What is Web3 and how will it impact the future of the Internet?

Original article posted here on 10th October 2022

The pirates are coming

The web has been stagnant for some time now with little real disruption and what could be described as just incremental improvements on already existing ideas and technology. Compared to the earlier years of Web 2.0, the insane innovation and the folks vying "to change the world" the party has become a bit tame. To blatantly steal Mark Andreessen's words, "The Silicon Valley pirates have become the Silicon Valley navy" and everything's just, well, all a bit same'y and rehashed. But there's a new band of pirates who don't sail the seas of Silicon Valley and they're ushering in a new era of the Internet and driving the movement of Web3. These new kids on the block are idealistic pirates fed up with the status quo and the power of the big centralised behemoths like Google, Meta, Twitter and the rest. Pirates with a whole different set of values to the old tech giants and, pirates who are far past ready for change.

It is an incredibly exciting time for the Internet and although Web3 isn't without its teething issues or high profile naysayers including Jack Dorsey and Elon Musk, like John Wu said "Never bet against innovation". If you believe in the phrase "follow the developers" then there are droves of smart people putting a lot of activity and effort into the space. Like it or not Web3 is coming and some people think it could become the "backbone of a new, tokenised society". Crypto investor, Lior Messika, told TechCrunch that, "Web3 will house our financial institutions, social interactions, personal identities and much, much more in the not-so-distant future." One of the most exciting areas of Web3 is the idea of a "decentralised identity" where we would control and own our identity data. Under a faceted identity model we could decide how much or how little of that data we share with others - so no more tech giants owning our identity. In the future, a decentralised identity could act like a reputation score, a record of things we've done, jobs, digital assets and so on. Eerily, not too dissimilar to the Black Mirror episode, "Nosedive".

So what is Web3? Well, there's the standard explanation of Web3 where everyone gives history lessons about the first version of the web and Web 2.0 then explain blockchains, NFTs, decentralisation etc... and we'll get to that too but, although it's safe to say certain technology and ideas will be involved in building out the next generation of the web, the reality is it's early days and nobody really knows yet what it's all going to look like yet. Web3 is still very much emerging and finding its feet. Bloomberg said the definition of Web3 was "hazy" and even within the proponents of Web3 there are differing views on how things should be done. Some see it as being completely decentralised but I'm more aligned with Chris Dixon's view that Web3 systems will be designed and built in the Web 1.0 mould where there are strong checks on power but with centralised companies in the mix. However, the network effects will accrue to public resources like the Ethereum blockchain and not to centralised companies. I think there will be a symbiotic relationship with platforms in order to bring Web3 to the masses as Taylor Wrobel (previously an engineer with OpenSea) said in his TEDx talk "Platforms are Compromising to Web3".

Web 1

So let's get to the history lesson. The first era of the Internet was from roughly 1990 to 2005 and was a read only, decentralised and a very simple web. People read web pages in a browser on a PC and that was pretty much it. It was built on open protocols like HTTP (protocol of the web) and SMTP (protocol of email). These protocols were designed to be shared resources so that anyone could design and build websites and products on top of them, not having to worry about the rules changing. The people who ran the sites were usually tech savvy folks who had built the sites and also written the content. There was a "dot com boom" up until the "dot com crash" in 2001.

Photo by Lorenzo Herrera

Web 2.0

After the dot com crash there was a rebuilding period called Web 2.0 which saw the dawn of the tech titans like Twitter, Facebook and Google. People realised that instead of just having a read only web and putting print material online like magazines and brochures they were dealing with essentially a whole new medium where they could build entirely new things. The idea of visitors to these new services being able to create accounts, create their own content and then have interactions with other people and their content was a brand new thing. If the first era of the Internet was read only then this next Web 2.0 era was read and write. The first iPhone arrived in 2007 and that further drove innovation and brought Internet to the masses. Native apps could be downloaded from app stores and, in time, most all websites became responsive. Now, instead of the Internet being filled mainly with tech types and early adopters on home PCs, the web was available 24/7 in everyone's pocket. That drove innovation even further again with apps like Uber, Instagram, and Snapchat that essentially transformed society.

Photo by Mathieu Improvisato

But there's one drawback with Web 2.0 and those systems. They offer a service for free but they control your data. Users are at the mercy of big tech companies and if they want to kick someone off their platform they can. If they want to change their algorithms, they can. If they want to serve you ads, they can. They don't answer to us and their algorithms are closed. In the beginning, these big corporates want to attract people to the their networks but, once a critical mass is achieved, then they set about extracting money from the people they had attracted. So, for a long time these big titans were competing and attracting people to their networks and products and all was well, but then, sometime around 2015 there was a shift. They became big enough to change the rules as they saw fit. The earlier dream of an idealistic Internet where anyone could have an idea and compete at a level playing field was over. Many people, myself included, became disillusioned and began to think something was wrong with the whole Web 2.0 thing. The idealistic vision of the decentralised Internet faded and so too, it seems, did the folks who believed in it.

Unlike the earlier era of the Internet, Web 2.0 platforms depend entirely on their users to create their content. The platforms make a lot of money from that content but the creators get very little. Facebook for example makes nearly 100 billion in revenue every year. YouTube have a revenue split model where they take around 45% and creators get 55%. That's good but 45% is still a chunk of change. Twitter, Facebook, Instagram and TikTok give their creators zilch. That's not a fair economic model and it isn't sustainable. The system is fundamentally broken and that fact alone will be a major driving force behind Web3. Content creators will be big adopters of new Web3 ideas and there are an ever growing group of people who think that Web 2.0 will eventually be seen as just "a detour on the way to a better, Web3, Internet".

