You may have heard of web3. It made quite the buzz this year; it seems like people either love it or hate it. Honestly, I didn't know what web3 was until I somehow ended up in the web3 world itself. I didn't even know that the traditional tech world, which I am in, is called the web2 world (ps: no one calls it web2 there).
After months of experimenting, learning and building in the web3 world, I decided it's time to explain how I see web3, why I'm excited about it, alongside some of the challenges.
To understand web3, we first need to understand the evolution of the web. The web has evolved a lot since it got into our lives: web1, web2 and web3 as terms to describe the different eras.
Web1 is the first web era, also known as the read-only web. Web1 roughly covers the years between 1990-2005. During this period, users were mainly consumers of the technology—an era when static websites were a thing.
Then came web2. Web2, the read-write web, started around 2005 and is mainly used today. The web became a place where anyone can create content. It became a new collaborative and interactive environment. Social media has been a significant catalyst for web2. It's never been easier to upload a cat photo to Instagram, celebrate birthdays from Facebook and chat via Facetime.
So, it went from only super shady coders doing something on web1 to making it so easy that now everyone can easily use web2.
Here's a great intro video for the eras of the web by Whiteboard Crypto -What is Web 3.0? (Explained with Animations)
Web2 is highly centralized. In web2, large companies own servers that provide messaging, searching, storing etc. These companies have complete control and ownership over the services they provide.
You need to agree to the terms and services to use the platforms. This makes sense as the companies pay to operate these servers and provide you with certain services. That been said, with every term and condition agreement, we give the ownership and control of our data. Companies use this data to monetize their platform; it's fair to say that many large companies solely exist to collect data. Not to get into many buzzwords, but this is also called the data economy.
Aside from the issues with companies using and selling our data, these entities are the primary targets for hackers. Cyberattacks and data breaches are inevitable when there is a single point of failure.
Last but not least is the control that the centralized cooperations have. They can change the product and the features anytime, affecting others using their platforms. Companies also have the power to censor and block any account.
In this environment, we see web3 emerging.
Before moving on to what web3 is, I want to explain how I ended up here. Because quite honestly, it wasn't due to the issues in the web2 world. I got in as an investor (sounds cooler than just saying money), but I saw all the prices going up and tried to give it a go. You can read more about how I got into web3 in this post. In short, after getting in for the money, I fell in love with the technology and community. I started to learn, build, contribute, and that's how my web3 journey started.
The way I see it is that there are these problems in web2, but there's no denying that it's a working system and has great benefits. The disadvantages feel like something most people accept without diving deep when using web2 platforms. People love to use Instagram, TikTok, Google, Twitter etc. I did too, but once I learned that an alternative exists, I started to dig deeper and ask interesting questions; that was a turning point for me.
Web3 is mainly described as the decentralized web; it's still a term under construction.
Here is a more detailed definition that I enjoyed from this article by Dave Peck & the PSL Team:
“Web3” is the name* given to a suite of peer-to-peer technologies — particularly blockchains and distributed filesystems (like IPFS)— that are used to build modern “decentralized apps”, or dApps.
Essentially it's a group of technologies that are all decentralized and used to create decentralized applications.
This means that in web3, there isn't any single company in control but instead individual contributors that own and control the underlying technology stack. So basically, now service providers and users become the same person. Decentralization takes away the power from a single entity.
Now, this is where cryptocurrencies come into play.
Cryptocurrencies are the economic incentives given to network contributors (aka service providers). Each contributor provides resources to the network and gets rewarded in cryptocurrencies. Anyone can become a service provider, like you and me.
Consumers pay with cryptocurrencies to use the services. So it's a different economic relationship from the traditional web world that we know. For example, in web2, a user might pay AWS or Microsoft for cloud services; in web3, the money goes to the network participants.
There is value for both the creator and the consumer of the network. It's a relationship based on the protocol rules without any entity in between.
Today we mainly see the use of decentralized blockchain technology for building web3.
Now two important notes:
- A blockchain does not have to be decentralized. I mostly see people take decentralization when they refer to blockchain technology. However, blockchain does not imply decentralization.
- Web3 does not have to use blockchain technology. In the context of Ethereum, that is the technology used. However, keep in mind that web3 and blockchain are not the same things.
In short, blockchain is a shared ledger where each transaction is recorded and shared between the participants. Instead of having a central location for information, the information is shared among multiple computers on the network.
There are different layers to the web3 technology stack—which we will not cover in this post. Instead, here's a great post by Nader that I'd highly recommend if you'd like to dive deeper into the tech stack.
Essentially, in web3, there isn't any person or marketplace in the middle, but instead, there are protocols governed by network contributors which have economic incentives to participate.
Here are what I'm most excited for:
- Individual ownership and control: people can own and control what they create on web3. For example, you can have your self-sovereign identity without relying on any identity provider or you could create a blog post on a user-owned blogging platform where the content is yours.
- Trustless: the web2 world is based on trust. We trust the centralized cooperations to provide services and give them control over our data. It's a single point of control and thus trust, which creates a massive power imbalance. Instead, in web3, there are protocols that the users can directly interact with; there isn't any marketplace in between. Users do not need to trust anyone in the middle to utilize the services.
- Open and Global Ecosystem: The services and protocol are global and available to everyone regardless of location, age, sex etc. Every single contributor has a specific economic incentive to participate.
- Boost of Innovation: advertising is the dominant revenue model for the web that we know of today. Much time and energy is spent on advertising and learning the consumer better to show them the correct clothing item or even certain news. Alongside this, the boundaries of the web2 world are in some ways defined and limited. In web3, there is much room to explore and experiment, it raises many interesting questions, and people can try new things. I'm amazed when I hear about what some projects are trying to do.
Now you may be asking why I did not mention decentralization here. The reason being is that these properties are only possible with decentralization, so it's not the goal itself but the core component to get there.
The more people contribute, the more decentralized the underlying technology becomes. Recall that this technology is very new, so we yet need to understand the degree of decentralization and how to distribute cryptocurrencies in the best way.
Here are some of the challenges I see for web3:
- Regulations: there's no regulatory clarity. Most of the space is experimental without any guidelines. This creates an uncertain environment for everyone participating.
- The Language: There seems to be an invisible barrier of entry; at least, that was the case in my experience. There are too many new terminology and abbreviations. Alongside these, the false and overly-optimistic information make it complicated to understand.
- Monetary Incentives: Custodial wallets are growing faster than non-custodial; more people seem to be interested in the money than the tech. This does not speak well on the promise of decentralization. Additionally, there are "maxi's" (people who only like their coins and tokens, hate all the others), which creates a lot of intense discussions in the space. It's hard to tell if people believe in a particular tech or if it's their monetary incentives.
- The Narrative: there are a lot of opposing views on crypto. I constantly find myself explaining why I'm interested in the technology and then get the response: "but bitcoin is used for illegal activities". It takes time to change this, and we need concrete killer-use cases to do so.
Centralized platforms have been the standard for so long that it is hard to imagine otherwise. However, there's no denying the issues of web2. Web3 is reshaping the web, redesigning at its core, and I'm super excited to see what it will bring!
This post is my take on web3, and I'm sure there's more to learn as we see web3 evolving.
Thanks for reading! If you have any questions or comments, drop them below or reach out to me from Twitter. I'd love to hear from you!