also known as “Web 3.0″, simply refers to the next iteration of the internet which aims to promote decentralized protocols. Defining features of Web 3.0 include decentralization, artificial intelligence, connectivity, and ubiquity. But what exactly is Web3, and why is everyone talking about it? Here is what you need to know about Web3.
Web Versions Before Web3.0
To get an understanding of what Web3 is, you need to understand the versions of the web that came before. The initial version of the internet or Web1 was created in the 1990s. Web1 consisted of a collection of homepages and links. During that time, websites were predominantly static. There wasn’t much you could do apart from reading things and publishing basic content for visitors to read.
Web2 came next. Unlike Web1, with Web2, people gained the ability to not only read but open and edit files on the internet. This version of the internet allowed people to create their own content and publish it on platforms like Craigslist. Later, the creation of social media platforms like Facebook enhanced people’s ability to read, create and share content.
Although Web2 brought the world a lot of free services, many people have grown tired of huge tech companies that have gained control over their information. This is where Web3 comes in. Basically, Web3 enables users to read, write and own their own content online. Instead of using free platforms in the exchange of data, people can take part in the governance and operation of internet protocols. This means users can become shareholders on the internet and participate in how things are run.
Web3 introduces tokenization. You can think of internet shares as tokens or cryptocurrencies. These tokens are worth nothing on their own since they are just a representation of ownership. Each person will also have a share of decentralized networks known as blockchains. Those who hold enough tokens are the ones who will then have a say over the network. In the future, if you hold tokens, you can spend them on voting on the future of things like a decentralized lending protocol.
There are several differences between Web3 and the previous versions. Apart from decentralization, Web3 also enhances the internet as we know it with several added features. For instance, Web3 is:
- Distributed and robust.
Unlike Web2, where applications are built and deployed on single servers run by cloud providers, Web3 applications run on blockchains. These applications can also run on several peer-to-peer nodes. As a result, Web3 applications are known as decentralized apps or dapps.
When people talk about Web3, cryptocurrency is mentioned a lot. This is because cryptocurrency is an integral part of Web3 protocols. It provides financial incentives for people who are willing to participate in creating, regulating, or improving Web3 projects. This enables people to make a living by offering storage, computing power, hosting, bandwidth, and other services that are normally provided by web hosting companies.
Consumers of services in Web3 will also pay to use protocols, but unlike now, they will pay directly to the network participants. This will result in the cutting off of unnecessary intermediaries.
The best way to think about Web3 is as the ‘read-write-own’ web. This concept changes the way people think about ownership. In the physical world, people own things like clothes, cars, and cellphones. But do you have ownership of anything in the digital world?
Do you own your videos, tweets, or Facebook posts? These might seem like weird questions? Is it even possible to own a tweet? And what would you do with it if you owned it? Can you sell it, and if so, who would be interested in buying it and why?
All social media platforms depend on user-generated content. This means that without users, platforms like Facebook, Youtube, and Twitter wouldn’t exist. These platforms rely on content generated by their users. This means that whatever revenue they generate is made possible by their users. But what if the users own the content they create? How would that affect revenue sharing and business models? There’s no doubt that the introduction of Web3 will transform the digital economy via ownership of content.
What Actions Can You Perform on Web3
The term Web3 was introduced in 2014 by one of the co-founders of the Ethereum cryptocurrency. Since then, Web3 has become the reference term for everything that has to do with the internet becoming a decentralized digital infrastructure. With Web3, there will be no gatekeepers to control data. This means no one will be able to bar anyone’s access to the internet.
On paper, Web3 will give people unlimited access to the internet. An example of Web3 in action might be a peer-to-peer payment application that works on a blockchain. Instead of going through banks or applications like Paypal, people can use a decentralized app made for payments.
Before you can finalize a transaction, it will need to be verified by the network. After that, it will then be coded into the blockchain’s digital ledger. This type of payment system is beneficial to those who aren’t able to open a bank account.
Five Predictions for the Future of Web3
These are some of the things that you can expect with Web3.
NFTs or non-fungible tokens will become the commerce backbone of Web3. We have talked about ownership of digital content, but how do you establish that ownership? Fortunately, it’s quite an easy-to-understand concept. Think of it as the digital version of the physical world’s ownership registry.
If you own a car or a house, it is normally registered in a database that’s controlled and maintained by the government. This means that any transfer of ownership of these assets has to be recorded in the database. The new owner will then get a document, like a property deed, that serves as proof of ownership.
