Why It’s Time to Take Web3 Seriously
The potential impact of Web3 on the internet and the digital economy is beginning to unfold
By Irving Wladawsky-Berger
A few weeks ago, the Blockchain Research Institute (BRI) announced that its annual global conference would be renamed Web3 Blockchain World, and that the Enterprise Blockchain Awards would now be called the Web3 & Blockchain Transformation Awards.
I’ve been affiliated with BRI for a number of years as a research contributor and as chair of its blockchain awards committee. I was somewhat concerned with the name change, because, as is generally true of new technologies in their early stages, there are multiple views of what Web3 is all about. Critics view Web3 as little more than hype, a rebranding effort to shed some of the cultural and political baggage of crypto, while supporters believe that Web3 represents the future of the internet, upending traditional gatekeepers and ushering a middleman-free digital economy.
Over the following weeks I learned from BRI founder Don Tapscott his reasoning behind the decision that BRI should embrace web3 in its research and events. I read Think Blockchain, a book by IBM Fellow and VP of Blockchain Technologies Jerry Cuomo that will be published later this month. I read the section on Web3 and the New Internet of Value in Digital Asset Revolution, a book by BRI co-founder Alex Tapscott that was just published earlier this week. And I looked at a number of articles from both supporters and critics of Web3.
It’s a very promising set of technologies and applications in the early years. While, at this stage it’s not yet clear how it will evolve, it’s time to start paying serious attention to Web3 and try to influence its directions. Let me briefly share my views of Web3.
Cuomo asked me to write the foreword to his upcoming book. After reading the manuscript and exchanging a number of emails and calls with him, it was evident that a major reason why we were excited about the potential impact of a blockchain-based Web3 is because we both strongly believe that blockchain will play a major role in the evolution of the internet. I tried to capture this belief in the opening sentence of my foreword:
“Web3 now aims to replace trust and good intentions with a blockchain-based network where transparency and irrevocability are built into the technology.”
What do we mean by Web3? A good way of understanding it is by comparing it to Web1 and Web2.
Web1 refers to the original internet from the 1990s and early 2000s, where the vast majority of users were consumers, not producers of content. Web1 ushered a high degree of innovation as startups and established companies experimented with new business models — some of which turned out to be quite successful, and some rather silly.
Web2, which emerged in the early 2000s, made it easier for users to connect, interact, and transact online, and gave them the ability to create and publish their own content in personal websites, blogs, and social media platforms like Facebook, Twitter and YouTube. Over time, the Web2-based internet became dominated by a small number of global superstar companies which captured most of its monetary value.
Web3 aims to replace today’s corporate mega-platforms with blockchain-based decentralized networks that combine the open infrastructure of Web1 with the public participation of Web2, and thus lead the way to a more open, entrepreneurial internet and digital economy. Its supporters believe that Web3 will give creators, developers and users a way to monetize their contributions; that it will involve them in the governance and decision-making of the platforms supporting their work; and that it will give individuals more privacy and control over their data by being less reliant on advertising-based business models and targeted adds.
“The theory is that in a Web3 world, sensitive activities and data would be hosted on a network of computers using blockchain rather than corporate servers,” wrote Cuomo in Think Blockchain.
“The internet would likely have the same look and feel, at least initially, but your internet activities would be represented by your crypto-wallet and websites hosted through decentralized applications (DApps) run on a blockchain network.”
Three Main Features
While there are multiple definitions of Web3, he added, they generally include these three features:
- Self-sovereign sign-on: “Anonymous single-sign-on will allow one username and authentication method across all web sites and accounts, rather than individual logins for each site. This login would not require you to relinquish control of sensitive personal data.” With Web3 crypto wallets backed by blockchain networks, users always retain control of their personal identity information (PII) and login credentials. “As crypto wallet services evolve, options will exist as to what type of blockchain network will back your wallet.”
2. Token-economy: “Activities that contribute to Web3 are rewarded by a token (either NFT or fungible) to incentivize participation and distribute ownership. For example, when posting a new social message, an NFT representing that post could be “minted” (generated) and stored as an asset in a crypto-wallet. This token represents ownership over the message, which can then be traded with others via their wallets.”
3. Self-governing: “Along with the distribution of ownership is the distribution of decision-making power. Without a central authority, blockchains rely on the entire network to verify an activity via consensus. However, specific systems, such as those used in decentralized autonomous organizations (DAOs) can be established to democratize decision-making based on the quality or volume of a user’s investment into a site or DApp.”
In addition, web3 is often linked to decentralized finance (DeFi), cryptocurrencies, metaverse and other relatively new decentralized applications that are similarly in their early stages and thus lack well-formed and agreed on definitions. And, as was the case with dot-com innovations in the ’90s, some will become quite consequential over the years, while others will be long forgotten.
Decentralizing the Internet
A more decentralized internet and entrepreneurial economy are clearly top objectives of Web3. So is creating a blockchain-based stateful internet, that is, an internet that remembers preceding events and user interactions, as opposed to the present stateless internet which relies on the servers of the many institutions connected to the internet,— e.g., banks, e-commerce platforms, government agencies — to keep track of their user’s information and process their transactions. This was nicely explained in Alex Tapscott’s new book Digital Asset Revolution.
“In Blockchain Revolution, we predicted that blockchains would usher in a new era of the Internet that we dubbed the Internet of value, where individuals could transact, do business, and create value in a trustless and peer-to-peer way without the need for traditional intermediaries and gatekeepers. This was a radical idea and a big departure from the old ways of doing things.”
“With Web2, we rely on intermediaries — not only banks, but also social media giants and digital conglomerates — to perform many essential functions, from moving and storing value to verifying identities and performing such basic business logic as record-keeping, contracting, and so forth, all to establish trust in online transactions. This reliance is problematic for several reasons. For one, such intermediaries are centralized, which makes them vulnerable to cyberattack and corruption. Financial intermediaries also add friction to transactions online, adding delays of days or weeks, charging fees as high as 20 percent for international money transfers, and engaging in other rent-seeking behavior.”
“Banks as well as social media companies and Internet service providers are gatekeepers that exclude many people. In banking, over a billion people lack access to financial services. These gatekeepers also capture all the data and much of the value created online — the largest companies in the world are digital conglomerates like Apple and social media companies like Facebook, which have built their empires in part or in whole on user data.”
“Web3 will be built on top of blockchain networks,” adds Tapscott. “Blockchain gives us a way to digitize and manage our property rights online peer to peer.
Digital bearer assets, commonly referred to as tokens, enable us to hold and port valuable digital goods from platform to platform online. These goods can be currencies, securities, and other financial assets as well as collectibles, intellectual property, identities, and the as-yet unimagined.”
Finally, let’s keep in mind that Web3 does not replace the previous internet, but adds to its ongoing evolution by helping us create a more entrepreneurial, inclusive internet of value for the benefit of communities and economies around the world. Large institutions will continue to play important roles for many, such as trusted blockchain administrators and providers of identity and other critical Web3 services. We have much to learn over the coming years.
Originally published at https://blog.irvingwb.com.