no longer has to know how to code to set up a webpage, all they need is to set up a username and password on Facebook (and populate it with as much personal information as possible, of course).
During this current era, usage and adoption of the internet have exploded exponentially, as more people have been able to afford devices and navigate the web seamlessly. Startups have been developed and acquired, there is endless utility built into the internet every day that enriches the experience for those that access it. The current tech landscape has been fought over the past twenty years, and the winners are now well established. These platform owners offer their services mostly for free, as long as you don’t count the troves of data that they are allowed to collect and monetize. In this way, they have aggregated an immense amount of attention and user data, which they have used to consolidate an even greater amount of profits.
One clear downside of the Web 2.0 economy is that, through aggregation and consolidation, the platform owners now exert much power over our society because they host the public forums where the majority of our online interactions take place, and they have the ability to change the rules whenever they want based on the whims of shareholders, as opposed to the demands of the public.
The Early Days of Web3
All this brings us to today, where depending on who you ask, we are on the precipice of Web 3.0, the next version of the internet. Web 3.0 technologies (often shortened to simply “web3”) are built on top of the blockchain and are specifically designed to cut out the middleman, and give power back to individuals. In theory, a decentralized internet, governed by the community, with monetization built directly into the protocols, will enable individuals to capitalize on their own contributions and maintain self-sovereign identities. In other words, we will own our personal data and be able to monetize the things that we build that enhance the internet.
By now, Non-Fungible Tokens (NFTs) are perhaps the most well-known web3 product among consumers. They help enable ownership of digital assets, verified by the blockchain. In the early days of NFTs, we have seen these tokens assigned to digital images, videos, and music. In the future, we may see them assigned to protocols, code, articles, 3D virtual goods, or even ideas. Theoretically, anything can be minted with an NFT, and the smart contracts built into them can trigger payments when that thing is transacted or utilized.
Take for example that I have built a new method for online checkout. Today, if I wanted retailers to use my checkout technology, I would either spin up a business and sell it as a SaaS model in order to make money from my invention, or I would list it on an open-source coding site like IFTTT or Github, where more people might use it, but I wouldn’t be able to charge them for it. The promise of Web 3.0 is that I would be able to tokenize my technology, list it on an open-source platform for any other developer to access, and trigger a transaction fee back to the original creator (in this case, me), whenever my checkout technology is utilized by the end user.
Furthermore, even If my checkout technology is used by another developer as part of a D2C supply chain stack, the token will continue to recognize me as the owner of this technology, and continue to filter payments back to me, regardless of where it is implemented. It therefore behooves me to make my technology as widely available as possible and allow as many people to build on top of it as possible. Contrast this with Web 2.0 where Facebook would never dream of open sourcing their newsfeed algorithm for upstarts to copy and create competitive destination sites, one would start to see the radical departure that web3 is theoretically poised to bring.
It is important to state that although it is possible that web3 technologies are implemented into the development of a Metaverse, the two territories are distinct. In general, web3 refers to decentralized technologies built on the blockchain, whereas the Metaverse refers to an immersive, interoperable, persistent virtual world. Web3 tech like NFTs may be used to ascribe ownership and create scarcity for the digital products, which will be sold in the metaverse, but the Metaverse does not need to be built on the blockchain in order to thrive. For example, if Meta succeeds in building Horizon Worlds into the breakout metaverse experience that aggregates significant user adoption, it is unlikely that they would open source that experience by rebuilding it on the blockchain. Our Content Manager Richard Yao has expanded on the delineation between the two innovation territories in a previous piece.
A Fad or a Paradigm Shift?
So why are we so obsessed with Web 3.0 and why now? There are a number of cultural trends that are coalescing to make Web 3.0 technologies sound particularly appetizing: internet users are more aware of privacy concerns and who are monetizing their data, and they increasingly want to take more control over how their data is monetized. For example, the gaming industry is making billions of dollars by selling digital assets and they would love to be able to create scarcity and provide proof of ownership. During the Covid-19 pandemic, many workers have gone remote and the pendulum has shifted heavily from physical interactions to digital. And finally, we are witnessing the largest wealth gap in human history, largely driven by the billionaires minted in the Web 2.0 era.
It is quite possible that we’d eventually reach a place where web3 technology is widely adopted and utilized, and we have an open source, community-governed version of the internet that is not ruled by tech oligarchs, but that day is far from certain. There are quite a few hurdles in the way.
First of all, the cryptocurrency market is not exactly inspiring much confidence in web3 followers these days. Socio-economic headwinds have resulted in an extremely volatile cryptocurrency market in recent weeks. As of this writing, Bitcoin is down around 60% from its high of $69,000 in November 2021, hitting an 18-month record low. Athletes, celebrities, and politicians who opted to take their paychecks in cryptocurrencies have proven quite unsavvy. Last year, El Salvador adopted Bitcoin as an official currency and invested over $100 million in the cryptocurrency, around 4% of their federal reserves. Although this is a relatively small percentage, the country’s 2,300 bitcoins are now worth half what the government paid for them.
As a result of the market uncertainty, there have been significant layoffs across the web3 industry, with some organizations rescinding offers to new hires before they even started, which will disrupt the influx of talent into web3 startups.
In addition, bad actors and scam artists in the crypto space have conducted theft on a massive scale and sowed distrust in the adoption of these technologies amongst the wider public. This also makes web3 a tricky territory for brand marketers to navigate, as there’s little safeguard for brand assets and misinformation.
Finally, there are significant environmental concerns around the energy consumption required to power the blockchain. It is estimated that Bitcoin currently consumes 150 terawatt-hours of electricity annually, which is more than the entire country of Argentina, with its population of 45 million.
Until these issues are addressed, we will not see a wholesale shift in adoption from Web 2.0 technology to Web 3.0. If anything, the frantic web3 developments over the past two years felt akin to the Virtual Reality boom in the 90s — way ahead its time, both in terms of technological capability and cultural acceptance. It took VR over two decades to make its way back into mainstream spotlight, and even now it is still far from realizing its full potential as a mass media channel. Web3 may follow an accelerated track in comparison to VR, but it could also face a long, winding road ahead.
As the crypto markets continue to crash, it is clear that web3 technologies are dropping into the Trough of Disillusionment phase on the famous Gartner’s Hype Cycle for emerging innovations. How deep the descent will be and how long they will stay there remain to be seen. But as more consumers want to be rewarded for their contributions to the internet in a meaningful way and decide that they should be the ones getting reimbursed for access and use of their personal data, the promise of web3 will continue to inspire next-generation of web-builders to tinker with the distributed networks that could one day replace today’s centralized web2 infrastructure.
