Web 3.0 — The next evolutionary step of the Internet
Part 3 — The natural evolution of the Internet or just a hyped-up phenomenon?
If you’re reading this, then you are a participant in the modern web…
The web we are experiencing today is much different than what it was just 10 years ago. How has the web evolved, and more importantly — where is it going next? Also, why do any of these things matter?
If history has taught us anything, these changes will matter a lot.
Think about how the internet affects your life on a daily basis. Consider how society has changed as a result of the internet. Social media platforms. Mobile apps. And now the internet is going through another paradigm shift as we speak denominated WEB 3.0, are you ready for it?
Let’s find out.
The evolution of the web
The web has evolved a lot over the years, and its applications of it today are almost unrecognizable from its most early days. The evolution of the web is often partitioned into three separate stages: Web 1.0, Web 2.0, and Web 3.0.
What is Web 1.0?
Web 1.0 was the first iteration of the web. Most participants were consumers of content, and the creators were typically developers who build websites that contained information served up mainly in text or image format. Web 1.0 lasted approximately from 1991 to 2004.
Web 1.0 consisted of sites serving static content instead of dynamic HTML. Data and content were served from a static file system rather than a database, and sites didn’t have much interactivity at all.
You can think of Web 1.0 as the read-only web.
What is Web 2.0?
Most of us have primarily experienced the web in its current form, commonly referred to as Web2.
You can think of Web2 as the interactive and social web.
In the Web2 world, you don’t have to be a developer to participate in the creation process. Many apps are built in a way that easily allows anyone to be a creator.
If you want to craft a thought and share it with the world, you can. If you want to upload a video and allow millions of people to see it, interact with it, and comment on it, you can do that too.
Web2 is simple, really, and because of its simplicity more and more people around the world are becoming creators.
The web in its current form is really great in many ways, but there are some areas where we can do a lot better as the whole infrastructure comes with some issues.
Web 2.0 Monetization and Security
In the Web2 world, many popular apps are following a common pattern in their life cycles. Think of some of the apps that you use on a daily basis, and how the following examples might apply to them:
Imagine the early days of popular applications like Instagram, Twitter, LinkedIn, or YouTube and how different they are today. The process usually goes something like this:
- Company launches an app
- It onboards as many users as possible
- Then it monetizes its user base
When a developer or company launches a popular app, the user experience is often very slick as the app continues rising in popularity. This is the reason they are able to gain traction quickly in the first place.
At first, many software companies do not worry about monetization. They strictly focus on growth and on locking in new users — but eventually, they have to start turning a profit.
They also need to consider the role of outside investors. Often the constraints of taking on things like venture capital negatively affect the life cycle, and eventually the user experience, of many applications that we use today.
If a company building an application takes in venture capital, its investors often expect a return on investment in the order of magnitude of tens or hundreds of what they paid in.
This means that, instead of going for some sustainable model of growth that they can sustain in a somewhat organic manner, the company is often pushed towards two paths: advertisements or selling personal data.
For many Web2 companies like Google, Facebook, Twitter, and others, more data leads to more personalized ads.
More Ads = more click = more revenue $$$
It’s a simple and yet efficient equation based on the exploitation and centralization of user data is core to how the web as we know and use it today is engineered to function.
Security and privacy
Web2 applications repeatedly experience data breaches. There are even websites dedicated to keeping up with these breaches and telling you when your data has been compromised.
In Web2, you don’t have any control over your data or how it is stored.
In fact, companies often track and save user data without their users’ consent. All of this data is then owned and controlled by the companies in charge of these platforms and users who live in countries where they have to worry about the negative consequences of free speech are also at risk.
Governments will often shut down servers or seize bank accounts if they believe a person is voicing an opinion that goes against their propaganda. With centralized servers, it is easy for governments to intervene, control, or shut down applications as they see fit.
Because banks are also digital and under centralized control, governments often intervene there as well. They can shut down access to bank accounts or limit access to funds during times of volatility, extreme inflation, or other political unrest.
Web3 aims to solve many of these shortcomings by fundamentally rethinking how we architect and interact with applications from the ground up.