Photo by cottonbro

Web3

So what is Web3? It is essentially a new architecture for building Internet services that, is said, will drive a new era of Internet companies and digital services owned and operated by communities instead of owned and operated by corporations. To understand Web3 it is important to understand Cryptocurrency and Bitcoin. Cryptocurrency is basically a digital, or virtual, currency that is secured by cryptography. Bitcoin was launched in 2009 and, although it wasn't the first attempt at a currency of this type, it has become the most successful in no small part due to blockchain technology.

There have been many attempts at making digital money in the past but all failed due to trust. Say, for example, if I create a new currency called the yollar, how can you trust that I won't give myself a million yollars, or steal your yollars? Bitcoin was designed to solve this problem by using a specific type of database called a blockchain. Most normal databases have someone in charge who can change the entries and potentially give themselves a million yollars. Blockchain is different because nobody is in charge. It is run by the people who use it. Bitcoins can't be faked, hacked or double spent. So people that own this money can trust it has value.

Image by nir_design

There has been a huge uptake in Bitcoin since it arrived on the scene, and it is this relatively recent interest in Cryptocurrency, and in particular another blockchain called Ethereum which has its own digital currency called Ether (now the second most popular Cryptocurrency behind Bitcoin), that is driving Web3. Transactions on the Ethereum blockchain network can now also contain executable code whereas data attached to Bitcoin network transactions is only used to record transaction information. This new idea of containing code or "Smart Contracts" along with transactions is one of the main driving forces behind Web3 and opens up a whole new way to build a decentralised Internet. Ethereum is basically like a community-owned computer system that lives in the sky where people can build applications on top of it. It's like the cloud but not owned by big mega corporations. Nobody runs or controls that system, it's run by a community and anyone can own a piece of that system if they buy or earn Ethereum tokens.

There is also another very important new concept in Web3 called tokens and non-fungible tokens or NFTs. Tokens can represent ownership of digital content like a picture, a piece of art, a concert ticket, behind-the-scenes access, a video game object or a whole raft of other different things. This is the first time in Internet history where users and creators can actually really own digital content, and that fact alone is going to revolutionise the thinking behind how things are done. If you can look past the rich people buying silly apes, tokens are incredibly powerful. When a user owns a token it means they have a secret password that gives them the ability to control that particular token. This is a totally new concept that didn't exist prior to Web3 and we haven't even scratched the surface of its many applications.

Photo by GuerrillaBuzz Crypto PR

Decentralised technology will be the new protocol layer for the Internet upon which we can build a better web to dethrone the tech giants, reclaim free speech, protect online identities and facilitate free trade in a border-less digital economy. Almost every large corporate in Germany now has blockchain activities. BMW is looking at the blockchain for their future fleet of electric cars to interact with public transport. Lufthansa wants to see if the blockchain can better track parts and maintenance. And Deutsche Telekom is using smart contracts to negotiate tariffs for roaming costs with other telecoms. Bitcoin has been described as one of the most exciting inventions in the history of mankind and according to some projections the Cryptocurrency markets will be worth 8.7 trillion dollars by 2027. The biggest mistake right now would be to think you've missed the boat with Crypto. In simple terms if the value of 1 Bitcoin now is around 20 thousand euro by 2030 that same Bitcoin is projected to be valued at around one million euros. That's a multiplier of 50 in just eight years. While you shouldn't own an amount of Bitcoin you can't afford to loose, if you put 1% of your net worth in Bitcoin, it could become more than 100% of your net worth down the line, which could change your life.

Imagine a future where the vast sums of wealth accrued by the small few was distributed a little more evenly. Imagine a future social network without propaganda and democratically censored. Imagine Internet browsing without the tracking software where you can opt in for advertisement and where you get paid the money for your attention. At the end of the day, the vast majority of people don't really care about the technology or how the web is built, and most won't even notice the difference. But what people do care about are products and services that will make their days better and their lives more prosperous. There won't be a great light switch moment where Web 2.0 stops and Web3 takes over. Web3 will run alongside Web 2.0 sites, with the latter adopting Web3 technologies in order to stay relevant.

We are at the cusp of an entirely new Internet. Web3 is a radical new way to do things that will fundamentally rewire the Internet. Recently, I watched a documentary called "Cryptopia" and as two men argued over Bitcoin one of them said, "This is bigger than the Internet, the iron age, the renaissance, the industrial revolution. This effects the entire world." Although that's a bit of a grandiose statement there's some merit to it. People will spend more and more time on the Internet in the future, engaging in more immersive experiences from socialising with friends, to working with colleagues, to working out in the living room. The face of what we know today will have completely changed in the next five to ten years, especially when other emergent ideas and technologies are layered on top of Web3.

Electric vehicle batteries that last 20 years and can be charged in 3 minutes. AI muscling in on graphic design. The impending jump from narrow to broad artificial intelligence. Continually improving drone technology everywhere. Robots everywhere. Life in the Metaverse where people spend time in online spaces as digital avatars, a concept alone that will change the Internet.

The coming years are going to be the most pivotal and transformative the Internet has ever seen.