What is Web3 and Why Does It Matter?
It has top tech engineers at Silicon Valley mega-corporations leaving their jobs for a new and uncertain frontier. It ignited a public spat between the ex-CEO of Twitter and major players in the DeFi world. And it doesn’t even exist yet.
We’re speaking, of course, about Web 3.0, or Web3. Elon Musk called it “more like a marketing buzzword than reality right now,” and that may have some truth to it, but buzzword or not, it has tongues all over the tech world wagging. So what is it, exactly? Well, Web3 conceptually is a decentralized version of the internet based on blockchain technology, smart contracts, and non-fungible tokens, or NFTs. To many people, such an explanation can sound like technobabble, so first it’s important to rewind and distinguish the defining characteristics of the two previous ages of the internet.
The Wayback Machine: History of Web 1.0 and Web 2.0
It’s almost impossible for many of us to imagine a world without the internet, and some of you reading this may have never known life without it, but there were distinctive phases of its early years that are important to understand. The World Wide Web was made public in 1993, ushering in what is considered “Web 1.0”, a form of the internet where information and documents could be viewed, but not edited. This early stage internet is sometimes now referred to as the “static web” or “read-only web” and was dominated by only a few companies, like AOL and Geocities. More official published content existed, as did personal web pages, but both looked drastically different than they do today.
Fast forward a decade or so. At this point, the internet had about one billion users worldwide, and the stage for Web 2.0 was set. As opposed to the “read only” internet that came before it, Web 2.0 ushered in what is now considered the “read/write” internet, exploding with user-generated content. A core feature of Web 2.0 was that this ability to generate content for free on a platform was provided in exchange for the user’s data. Web 2.0 is where we collectively live today. With now almost 5 billion users worldwide, the internet has changed in an unfathomable number of ways, but structurally is now almost entirely controlled by Big Tech monopolies in the form of Facebook, Google, and Amazon. Many believe a solution to this particular problem is precisely the central concept of Web3.
A Closer Look at Web3
Like the invention of cryptocurrency, the essence of Web3 is decentralization. Addressing the Big Tech monopoly problem, Web3 is primarily concerned with the more equitable and widespread distribution of power through blockchain technology, and envisions users getting a say (perhaps even voting privileges) in the way platforms operate, as partial owners of said platforms. The user would become a stakeholder shaping corporate governance and operational protocols, not just a customer.
With the deluge of news over the past 5 years about corporate malpractice in Silicon Valley and personal data harvesting undisclosed to platform users, it is unsurprising that a proposal of an internet “owned by the builders and users” would seem attractive to many. In 2019, the Federal Trade Commission issued the largest penalty in its history, fining Facebook $5 billion for breach of data privacy laws, further eroding public trust in Big Tech.
In Web3, voting stake and shareholding will take the form of NFTs, putting the power of the internet in the hands of the people, not venture capitalists. Proponents believe that the internet, which is vital to the global economy, should not be controlled by so few companies and individuals. It is in some ways a return to the community-governed spirit of Web1. Web3 has a lot of people excited for obvious reasons, and is a natural progression with an eye towards the metaverse. In fact, many social media companies already have teams specifically dedicated to strategizing in accordance with the eventuality (some say inevitability) of Web3.
Some Critiques of Web3
For all of its nascent momentum, Web3 as a concept is not without its detractors. A repeated criticism of Web3 is that it would be merely “decentralization theater,” wherein blockchain projects are decentralized in name only. The DeFi world is no stranger to such accusations, as many believe it is a transfiguration and expansion of the old financial system with VC-backed investments where only a few people are gatekeepers to the vast majority of the money to be made.
There is also the issue of shareholder governance. Many people still do not feel that crypto and NFTs are accessible and despite rising popularity, the barrier to entry to the system is already high. Not to mention that such a decentralized voting structure is bound to be rife with voter absenteeism.
Twitter founder Jack Dorsey, a fervent Bitcoin advocate, threw cold water on the idea of Web3 in a series of tweets in December 2021. Clearly, Dorsey is a fan of decentralization, and even started developing a concept for decentralized social media while he was still CEO of Twitter, but he did not mince words in his assessment of the user-as-shareholder concept of Web3. “You don’t own ‘web3,’” he said, the investor class will, as they do everything else. He continued, “It will never escape their incentives. It’s ultimately a centralized entity with a different label.” Dorsey’s critique of venture capitalists’ role in Web3 is focused on the financial implications of VC-backed blockchains, arguing that they inevitably funnel money away from users and become de-facto landlords of their own systems, not dissimilar to the current state of Big Tech.
Final Thoughts
Whether one’s opinion of Web3 is positive or negative, at this stage it’s still all purely speculative. Nevertheless, the groundwork for it has been laid as more major tech companies expand their efforts looking towards a decentralized internet. There is no downside, as a user and consumer, to being informed and prepared for what may come next.
