What is Web3 and why should I care?
Ignore the drama. Here’s why it’s time to start paying attention to blockchain, crypto, DeFi, and DAOs.
Like many technologists, I have an innate skepticism toward emerging technologies. It’s not that I don’t love them — they’re my bread-and-butter, my passion, and my art all rolled into one…
It’s more like I feel the same wry fondness toward baby technologies, as I do toward baby humans.
“Really?” I think when I’m with my friend’s toddler, “You’re adorable but are you really going to put that in your mouth?
Like human children, it's easy to fixate on the misbehavior of an emerging technology and miss all the ways that they are silently, and oh-so-swiftly, growing up.
So why do I think Web3 suddenly merits all y’all’s attention despite cryptocurrencies' very-public ups and downs?
To use our metaphor, Web3 is growing up, talking back, and about to become that big smelly teenager who suddenly has something unmistakably interesting to say. In other words, ignore the tantrums, and look at the growth curve!
I’ll explain, but let's start with some definitions so we’re all on the same page.
Have you heard of Web3?
Yeah, if you’re like me you probably should have, but haven’t. I’ve been sort of baby-monitoring blockchain and cryptocurrencies but didn’t pay a lot of attention until I had a real-world problem only blockchain could solve.
Then I checked in on the metaphorical crib to find something new, something useful, and something really exciting.
Web3 is a term technologists have begun to use to describe the emerging blockchain-based internet. It refers to an interconnected web of currencies, services, and organizations that are being built on the technology.
The reason Web3 actually deserves an ‘Internet 3.0’ rating is because of the massive shift in trust. In this classification:
- Web 1.0 is the static internet. Static web pages we view. Primarily information-delivery and unidirectional.
- Web 2.0 is the interactive internet. Web applications that give us bidirectional interactive services from our browser: social media, Gmail, Grammarly, etc. These services are centralized in a pyramidal structure. In Web2, which is the internet most of us use today, we see a few winners, and a lot of losers. For instance, data suggests that only one out of twelve startups succeed, and from 1999 onward the industry posted negative mean and median returns. Think of the billionaires from Apple, Google, Microsoft, and Facebook and then the 32 million faceless small business owners who burn through their savings trying to compete. Tech entrepreneurs work an average of 60–100 hours per week for an median income of $68k per year. Consequently, people who live and work in Web2 are bullish about their ability to earn, achieve success, and profit from their own work — and with good reason. It's a glorified Ponzi scheme, and the only people who are successful within it are those with good boundaries, self-restraint, and a healthy degree of skepticism (Some might say cynicism but hey, we’re going with optimism in this article:)
- Web 3.0 is the decentralized internet. Blockchain-based web applications that automate and reduce middle-men operational friction still further. Additionally, these applications utilize smart contracts to flatten the pyramid, incentivizing everyone to contribute. The benefits to world-weary developers are obvious, it's easier to slice the pie, and see how it's apportioned, and consequently, there are more pieces. People who build technology already work collaboratively and across borders.
Tech adoption is often a cultural problem, and the culture of Web3 is more aligned with the culture of builders who, at least in the US, often represent a vanishing middle-class. Social adoption of Web3 among builders will be swift, and irreversible.
While Web2 scales services, Web3 also scales rewards. This leads to increased productivity through a feeling of shared ownership, more creative problem-solving, and stabler real-world economies.
What are the rewards of Web3?
In June 2021, Peter Theil, the legendary investor behind Facebook led a $230 million funding round for BitDAO, the largest decentralized investment fund in the world.
Why? What did he see in DAOs that you’re missing?
Most people know something about blockchain, the technology Web3 is built on, but distributed autonomous organizations (DAOs) are a relatively new phenomenon — and one you should know about.
DAOs are one of the three main innovations emerging from blockchain and composing Web3.
- Cryptocurrencies: Almost everyone has heard of cryptocurrencies (whether they want to or not).
- Smart contracts: Blockchain can be used for more than just currency. Because it's transparent it can be used for smart-contracts, enabling websites to give micropayments. For instance, artists are using smart contracts to track their digital art. Now instead of hoping that Unsplash and Medium’s Web2 algorithms, or our generosity, rewards the artist behind the beautiful photograph above, the artist can receive a micropayment every time this article is read. With smart contracts, my success, the artist’s, and that of Medium, and Unsplash would be directly, and automatically correlated, no lawyer or PayPal donation needed.