The Road to WEB 3.0
At the most basic level, Web3 refers to a decentralized online ecosystem based on the blockchain. Platforms and apps built on Web3 won’t be owned by a central gatekeeper, but rather by users, who will earn their ownership stake by helping to develop and maintain those services.
Gavin Wood coined the term Web3 (originally Web 3.0) in 2014. At the time, he was fresh off of helping develop Ethereum, the cryptocurrency that is second only to Bitcoin in prominence and market size. Today he runs the Web3 Foundation, which supports decentralized technology projects, as well as Parity Technologies, a company focused on building blockchain infrastructure for Web3.
Web3 enhances the internet as we know it today with a few other added characteristics. web3 is:
- Verifiable
- Trustless
- Self-governing
- Permissionless
- Distributed and robust
- Stateful
- Native built-in payments
Web3 also introduces the concept of “native assets” known as TOKENS used for settlements and as information carriers through the native chain in which they are hosted.
Tokens also introduce a native payment layer that is completely borderless and frictionless. Companies like Stripe and Paypal have created billions of dollars of value in enabling electronic payments.
These systems are overly complex and still do not enable true international interoperability between participants. They also require you to hand over your sensitive information and personal data in order to use them.
The whole token economy of the multitude of blockchains saw the development and successful implementation of the web browser extension such the like of MetaMask, Torus and Phantom enable you to integrate easy, anonymous, and secure international payments and transactions into web3 applications.
Networks like Solana offer several hundred digit millisecond latency and transaction costs of a small fraction of a penny. Unlike the current financial system, users do not have to go through the traditional numerous, friction-filled steps to interact with and participate in the network. All they need to do is download or install a wallet, and they can start sending and receiving payments without any gatekeeping.
A new way of building companies
Tokens also bring about the idea of tokenization and the realization of a token economy.
Take, for example, the current state of building a software company. Someone comes up with an idea, but in order to start building, they need money in order to support themselves.
To get the money, they take on venture capital and give away a percentage of the company. This investment immediately introduces misaligned incentives that will, in the long run, not align well with building out the best user experience.
Also, if the company ever does become successful, it will take a very long time for anyone involved to realize any of the value, often leading to years of work without any real return on investment.
Imagine, instead, that a new and exciting project is announced that solves a real problem. Anyone can participate in building it or investing in it from day one. The company announces the release of x number of tokens, and gives 10% to the early builders, puts 10% for sale to the public, and sets the rest aside for future payment of contributors and funding of the project.
Stakeholders can use their tokens to vote on changes to the future of the project, and the people who helped build the project can sell some of their holdings to make money after the tokens have been released.
People who believe in the project can buy and hold ownership, and people who think the project is headed in the wrong direction can signal this by selling their stake.
Because blockchain data is all completely public and open, purchasers have complete transparency over what is happening. This is in contrast to buying equity in private or centralized businesses, where many things are often cloaked in secrecy.
This is already happening in the Web3 space.
One example is the app Radicle (a decentralized GitHub alternative) which allows stakeholders to participate in the governance of their project. Gitcoin is another that allows developers to get paid in cryptocurrency for jumping in and working on Open Source issues. Yearn allows stakeholders to participate in decision making and voting on proposals. Uniswap, SuperRare, The Graph, Audius, and countless other protocols and projects have issued tokens as a way to enable ownership, participation, and governance.
DAOs (Decentralized Autonomous Organizations), which offer an alternative way to build what we traditionally thought of as a company, are gaining tremendous momentum and investment from both traditional developers and venture capital firms.
These types of organizations are tokenized and turn the idea of organizational structure on its head, offering real, liquid, and equitable ownership to larger portions of stakeholders and aligning incentives in new and interesting ways.
For example, Friends with Benefits is a DAO of Web3 builders and artists, is about a year old, has a market cap of around $79.5 million as of this writing, and received, on September 10th, 2021, a $10 million round of investment from a16z.
DAOs could encompass an entire post in and of themselves, but for now, I’ll just say that I think that they are the future of building products and (what we in the past thought of as) companies.
The Debate of Web2.0
Web 2.0, which we’re living through now, is the era of centralization, in which a huge share of communication and commerce takes place on closed platforms owned by a handful of super-powerful corporations — think Google, Facebook, Amazon — subject to the nominal control of centralized government regulators.
