Web3 is widely considered to be the next frontier for cryptocurrency and blockchain development. It also signifies the next generation of the internet, where the end-user will regain data control. However, there are still questions as to whether this is a passing fad or a legitimate trend for the future, although global Web3 excitement continues to build.
What Is Web3 Exactly?
The concept of Web3 - or Web 3.0 - revolves around revamping the World Wide Web through decentralisation and blockchain technology. Instead of the current approach in which centralised companies - social media firms, Apple, Google, Microsoft, etc. - hold all the power, the focus would shift to empowering end-users. More specifically, the users would control their data and access new ways of monetizing their details.
Moreover, the Web3 approach involves using token-based economics, either through existing or new cryptocurrencies. Those tokens, combined with blockchain technology, can facilitate broader financial inclusion, data security, privacy, and scalability. More importantly, the Web3 approach wrests control away from the handful of centralised companies controlling the world's data. Leveling the playing field for all parties would shake up the internet as we know it today, although it remains to be seen if Web3 can succeed.
The History of Web3
The concept of Web3 is attributed to Gavin Wood, the co-founder of Ethereum and Polkadot. He referred to a "decentralised online ecosystem based on blockchain" in 2014. More specifically, Gavin Wood is credited with the term Web3 in a blockchain-related context. It is different from the semantic web idea coined by Tim Berners-Lee in 1999, as Tim described the semantic web as one of the components of what is known as Web3 today.
There are still differing visions for what Web3 should become. The ideas of decentralisation are found in every version, but the use of blockchain and cryptocurrency isn't necessarily required. The Gavin Wood version of Web3 would feature those technologies, whereas Bloomberg sees it as a "world of financial assets integrated into the inner workings of all online activities".
The Current Web3 Situation
The infrastructure to unleash the potential of Web3 does not exist fully or not yet. While there are hundreds of blockchains and wallets for every ecosystem, those are just the essential building blocks. The same goes for NFTs, which put a different spin on asset ownership. However, NFTs have yet to gain more mainstream utility and traction, as they primarily serve as a tool to own digital artwork today.
Several tools exist to facilitate the transition of Web3 or what that future may look like. The Brave browser and MetaMask wallet are two crucial examples.
Brave lets users preserve privacy by default and removes advertisements. However, it also lets users earn BAT tokens for clicking ads that pop up through the browser, creating a new advertising economy.
MetaMask is the most popular wallet to access blockchain-based applications and games across Ethereum and other popular networks. It is accessible as a browser extension or mobile app, making it easier for users to interface with distributed ledgers and store their crypto assets and NFTs. It is all about control and ownership, and MetaMask makes those concepts easier to digest.
Core Ideas of Web3
Many people may think there is no need to evolve into an improved internet. Everything we have today is convenient but comes with tremendous trade-offs. Users are subject to data harvesting by all major service providers. Those companies will either use that data for advertising purposes or sell it to third parties without user consent.
The primary idea of Web3 is to decentralise the internet to prevent these companies from continually harvesting user data. Rather than putting more control in the hands of these companies, ownership is distributed across all the builders and users of the next iteration of the internet. As everyone can contribute to Web3, anyone can become a crucial cog in the machine and help create a balanced ecosystem where users are the #1 priority.
Secondly, Web3 is a permissionless version of the Internet. Everyone has equal access to the new ecosystem, and no one is excluded. That is different from Web2 today, where gatekeepers - ISPs, service providers, and governments - will determine who can access what and when. Such an archaic approach has fractured the World Wide Web and created a landscape that milks users for every shred of data.
Third, Web3 is home to native payment solutions. The current focus lies on using cryptocurrencies and blockchain-based assets and tokens to send money online, reward creators, and help users earn rewards. There is no need for archaic infrastructure provided by banks and payment processors, although those options will remain available for some time to come. They will not be the primary payment option, though, but rather an afterthought.
Last but not least, Web3 is trustless. Its native incentives and economic mechanisms create a new paradigm where users are in the driving seat, and centralised companies will pay to get the data they need. There is no reliance on trusted third parties in Web3, as there is no need for such entities in this trustless and decentralised environment.
Will it Succeed?
The big question is whether Web3 is a passing fad or if it is the future of the World Wide Web. Opinions are divided on that front; as Jack Dorsey is concerned Web3 will become a lopsided creation where venture capitalists will retain a firm degree of control as they help fund all development in this space. The use of governance tokens - which can be bought and sold freely - incentive VCs and large investors to buy up a majority of the supply to exert control over protocols and projects.
Additionally, there are concerns over building Web3 technology on networks relying on Proof-of-Stake. Ankr CEO Chandler Song raised concerns over this trend as Proof-of-Stake requires validators to process transactions. As such, validators with the most money can put up more crypto assets to stake, increasing their chances of getting rewards and making the rich even richer.
The use of Decentralised Autonomous Organisations is another double-edged blade. While it will put the users in control and grant them governance rights, DAO code can also contain code weaknesses. That raises the topic of overall cybersecurity in Web3, which will need to evolve if this technology is to power a new iteration of the World Wide Web.
All of these concerns are valid, but not insurmountable. Web3 is still in the very early stage of development, and there is much to figure out. If the issues above can be addressed and resolved, there is a good chance this technological push will transform the Internet for good. However, it remains to be seen if users and companies will embrace these new standards, which is always more challenging than anticipated.
How To Invest In Web3?
Investing in Web3 is possible through various means. The most obvious option is buying Web3-oriented cryptocurrencies by focusing on assets native to specific projects or infrastructure. That includes buying Ethereum or Solana, for instance, but may also apply to owning a leading decentralised exchange Uniswap's UNI, or investing in decentralised storage solution Filecoin. Always conduct research before making financial commitments, though.
For those who prefer to invest in equities, that option exists too. Multiple prominent companies - including Meta, Apple, and Microsoft - have ambitions to develop the next version of the Internet. These companies are among the biggest benefactors of the current Web2 technology, though, but it will be interesting to see what they can do for Web3 development.
Private companies may also play a big role in Web3, at least where investment opportunities go. Prominent companies such as OpenSea are private firms that do not provide shares directly. Instead, users can acquire pre-IPO employee shares of such firms, although it may prove a slightly more complicated and riskier approach.
Other investment options include investing in companies or projects providing the hardware for Web3 or the technologies that will elevate blockchain to new levels, such as artificial intelligence and deep learning. Connecting the whole world will require billions of computer chips, network cables, Wifi connectivity, mobile data, etc. All of these providers can play an important role in the next iteration of the World Wide Web, assuming the technology gains mainstream traction.
Conclusion
There is much to like about the potential of Web3, even if the technology and infrastructure are not available today. The idea of empowering users and giving them control over data and monetization is appealing and seems like a necessity at this stage. However, one must acknowledge there is still much work to do in the coming years, and we may not unlock the full potential of Web3 for a while.
That doesn't make the concept less valid or exciting, though. It is good to see people raise concerns in this early stage, as it confirms a long-term vision for the World Wide Web that focuses on the end-user rather than big companies.