- DAOs: There are thousands of DAOs but I’m going to talk about the one I know best, BitDAO. Digital builder-collectives like BitDAO enable anyone to join for free. Members can earn tokens by a variety of mechanisms —in this case, BIT tokens which exchange at about $1. The organization can also offer automated bounties for interdisciplinary skills. I’m a writer so I proposed an article under the article bounty program that I thought would benefit the community. Then I was awarded a BitDAO smart contract by a human approver (aka. “web3 rails”). Under the contract, I earn BIT for writing a successful article. But I profit not only from the concrete work I contributed, but for the appreciated value in the BIT if my article is of benefit to the collective. With minimal capital, I’m one of 3,400 investors in the BitDAO collective and directly profit from our collective success. Sure, I’m not making as much as Peter Theil, but I didn’t invest as much, and I’m making something for my time and writing an article I was individually creatively motivated to write. (Which is more than I can say from the $0.06 payment I got from all my previous Medium work combined.) DAOs are as diverse as the human communities in Web2, but what makes them unique is their ability to distribute wealth and decentralize finance (DeFi). Like Medium, I don’t have a boss, and no one told me what to write, but unlike Medium, I got paid fair market rates for my time, and I now own a tiny fraction of the brand I wrote about.
Why Web3 is going to take over the world
If your eyes glaze over when the nerds start nerding, you’re probably going to want to skip this part. But if you want the uber-nerd gritty details, keep reading.
There is a lot of hard science that would indicate that the interaction I’m describing with BitDAO is a very exothermic societal reaction. Especially in 2022.
Fairness is a part of our neurobiology. We know from mammalian studies in rats that while social play between two rats does not require a 50:50 win ratio to be stable, a play-partner that wins excessively leads to unstable play, and eventual ostracism by the group. In other words, no one gets to keep winning forever.
Economic stability around the world is strongly influenced by the cultural ideals of the populace — cultural ideals like the American dream of meritocracy. When the ideals don’t match the reality, people feel bad about themselves, and the system becomes unstable, and in the US right now there is increasingly less upward social mobility — we’re not living up to our values.
There is a benefit to meritocracy in the modern world. Meritocratic ideals have an evolutionary advantage in team-based work like complex technological projects. Statistical modeling research shows that in collaborative interdisciplinary work like programming or research — where resources are pooled and everyone splits the rewards —equity is the most stable strategy.
Indigenous tribes universally exhibit collective behaviors, but until recently larger societies didn’t have mechanisms to enforce collective equity. To this day, graft and corruption limit much of the developing world by deterring investment and economic growth. More developed nations have complicated, and relatively expensive, structures to enforce systemic trust. But with Web3 we have less costly alternatives.
Web3 technologies like blockchain, cryptocurrency, and distributied autonomous organizations (DAOs), represent an advent horizon. This technology can enable high-trust, yet equitable relationships, occurring at scale. When these tools are used to collaborate on technical problems we can increase our efficiency and solve harder problems.
Sure, there will still be hierarchies within Web3 structures. BitDAO has an obvious and transparent hierarchy in the amount of BIT owned. But hierarchies create surplus in group productions and form a large component of our species' relative evolutionary advantage.
We’ve seen what we can build with Web2, but Web3 is the next step. It can significantly reduce the extreme economic disparities we see in tech hubs with fairer systems and distributed ownership. And with it, we can prevent the geopolitical instability and the anomie (sociological breakdown) historically associated with technological change.
Yeah, that got nerdy quick.
Okay fine, Web3 is the next big thing. When is it going to get here?
As a technologist, all you need to know to assess a technology is the Diffusion of Innovation theory and the Gartner hype cycle (the aforementioned growth curve). Through these lenses, blockchain has been doing the typical things young-tech does which is diffuse to techies first, have lots of bugs, and then get wildly overhyped.
Oh and crash a few billion dollars worth of markets (is it too soon?!).
Normal growing pains.
But I see a different future in Web3. And I hope now you do too.
Yes, I’m a skeptic (and a cynic). But I honestly believe, truly, devoutly, wholeheartedly, that Web3 is going to become suddenly, violently, and disruptively useful to all of us.
Originally published at https://www.todreamalife.com on May 16, 2022.