This is the same idea with NFTs. However, unlike physical deeds, Web3 implements proof of ownership digitally. In the case of Web3, the database with ownership records of assets is the blockchain. However, instead of being controlled by the government, the blockchain is maintained by a global network of computers. For safety, this database is secured using cryptography. Owners of assets on the blockchain are given NFTs as proof of ownership.
Digital Global Economies
One of the most significant effects of Web3 will be to break down international boundaries for commerce. At the moment, digital economies are mostly regional. This is because any transactions that are carried out in the economies are dependent on the global banking system.
You will find that each regional economy has its own taxation, monetary and fiscal regulations. For instance, if you want to participate in your country’s digital economy, you need to have a bank account. Also, the government in your country will decide how much you are taxed for various things. Apart from that, the government also decides what they do with the money they collect as taxes.
With Web3, digital economies are starting to form on the blockchain. Unlike regional digital economies based on banking systems and regulated by governments, anyone can participate regardless of location. This means anyone can choose what economy they want to be a part of. People will also be able to make decisions on how the economic output is distributed instead of having decisions made by governments.
Digital economies are starting to form on Ethereum, Avalanche, Solana, and Polkadot, among other platforms. These economies will grow into digital economies that will rival the current regional economies. However, this will likely take some time.
Staking Becomes an Important Income Source
With Web3, proof of stake ecosystems will enable anyone around the world to participate in staking. This means people will be able to receive a form of universal basic income from staking rewards. At the moment, the main sources of income are labour, which is rewarded by salaries, and capital income which is rewarded by interest and dividends. Unlike these ways of earning income, staking allows people to participate in the economy passively.
So, what is staking? This concept has something to do with decentralized finance and staking. There are two ways to view staking when it comes to decentralized finance. The most “to-the-point” way of understanding staking would be to view it as staking crypto assets, so you can be a validator in a decentralized finance protocol. Staking, in this case, is basically locking fungible and non-fungible tokens into smart contracts.
Users of Web3 will be rewarded for staking crypto assets. On the other hand, you can also look at staking as any activity that involves a temporary commitment of crypto assets.
Transformation of the Middle Class
Currently, major businesses are able to keep profits high by hiring cheap labour. This is what led to the creation of the middle class, and this is what will probably lead to its demise as well. Web3 will likely transform the middle class by providing class mobility. Class mobility simply refers to the ease with which a person born in the low or middle class can migrate to the upper classes. Web3 promotes class mobility by introducing fair and inclusive ways of distributing value. This means it will be easier for someone to move from a lower class to join an upper class.
Exponential Increase in Investors
With the introduction of Web3, everyone around the world will be able to participate in digital economies. This means everyone will also be able to become an investor. Since everything will become tokenized, there will be an increase in investment opportunities.
Democratization of digital economies, changes in how value is distributed, and an increase in class mobility will lead to more people having more resources to invest in. Currently, most people don’t have the opportunity to invest because of regional barriers and limitations imposed by the banking industry. This will be improved by Web3 since people will be able to manage their own assets and tokens.
A New Way of Building Companies
Tokenization and the expected increase in investors will lead to a new way of building companies. At the moment, for one to build a software company, they will have to engage venture capital. This means they end up giving up a certain percentage of their company so they can get funding to build their idea.
There are many problems associated with this type of model. For instance, venture capital investments introduce misaligned incentives and, in the long run, will get in the way of building out the best user experience. Also, if the company grows, it will take a long time for the parties involved to realize any value. This means founders will have to work for many years without getting a real return. Web3 introduces the possibility of a new way of building companies.
Instead of taking on venture capital, with Web3, anyone can invest in the building of a company from day one. The founders announce the release of a certain number of tokens and then give 10% to the early builders, and another 10% are sold to the public. The rest of the tokens can be put aside for future funding of the project. Once the project is up and running, people who believe in its success can buy and hold ownership, while those who think otherwise can sell their stake.
Because of this type of model, the public will have complete transparency over what is happening. This is unlike what happens now, where a lot of things are often cloaked in secrecy. This type of activity is already happening in the web3 space with some companies selling tokens to the public.
Web3 is already here, even though regulators have not said much about it. One of the hurdles that the industry might run into is that crypto tokens exist in a regulatory grey zone in most, if not all, countries. Considering that crypto tokens are critical to Web3’s applications, that could be a serious problem. However, most of what is known about Web3 right now is purely theoretical. For now, you can expect to hear a lot about Web3 as the world tries to wrap its head around this world of new opportunities.