Everyone is talking about web3.
Richard Muirhead, a partner at Fabric Ventures, hails web3 as the next information exchange revolution, analogous to the shift from a primarily agricultural society to a more urban one. He defines web3 as “a composable, human-centric and privacy-preserving computing fabric for the next wave of the web.” From his perspective, web3 will usher in an entirely new paradigm for interacting with the internet.
Others take a less optimistic view of its promise. Didier Thizy at Stellex Consulting claims that web3 is merely a term for a collective internet nostalgia, a time more like the first incarnation of the internet, when “creators were not at the mercy of Big Tech social media platforms” like YouTube and Facebook. Didier sees web3 primarily as a way for fringe internet users to keep more of their online assets insulated from giant tech conglomerates.
Both of these visions, though contradictory, are at least partially true. So, what do we really “know” about web3, and how many of the promises that are frequently touted are likely to become a reality in the next five years?
4 Predictions for Web3 Technologies
- Digital currencies.
- Digital asset ownership.
- Distributed ownership of major blockchains.
- Personal or distributed ownership of data.
The Possible Futures of Web3
To understand web3, we first need to understand blockchain technology’s impact. A blockchain is a digital ledger of transactions maintained by a group of computers. When talking about web3, understanding the internal workings of a blockchain isn’t as important as the fact that the technology enables a system of recording information that makes it difficult or impossible to change, hack or cheat the system.
Thanks to the secure nature of blockchain, web3 offers two major promises: ownership and decentralization. So, let’s examine each of these as concepts and the features or use cases that they might enable.
Blockchain technology offers a mathematical method of verifying transactions. This verification could entail anything from the transfer of one dollar worth of cryptocurrency to the purchase of a $3 million piece of digital art. Blockchain provides a concrete record that ensures the legitimacy of ownership without human intervention. For comparison, the traditional method of selling a car requires many human hours of work to verify, but keeping those records on the blockchain would greatly reduce the friction of the transaction while simultaneously increasing its security.
The first and most fundamental new feature that such concrete proof-of-ownership enables is the concept of digital money, also called cryptocurrency. The second use case is an expansion of this ledger technology to include digital and non-digital assets, including NFTs (non-fungible tokens), which are already flourishing in popularity, and also property or other ownership verification.
Decentralization is another concept associated with web3. Traditionally, though not necessarily, blockchains are maintained by decentralized networks of computers. In terms of cryptocurrencies, this means that the record of who has how much of each currency is not maintained by a bank, but by hundreds of thousands of computers constantly validating the transactions that occur.
The primary feature that this decentralization allows is that ownership verification can occur without the need for a middle-man like a bank or a digital asset-holder like Facebook or YouTube. The primary value that these entities provide is security and trust.
The other feature that decentralization might allow is the ability to “own” your digital data. Such ownership means that, in the future, you could own the data that you see when you log into Facebook. You would lend it to Facebook when you log in, essentially making the company blind to the actions that you perform inside the application.
This type of ownership is theoretically possible but practically very difficult to achieve. Guy Zyskind, co-founder and CEO of cryptosecurity startup SCRT Labs, says that “No technological legerdemain can overcome the fact that once the buyer has your data, you’re done. They can take your data, they can copy it, they can go off-chain and then that's it.”
So, which of these blockchain-enabled concepts we discussed are actually realistic, and which are likely to be part of the burgeoning web3?
The Chopping Block
The features of web3 that are most likely to succeed are those that are attractive to anyone with the capital to invest; accordingly, those that are not attractive to capital will fail. Therefore, digital currencies and asset ownership are likely to make it into the mainstream the fastest, while decentralization via blockchain networks is likely to take the longest to make it into the mainstream of web3.
It is laughable to imagine a world in which the U.S. government contributes capital to developing a distributed money alternative that it is unable to regulate. Equally preposterous is thinking that the investors who own shares in Google would help users keep their data private from advertisers.
This incentive structure means that we will see more corporate and government-owned blockchains gaining traction in web3 while decentralized coins and digital data ownership features will stagnate or fail.
NFTs and cryptocurrencies will be mature and in production by important players in the corporate and government realm (think governments and Big Tech), and we can expect to see more traditional ownership contracts turning into digital versions. Artists will be able to sell their work more easily on the internet, and fundraising for new digital projects will be easier as well.
Digital data ownership and decentralized networks will fail, or else become non-decentralized. The top 2 percent of accounts own 95 percent of the $800 billion supply of Bitcoin, and 0.1 percent of Bitcoin miners are responsible for half of all mining output. I expect this trend to continue across the rest of the decentralized coins and other assets.
Web3 is still an abstract term for the next generation of the internet. It may or may not incorporate the many potential features enabled by blockchain technology.
The first generation of web3 is likely to be our current web but enriched with new platforms based on digital ownership and digital currency, while the true democratization and decentralization of the internet is an aspirational dream still far out on the horizon.