The term web3 is a contentious word depending on who you ask. Essentially, web3 is an attempt to create a new business model for the internet, mainly using blockchain technology.
The goals in most web3 proposals are to create a decentralized platform where users own their content outside the borders of the platform and can earn directly from others without a middleman. Why?
When web2.0 was popularized it was a model based on user-generated content; YouTube videos, WordPress blogs
The current internet relies on ads, tips, or subscriptions. People buying newspapers and cable subscriptions dropped dramatically over the past 2 decades, so most media has pivoted to making money from targeted ads or subscription models. When web2.0 was popularized it was a model based on user-generated content; YouTube videos, WordPress blogs, and other sites that allow users to create and potentially monetize their own content. Most of these sites have the same basic model to make money, with the hosting company taking a percentage fee, or all profit, to provide the service.
The new web3 model is based on making things decentralized and eliminating targeted advertising, reducing large profit cuts taken by hosting providers and allowing users to "own" their content on a new, less intrusive internet ecosystem.
Using a "smart contract" that acts as the service provider (Like YouTube), content is managed via the blockchain without a central company, so you can tip your favourite creator or set up a monthly subscription with all the profit going to them. Some web3 apps take this further with models that also share a percentage with everyone on the site, so no matter how popular a creator is, everyone will get something for making content.
What web3 can do well
When set up properly, web3 apps can achieve their goal of passing on higher profits to users. Newly launched apps like LooksRare allow users to create and sell NFT art, with a 2% platform fee. This 2% fee also goes back to the community with a token that can be bought and held to earn from these fees.
The user who created and sold the art will still net 98% of the profit, which is higher than most other digital art marketplaces or content platforms like YouTube. For comparison with YouTube, even when users are setting up a monthly membership to a channel to support specific users, YouTube takes a 30% fee.
web3 that does utilize the blockchain to store content, also allows users to bring their content with them. As a user you can publish your art on OpenSea, then you'll instantly have it show up on other platforms like Rarible and Nifty Gateway without having to do anything to make them appear.
What web3 doesn't do well
web3 doesn't always manage to hit its goals of a decentralized economy where you own all your content and get paid without the middleman.
One of the biggest issues with web3 is the fact that almost everything relies on fees, which is the nature of blockchain.
Submitting something new, purchasing something; most interactions with data require a "gas fee" to be able to do something on the blockchain. Depending on which blockchain a web3 app uses, this gas fee could be anywhere from $0.10 to $120.
How does a struggling artist without much money approach this? How does someone young, broke, or with no access to crypto start using these apps?
Acquiring the crypto to pay the gas fee usually requires registering with an exchange, purchasing crypto for a fee, then transferring it to your personal wallet for a fee, not to mention the tax that some countries charge on this. So how does a struggling artist without much money approach this? How does someone young, broke, or with no access to crypto start using these apps? Well... generally they can't. Pricing users out of being able to use the app is an issue. Some apps like OpenSea absorb some of the fees when creating or transferring content, but oftentimes to be able to interact and do anything you need some amount of money to start with.
Another key issue that web3 sometimes fails to deliver on; being decentralized. Whether it's hosting the site or the user content; the blockchain isn't good at storing large data, especially data larger than a small jpeg. When it comes to high-quality audio or video content, it's infeasible to store this on any blockchain. One solution that apps utilize is IPFS, which stores data on public servers without a central authority, but without "pinning" which requires either money or a central server, the data can be wiped from servers. Many apps fall back to storing data on centralized servers, which suffer the same issues as a regular app. If the server goes down, the content disappears the same as it would anywhere else.
When an apps goal is to be decentralized and generally owned and governed by the community that use it, who really manages it?
One of the biggest issues with decentralized web3 apps today is management. When an apps goal is to be decentralized and generally owned and governed by the community that use it, who really manages it?
Running an app requires several layers of people; developers who make the app, designers who design what you're looking at and clicking on, someone to determine new features, test new things, and moderators to make sure content isn't stolen or illegal. When an app becomes decentralized and removes targeted ads and as many platform fees as possible, it becomes harder to manage who creates the app, how they benefit, and what level of moderation and censorship exists, without becoming almost the same as any standard internet app that exists today.
In the end, many existing web3 apps can be run and managed by corporations that harvest the same user data, with the same profit goals in mind, simply shifting how they increase their earnings without actually benefitting users.
The future of web3
web3 is still very new, with new apps launching every week that try to achieve the goal of making websites and apps less centralized under big corporations, with more earnings going towards users for their contributions.
While there are several challenges to be addressed, we will continue to see a wave of different techniques and mixes of current and new web technology that could possibly deliver a new or better experience of the web in the near future.
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