The model for Web 2.0 was much the same as the model for society before the internet existed. If we go back 500 years, people basically just stuck to their little villages and townships. And they traded with people that they knew. And they relied on, broadly speaking, the social fabric, to ensure that expectations were credible, were likely to actually happen.
That structure works reasonably well, because it’s difficult and very time-consuming and expensive to move between towns.
But as society moved into something larger-scale, and we have cities and countries and international organizations, we moved on to this weird kind of brand reputation thing. We’ve created these powerful but regulated bodies, and the regulators, in principle, ensure that our expectations are met. There are certain statutory requirements that, to operate in a particular industry, you must fulfill.
This is not a great solution, for a few reasons. One of them is, it’s very hard to regulate new industries. The government is slow, it takes a while to catch up. Another is that regulators are imperfect. And especially when they work closely with the industry, oftentimes, there’s a bit of a revolving door relationship between the industry and the regulator.
Another is simply a regulatory body has very limited firepower. It’s how much money the government puts into it. And so necessarily, regulation is going to be patchy. They will be able to regulate maybe the biggest offenders, but they aren’t able to retain a really strong influence all the time everywhere. And, of course, the regulators and the laws differ from jurisdiction to jurisdiction. If you go somewhere in the EU, then company X is fine; if you go somewhere else, then it’s not fine. And as we become a very international society, this effectively means that your expectations are still not being met.
So we need to move beyond this. But unfortunately, Web 2.0 very much still exists in this very centralized model.
The Internet we have today is broken. We do not control our data, nor do we have a native value settlement layer. Thirty years into mass adoption of the Internet, our data architectures are still based on the concept of stand-alone computers, where data is centrally stored and managed on a server and sent or retrieved by a client. Every time we interact over the Internet, copies of our data get sent to the server of a service provider, and every time that happens, we lose control over our data. Even though we live in a connected world, with more and more devices getting connected with the Internet — including our watches, cars, TVs, and fridges — our data is still centrally stored: on our computers or other devices, on the USB stick, and even in the cloud.
This raises issues of trust.
Can I trust those people and institutions that store and manage my data against any form of corruption — internally or externally, on purpose or by accident?
Web 3.0 as the new norm?
While the Web2 was a front-end revolution, the Web3 is a back-end revolution.
It is a set of protocols led by Blockchain, that intends to reinvent how the Internet is wired in the backend, combining the logic of the Internet with the logic of the computer. This is why some refer to blockchain as a distributed world computer. It is possibly the next big step in the development of computers and the Internet.
Some experts say, in the best-case scenario for Web3 enthusiasts, the technology will operate alongside Web 2.0, not fully supplant it.
In other words, blockchain-based social networks, transactions, and businesses can and will grow and thrive in the coming years. Yet knocking out Facebook, Twitter or Google, and other tech giants completely is not likely on the horizon, in my opinion.
Web 3.0 is the first tangible step towards a fairer internet by enabling the individual to be a sovereign.
The rise of technologies such as distributed ledgers and storage on blockchain will allow for data decentralization and create a transparent and secure environment, overtaking Web 2.0’s centralization, surveillance and exploitative advertising. Decentralized infrastructure and application platforms will displace centralized tech giants, and individuals will be able to rightfully own their data.
Indeed, one of the most significant implications of decentralization and blockchain technology is in the area of data ownership and compensation. As we move toward Web 3.0 and the technologies that support it mature and become scalable, I believe the web will reflect its original intent.
Surely, Berners-Lee did not foresee that internet behemoths would dominate the web and become owners and profiteers of our data. The chronic interruptions that have become the norm in Web 2.0 will disappear as decentralization also makes possible transparent, opt-in, peer-to-peer communications that allow individuals to take ownership of their precious time.
True sovereignty implies owning and being able to control who profits from one’s time and information. Web 3.0’s decentralized blockchain protocol will enable individuals to connect to an internet where they can own and be properly compensated for their time and data, eclipsing an exploitative and unjust web, where giant, centralized repositories are the only ones that own and profit from it.
End of Part 3
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