When working on a coherent answer to the question “what is Web3?”, I tend to use the short version: Web3 is decentralised Internet.
But then I almost immediately get an elbow touch: “Isn’t the Internet decentralised already?”
No, I reply patiently, well, not exactly. Let’s see. We began to talk about Web3 some time 2014-ish and used it as a term for new types of protocols that allow for decentralised consensus.
The term now represents more or less the entire public blockchains, multiple dapps, and even schools of philosophy that cover everything from gaming to design to the new ethics of the digital age. Interestingly enough, there’s no unified definition of Web3, but…
Aaaand that’s how I get sucked in. In most cases, I accept my fate and take the conversation (monologue, really) as far as my inquisitive interlocutor is willing to go before he or she gets called away for a new round of cocktails.
Honestly, though, I love talking about it, and if my efforts don’t fall on completely deaf ears, I can speak of the elegance and functionality of Web3 for hours. So stop me whenever you feel you need a refill. Otherwise, here I go again.
Decentralised data storage
I love Web 3. I’ve been speaking, writing and researching it since 2017. But what does “Web 3” actually mean? At the very least, it’s the philosophical touchstone that guided TRASTRA at its early stage. Our free ETH wallet is the first choice for customers to access Ethereum and other Ethereum-compatible networks. It’s completely secure, meaning you’re the only one to have access to your online data. You can choose what you want to keep private or share with others. In a nutshell, our wallet is a cryptographic consent manager that also enables people to spend their crypto online in a way they control.
But, as we’re moving forward and advocating for the decentralised web3, it’s important to remember that we’re not just talking about decentralised access to cryptocurrencies. There is also a variety of aspects that go into this idea. One such factor is decentralising your data storage for purposes like security, immediate access, and full control. The Blockchain industry is showing rapid developments in that direction. Last year, at least seven new platforms were launched with token sales focusing on data storage. In 2022, the number of projects is growing exponentially. For example, Golem (created in 2016), W3BCLOUD (launched in 2017) or The Graph Protocol launched recently.
Foundational protocols of Web2
When developers are asked to describe Web3, their first reaction, like mine, is to steer the conversation away from the topic: it’s almost inaccessible to a dilettante, and a professional will make more specific queries. If pressed, they’ll say it’s a continuation of the read-only Internet followed by the read-write iteration. Web3 is read-write-own. The Web was originally based on open-source protocols like TCP-IP, SMTP, and HTTP. A protocol is basically the set of rules that computers agree to abide by when communicating with each other.
These foundational protocols are responsible for the flow of information and messaging on the Internet, meaning you can build applications using their rules without having to pay for access. One could say that Web3 is an evolutionary step towards the Internet we want to love – built on free and open-source technology.
This is the moment of truth. If my audience retains focus after this tirade, I congratulate myself on a new flock and continue to preach.
Microblogging and crowdfunding
A significant shift was that individuals could add content to the Web, unlike read-only versions of Web1 websites. Rather than maintaining a server to display websites, Web2 companies created a silo of user data, behaviour, and actions to construct a social graph that is very valuable to advertisers. What initially started as upvotes on Digg message boards became microblogging on 2,89 billion Facebook profiles.
Another characteristic trait of Web3 is crowdfunding. Web2 users can invest in Web3 using the so-called Token Curated Registries (TCRs) and build new apps around them. Token-based networks that run on the Ethereum blockchain and other smart contract blockchains have introduced new models of ownership not necessarily found in cooperative or shareholder equity models.
For example, let’s say you’re providing liquidity for a network by introducing a token that becomes available only when your role on the network is fulfilled. A token like this could also govern changes that take place on the network in the future. The goal is to have every participant of any particular network own something to ensure they have a stake in it.
A solution to the double-spend problem
One of the best things about the Internet is global access to the free flow of information. Unfortunately, this doesn’t work with value inherent to money, property, and other possessions we still have despite John Lennon’s incantations. Like it or not, the scarcity factor (there can never be more than one Rembrandt, which makes the one you own extremely valuable based on the fact that other people also want it) is what makes our society and economy what it is is today. Again, I’m not judging.
With the scarcity of money came the ‘double-spend’ problem: for centuries, merchants struggled with keeping accurate ledgers on debit and credit until Florentine bankers introduced double-entry bookkeeping. Seven hundred years of that – and we have an incredibly complicated banking system rife with fraud and prone to inflation.
Bitcoin solves the double-spend problem by introducing scarcity online. When decentralised cryptos are used, verification works efficiently by harnessing technology that is available to us now. This means your account won’t double spend because there are multiple points of validation. Anyone can join the decentralised database and all of its data is made public. The power of the crowd makes it hard for a third party to tamper with your transactions or censor them.
Another attribute of scarcity is fungibility. The word is fancy indeed, but essentially it means that a unit is worth the same as another, meaning you can replace one with another, and it’s still the same. Hence, non-fungible means individually unique. Non-fungible Tokens (NFTs) address the issue of how many people can own a single object. By having a finite number of tokens representing value, they create scarcity. Tokenised ownership is one of the most promising attributes of Web3: a DAO comprised of a million people can issue a token that represents an equity stake in anything – be it a Picasso or a building. Non-fungible shares are what makes ownership as solid as can be – verifiable, irrefutable, and highly liquid.
