Web3 is all the rage in the blockchain market right now. Despite a work-in-progress mode, the “next phase of the internet” has got everyone talking, from Elon Musk to DeFi’s chief proponent, Jack Dorsey.
While both entrepreneurs have been wary of what Web3 might offer, the market enthusiasts are hopeful of its future in the upcoming tech space.
Web3: The Future or a Fad?
Web3 is simply decentralising the internet via blockchain technology. It’s an umbrella term for crypto assets, non-fungible tokens (NFTs), DAOs and even the metaverse, AR/VR and gaming technologies. Web3’s predecessors, Web1.0 and Web2.0, were launched in 1989 and 1999, respectively.
While the former started as a communication medium for experts through decentralised, open protocols (HTTP), Web2 introduced browsers as search platforms, widened the internet base and centralised user activities. Web3 is set to take the best out of both. Gavin Wood, Ethereum architect, and a Web3 rep, envisions the technology as open-sourced, permissionless and trustless. With Web3, consumers can directly provide their services, arts or assets to other internet users without going through middlemen/women or a load of paperwork.
Web3 is still in ideation mode, and the definition depends upon who is telling it – the service providers, consumers or intermediaries like Meta or Google. For average consumers, a decentralised internet looks like web surfing without ads, access to websites without state intervention, creating and owning digital assets, secret off-the-book monetary transactions, a personalised less hackable internet, and conscious control over personal data.
As of now it seems to threaten the oligopoly of the tech titans as guardians of user data. Blockchain’s distributed ledger technology will minimise centralisation of data by intermediaries while storing it in the form of nodes at the backend, controlled by blockchain users. Moreover, it will allow consumers to sell their data without ownership loss – signs of the advent of a different data economy.
How is the UK’s Economy Looking at Web3?
The whole Web3 buzz started after Facebook revamped itself as Meta (on the lines of metaverse – a virtual universe) last October, rekindling its interest in cryptocurrency. After the tech giant’s support, venture investors doubled down on acquisitions in the Web3 sector.
As per Pitchbook, Web3 has already seen investments worth $27 billion (£20 billion) last year. This comes after the long craze for iPhones is starting to fade, and the current invested technologies deliver limited results. Globally, Antler is leading efforts to bring onboard 100+ nascent Web3-based projects and has recently announced an initiative on the same lines. Antler will partner with geographically-distributed Web3 dev communities like Polygon, Questbook and Solana for the process.
Opera has become the first browser system to introduce a built-in crypto wallet. Opera has partnered with Ramp to allow crypto top-ups directly through bank accounts for UK residents. The team has also come up with a decentralised application (dApp) explorer where users can explore blockchain-hosted dApps like ETH or BTC. With the venture, Opera has activated more than 170,000 crypto wallets in a short span.
Opera isn’t the only name that saw a surge after introducing DeFi applications. Swash has recently seen an oversubscribed funding round of $4 million (£2.95 million) from Web3-oriented venture capitalists, including KuCoin. Swash intends to use Web3 for reclaiming data ownership for users from tech firms. The startup has come up with data unions that collectively control data flow to processing units. These unions can then incentivise their efforts in the form of SWASH tokens. The tokenship is a two-way street here. Businesses can also purchase services via SWASH and subscribe to internal user data. Currently, Swash has amalgamated around 80,000 data unions and is looking to grow its product suite through intelligence dashboards and real-time data analysis units.
In addition, last month thirdweb powered up to offer a technology platform for building non-fungible token (NFT) and Web3 apps. According to the tech startup, over 1,000 developers are using thirdweb in the early access stages. The firm allows people to add features to projects including social tokens & currencies, marketplaces (for buying and selling tokens), and NFT lootboxes & drops.
Antagonism around Web3: From Dorsey’s Perspective
Critics like Musk and Dorsey have disputed the very existence of Web3 with their tweet threads. For critics, Web3 boasts more than what it can offer. The promise of a democratised currency is also in question nowadays.
A new report by the US-based National Bureau of Economic Research reveals that 0.01% of holders control 27% market share. Another issue is the scalability since transactions are decentralised with higher response times and expensive adoption. While the world is moving towards minimising program execution time, Ethereum machines are designed to do the exact opposite. The network recomputes every single program that goes in and out of the system, at times repeating the same code lines. Web3’s UX is a bit more complex than what users encountered with Web2.0. A complicated UX could quickly cause a mass adoption strategy to fail.
The whole idea of Web3 and blockchain technology revolves around decentralisation, but not for Dorsey and supporters. Most have termed Web3’s decentralisation ‘fake’ since the actual authority to drive data traffic will still lie with the tech giants. The appeal has some weight since most current blockchain networks are in the grip of a handful of early adopters or venture capitalists. This is one reason for investors to put money into blockchain.
Niels Ten Oever, at the University of Amsterdam, notes: “Building a distributed architecture on a centralised infrastructure doesn’t amount to decentralising”. Web2.0’s internet comes from a minority of companies, like Google, and Web3 services will be only powered by those hosting dApps.
A decentralised internet already comes with certain issues – higher instances of money laundering with crypto, its inability to prevent cyber crimes and the absence of a regulatory authority; which is a moral more than a legal need for today’s Gen Z. Now that consumers are both products and service providers in a Web3 internet, the task of managing finances without banks will be a walking nightmare.
Tim O’Reilly, the man behind the phrase Web2.0, thinks it’s a bit early for the internet to offer polarising conclusions. Web3 definitely has some potential in creating a consumer-centric world. But extinction of centralised infrastructures like Amazon or Google is a long way off.
Anyway, the world is turning more reformist than revolutionary, and so is the internet. A radical decentralisation? That’s a distant dream as of now.