If you follow debates within crypto, you can’t help but notice increasing mentions of the phrase 'web3.0'. The term might be trending, but it must rank as one of the least understood concepts. Ex-Twitter CEO, Jack Dorsey, has even gotten into a spat with a prominent Venture Capitalist over what it means and represents. So what is web3.0 and what has it got to do with crypto?
In March 1989 Tim Berners Lee, a software engineer at CERN, the Swiss laboratory famous for building the large hadron collider, published a paper called “Information Management: A Proposal”. It was a blueprint for leveraging the internet, which at the time connected computers, but was lacking a universal system for sharing information:
“In those days, there was different information on different computers, but you had to log on to different computers to get at it” Tim Berners Lee
Though the response from his boss to the paper was underwhelming - “vague, but exciting” - it would provide the framework for the first iteration of the world wide web; what in retrospect is described as web1.0, roughly covering the 1990s.
Web1.0 introduced three critical technologies - now part of everyday life - that would enable the internet to evolve, and grow, and because Berners Lee recognised the importance of making them open to anyone to use and build on, he ensured they were royalty free.
Once browsers were developed, such as Netscape navigator, that could mesh these technologies together, and enable users to easily navigate the content that was emerging, the web really took off.
If you didn’t live through that era, it is hard to appreciate how rudimentary websites were, and how painful it was to simply establish a connection. Forget wifi, every home had a modem box plugged into their phone socket that would splutter and whirr over several minutes trying to hook your computer into this new information system.
Atttribution: Jeff Ogden (W163) and Jim Scarborough (Ke4roh), CC BY-SA 3.0, via Wikimedia Commons
Web2.0 describes the vast improvements to that web experience over the next two decades. This is when tech monsters such as Facebook, Google, Apple and Amazon emerged, understanding the importance of user generated content, mobile connectivity and above all, harvesting, leveraging and monetising the data the growing number of web users generated.
Though the realisation that clever use of data, personalisation and mobile usability, could enable billion dollar taxi firms to emerge yet own no taxis, there was an underlying tension, summarised as 'the user as the product'.
This came to a head with the Cambridge Analytica scandal in 2018, when a former employee of the consulting firm turned whistleblower, explaining how an App built for Facebook was used to covertly harvest huge amounts of user data, which was then used to feed political campaigns, such as the 2016 US Presidential Campaign and the Vote Leave Brexit Campaign in the UK.
The cat was out of the bag regarding the exploitation of user data, which wasn’t limited to that one rogue case, but was standard practice. The scene was set for the next iteration of the web.
One of the core principles of web3.0 is to reverse this power dynamic, where web users sacrifice their personal data in exchange for a customised experience. It’s become clear that was a very poor bargain, so web3.0 is about users controlling and monetising their own data, as they see fit.
The most obvious symbol of this sea-change is the constant cookie notices you receive navigating the internet. Whereas before your data was been extracted without request, websites now have to ask. That process might be annoying, but it is just the first step in what could be a journey that redefines our digital lives.
The three cornerstones of web 3.0 can be loosely summarised as:
If you’re a regular reader of Learn Crypto, or any crypto based information platform for that matter, you should immediately recognise the first two elements are fundamental principles of blockchains, the first being Bitcoin, created by the pseudonymous Satoshi Nakamoto in 2008, and then gifted to the world.
Being decentralised and permissionless are mutually dependent qualities. If a small group can exert power over an idea or technology they can decide its direction, who gets access and who benefits.
Bitcoin sacrifices elements of usability - such as transaction speed - in order to ensure anyone can participate by running a node, thereby keeping control distributed. And in an ultimate act of altruism, Satoshi simply walked away from the project in 2011, relinquishing an undue influence he/she may have.
So web3.0 aspires to the decentralised values of Bitcoin and to leverage the crypto economies that networks like Ethereum enable. This is enabling new ways of users deriving utility and reward from the huge amounts of data and content that under web2.0 they would happily surrender. So-called token economies, built on blockchains, will provide the mechanics for web3.0, for which every participant will need a web3.0 wallet like Meta Mask.
Web3.0 wallets are your way of storing the value you earn and create in this brave new web, as well as trading and spending. Given they are blockchain-based, they protect privacy; many people are predicting that Social Sign On (using a Facebook of Google account to access other services) will be replaced by something like Ethereum.
The web3.0 model is already enabling gamers to play-to-earn for example, turning existing player-platform relationship on its head.
The countless hours you might spend on your favourite game, building player value that was locked inside your XBox or Playstation Account, will now belong to you, represented via NFTs, which will be tradable.
The huge market for player skins (in game items) in games like CS:GO and the rise of professionalism within eSports, were the precursors to in-game economies that will be a key feature of web3.0, which is where it overlaps with the idea of the Metaverse.
A Metaverse won’t be a single experience, as a key feature of web3.0 is composability, where code and components of applications can easily be shared and reused.
The immersive 3D environment that the Metaverse promises won’t be just where you play, but work, and soon your employment contract could even be an NFT, that can be traded and exchanged.
But before we get carried away with the utopian ideals of web3.0, there are plenty of reasons to pause for thought.
The biggest challenge is that true decentralisation is both hard to define and achieve. There is no recognised measure for how decentralised a network is, but there are some fundamental characteristics:
Unfortunately, most of the vaunted web3.0 services flash red on some or all of these, which is the root of Jack Dorsey’s argument with venture capital.
The reality is that there is no utopian solution to digital economies, just as we lack equitable solutions for how society is governed. It is no coincidence that DAOs - decentralised autonomous organisations - are gaining popularity at the same time as web3.0 is such a hot topic, but they've yet to show conclusively how technology can enable decentralisation, coordination and democracy can coexist to further a value proposition.
So though web3.0 might become the new sound bite for 2022, under the surface we may simply be more of the same in terms of who really benefits from the growth of digital economies.
Aside from the philosophical arguments that will continue to rage around what web3.0 really means, and whether it is achievable, there is a question of whether it provides the basis of a productive economy?
So far, much of what can be described as web3.0 is speculative and produces value that only makes sense in terms of itself. What value does a play-to-earn metaverse game bring to the ‘real’ economy? This really depends on how you define the ‘real’ economy’.
Financial services are expected to account for $93trillion, or 24% of the global economy, but who really benefits? The same could be asked of the kind of value that might be generated from web3.0 and how it is distributed.
We are only really seeing the tip of the web3.0 iceberg. So much is submerged beneath the surface, and hard to understand or anticipate. One thing that is for sure is that arguments like that between Jack Dorsey and a16z will get louder, and the way we interact with the web will definitely change. How much you benefit may literally come down to how much attention you pay.