The History of Web3 in a Nutshell
By Ingo Rübe, founder of KILT Protocol and CEO of BOTLabs GmbH, the initial developer of KILT.
Is Web3 just hype or will it be integral to our day-to-day life in the future? Here’s a brief history of the web to put Web3 in context.
Web3 is often described in idealistic terms with the promise of freedom, democracy and a fairer internet for all. However, some users of the internet may be put off by Web3’s connection to cryptocurrencies and complicated blockchain technology. Others think it’s only for tech users or specialized use cases such as gaming, the metaverse, NFTs, or decentralized finance (DeFi).
But Web3 offers more practical and economical advantages than that. The new protocol layer expands the existing protocols of the internet, bringing innovation back to the web and increasing value creation — the process of turning resources into something of value for others. A look at how the web has developed so far shows how it has evolved, and puts current developments in perspective.
The web is such an integral part of life nowadays it’s hard to imagine life without it.
The internet made its first appearance in 1978, when it was developed for and financed by the military. The infrastructure consisted of several protocols such as IP, TCP, UDP, and SMTP, most of which are still being used today. Although these were free and unregulated, adoption was slow. It took until 1991 for the World Wide Web (www) to appear, invented by Tim Berners-Lee at the CERN scientific research center “to allow links to be made to any information anywhere”. Two years later this version of the web became freely available for the public to use.
Value creation was low in Web1, which was mainly used to send data from A to B or create static websites that weren’t much more than a digital brochure. Anyone who remembers the painfully slow and pay-per-minute dial-up connection needed to connect to the internet could hardly have imagined its widespread use today!
Several years after its launch, many were still critical of the web, exemplified by the statement in 1995 by AT&T’s vice president of multimedia strategy that “most things that succeed don’t require retraining 250 million people”.
But things were changing. The first Web 2.0 conference in 2004 highlighted developments that had started a few years previously to harness the potential of Web1. These began with the introduction of more interactive websites. Value creation increased as an explosion of useful applications was built on top of the original protocols, offering storage and computation, easy ways to search, social media platforms, and ways to buy, sell and pay for things.
This is the point where large monopolies began. While previously companies had a fairer playing field, in Web2 human psychology kicked in in the form of the Schelling point, a game theory concept. The original Schelling point experiment asked participants where and when they would meet a stranger in New York, given no further instructions. The most common answer was noon at Grand Central Station. On the web, some companies started becoming the “noon at Grand Central Station” of their field. Gaining even more users with the arrival of the smartphone in 2007 as increasing numbers of people started accessing the internet daily, these companies became Schelling points.
A Schelling point is a monopoly, which is very hard to replace. If it is replaced, the result automatically becomes the new Schelling point, creating a new monopoly. This monopolistic landscape of Web2 killed innovation, as it’s not enough for a new company to develop a better product, they also need significant funding and marketing to compete. In the meantime, established companies don’t need to innovate to survive as they already own the market.
Additionally, although Web2 services are generally “free” to use, the user pays indirectly with their data, which is often sold for targeted advertising. A company with a lot of data has a lot of control. And large companies with huge data silos are a honeypot for hackers.
Web3 evolved to address these issues.
Thanks to blockchain technology, new “fat” protocols (so-called because they have much more functionality than the historical “thin” protocols, such as HTTP, IP, etc.) were added to the protocol layer of the internet.
These protocols were developed to create the infrastructure required to provide vital services needed by web users, in areas such as identity, payment, ownership, storage and computation. These new services are not companies; they are networks, usually decentralized, run on blockchain technology, and fueled by utility coins, also known as tokens or cryptocurrencies. Anyone can buy the coin and use it to pay for the transaction provided by the blockchain service. By owning the coin, the user also owns part of the network. In this way, blockchain provides the possibility to build protocols not as a company, but in a decentralized way that combines ownership and utility. These blockchain protocols can replace the Schelling points that provided vital services for web users and developers.
As these protocols are open source and permissionless, this opens the field for competition, innovation and an explosion in value creation. Once again there is huge potential for development. When essential services like payment, ownership, identity, computation and storage are provided by a decentralized network, this provides a level playing field for developers of new and useful services on top of these essentials. Web3 protocols also provide easy to use interfaces (APIs), which greatly accelerate development speed and thus lower entry barriers for creative new companies. This setting will lead to a Cambrian explosion of decentralized applications (dapps) which provide additional utility to the Web and an enormous boost in value creation, which will easily be bigger than in Web2. Decentralized applications (dapps) are being built to create new valuable services, while the protocol level breaks the Schelling point circle.
Just as adoption hurdles were overcome with former incarnations of the web, challenges to Web3 adoption will decrease as the newer dapps, wallets, and interfaces become more intuitive, user-friendly, and as easy to use as any other app on your phone or browser. Dapps can be created for specific projects and services, and those protocols that provide utility to the services will thrive. And with a level playing field, dapp developers will need to keep innovating and improving to keep their market share, providing even more value for web users.
In the same way that Web1 was seamlessly absorbed into Web2, many Web2 elements will still exist in the future, running alongside a multi-chain network of Web3 decentralized services.
Even at this early stage of development, several Web3 protocols and dapps are already up and running. Along with wallets, recent years have seen real-world innovation and decentralized services grow in many areas, such as storage (IPFS, Filecoin), finance (DeFi and decentralized exchanges), and identity — including dapps built on KILT such as SocialKYC credentials and DIDsign (by B.T.E. BOTLabs Trusted Entity GmbH).
The typical internet user is not concerned with what protocols the app they are using is based on. They are just interested in the value the app adds to their life and digital experience. As decentralization in Web3 creates value with practical things such as creating a digital identity and returning control of data to its owner, alongside newer offerings like NFTs and the metaverse, adoption will continue to grow as it has throughout Web1 and Web2. As in previous iterations of the web, the only limit is our imagination!