One of the main reasons people adore NFTs is because they are Ethereum tokens, which makes them interoperable with the rest of Web3. They can be sold separately so you can have multiple shares; holders can use them as collateral for other decentralised financial services, receive royalties and remittances, or even create their digital identities based entirely on an Ethereum wallet.
One of the most pressing issues with the earliest internet protocols is the absence of a public, open-source identity layer. Web2 platforms like Facebook and Twitter have monopolised this layer in their closed-source applications.
The Web3 stance is a unique one in that it advocates for a person to own their online identity. It is based on the idea that revealing parts of your identity only when you want to seems like the best way to go. In practice, this means that an Ethereum identity plays an essential role in determining what can be claimed by that person.
So far, the Ethereum Name Service (ENS) is the closest thing we have to a universal identity layer in Web3 is the. With ENS, you can purchase a unique domain name as an ERC-721 token and then use it to point to any compatible website or a smart contract of your choosing.
ENS was created to provide human-readable Ethereum addresses but is currently being misused for airdrops. Although the idea of sharing your tokens with everyone might seem harmless at first, you’ll find out soon enough that it has security implications.
With services from 3Box Labs, such as IDX, you can tie your cryptocurrency wallets into them and manage your digital identity. You can associate your Ethereum addresses, social media profiles you already have, and any other self-identifying information you would like to include. Users will have to choose what data they want to share right at the sign-up process. This way, people won’t have to worry about their information being shared with other services.
Information push to trusted sources
Modern society relies increasingly on centralised organisations to store our personal data, and we have no way of taking it back once the relationship ends. However, this is not a recent problem – data breaches have been happening all the time for decades, affecting millions of internet users from all over the world. If you remember, in 2018, Cambridge Analytica was caught harvesting personal information from 87 million people and using it for psychographic voter profiles that aim to influence elections.
The principle of Web3 application design is that individuals push information to trusted sources instead of applications pulling it from sources that own your data. This contrasts with the traditional Web2 model, where you have to sign in to Google or another third-party provider just to get access, which forces you into a more passive role. This is such valuable information, and yet most of us give it up as soon as we read a platform’s terms of service. The lack of transparency on data you share with different social media apps makes them one of the reasons why social media networks can distribute our personal information to third parties without permission or disclosure.
Web3 is a reaction to the extractive relationship between users and platforms on the Internet today. It empowers users and gives them control over their data and how it is shared, unlike before.
The freedom of NFTs and good behaviour rewards
It was refreshing to see so many NFT projects launch in 2021, exceeding $23 billion in total trade volume, according to DappRadar. Artists can now create and share their work without relying on external funding or high-risk investments like the stock market, making it possible for anyone to support themselves as they follow their passion.
Unlike the social networks of Web2, your token can be purchased somewhere else or sold somewhere else. In other words, by inheriting the properties of Eth, we learned to represent value in a completely different manner.
The creators of the first NFT markets quickly realised that working within the constraints of a ‘marketplace’ would not be sustainable in the long run. They needed to find ways to create more alignment between themselves, their users, and the platforms they were setting up.
In 2021, SuperRare released a $RARE governance token. They also created the SuperRare DAO to reward their earliest collectors and artists, in addition to encouraging the community to participate in the curation of art.
Decentralised finance protocols like Uniswap have already created a positive-sum dynamic by incentivising liquidity providers to put up capital for the trading pairs of nearly every asset on the Ethereum blockchain. Other applications on Ethereum are now using tokens as a way to reduce fees and reward good behaviour. Web2 Reddit communities are also testing the use of points for contributors to earn a stake in their favourite social media platform.
A small Addendum to John Lennon’s “Imagine” (Instead of conclusion)
The Creator Economy
Imagine the “creator economy” where the Internet provides more platforms for content creators to monetise their talents, and websites like OnlyFans, Patreon, SubStack, Ghost, Mirror, OpenWrt, Twitch, or Youtube give users greater control over what they are earning from the fans who are supporting them.
Imagine your favourite computer game generates a reward in a variety of ways depending on the game, but the reward is always convertible into real cash – fiat money. Most GameFi projects are, in one way or another, revolve around game-native tokens that are proving to be highly liquid and NFTs that signify irrefutable ownership of something (anything) on the blockchain.
Radically New Patron-Artist Relationship
Imagine a patron-artist relationship in which artists have a direct line with their earliest supporters via a collection of Ethereum addresses or ENS names that can be used for mailing lists, entry passes, and payment systems for artists to engage their fans no matter the platform they are using.
DAO governance system
Imagine a DAO governance system. Think media companies like Bankless and grant-funding organisations like Gitcoin that use DAOs for various activities, including financials. There are now almost 2 million DAO token holders on Web3 where one can quickly see the amazing implications of pooling their assets to make decisions together without the need for a centralised authority.
Direct Stake in everything that Goes On Online
Imagine if everyone had a stake in services they use across the Web. Would a highly personalised user experience with a company offering near-effortless and highly organic advertising become a competitive advantage for smaller companies? Imagine your stake in a company is directly tied to the result of its marketing campaign, and you’re able to vote your shares in almost any decision-making process. That’s Web3 for you. Is your head spinning yet?