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What is Web3? Everything you need to know about the decentralized future of the internet

Suddenly, talk of cryptocurrencies and NFTs has turned into a proposed revamp of the entire internet. Here's what you need to understand.
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Written by Michael Gariffo, Staff Writer on

Once again we find ourselves at a time in history where a group of people are attempting to spearhead the redesign of the entire internet. As with 'Web 2.0' this revamp promises to put the power in the hands of the people, rather than major corporations. It brings with it visions of a completely egalitarian web where you and I, not Big Tech like Google and Facebook, have control over our own online presences, finances, and data. But, like any promise on this scale, Web3 requires a vast amount of scrutiny before we can trust even its basic concepts, let alone its lofty promises.

This explainer will take a look at the specific promises Web3 and its proponents are currently making, what pitfalls face the adoption of the technology, and why something that doesn't even really exist yet is already causing such a stir among some of the biggest names in the tech industry.  

What is Web3?

Web3 is a still-developing idea for a third generation of the web. It follows Web 1.0, with its reliance on traditional web pages filled with content produced by commercial entities, and Web 2.0's shift towards the introduction and growth of social media. Although Web 2.0 undoubtedly gave the average person more ability to produce, and even profit from, their own content on the web, any such plans still required the involvement of a Big Tech company such as YouTube (owned by Google), Facebook, Twitter, or any of the major social networks that influencers -- and individuals -- rely on to reach their audiences. 

Web3's proponents claim their vision for the internet can cut the Big Tech middlemen out of the picture by completely decentralizing the web in much the same way cryptocurrency is attempting to wrest control of world finance from large financial institutions and governments. The similarities don't end there. Web3 is also designed, like cryptocurrency, to largely revolve around blockchain technology

Where this tech is used in crypto to create and maintain a decentralized digital currency, it would be used by the Web3 infrastructure to produce individualized tokens for each user, asset, and trackable item across its entire expanse. The goal of this is to provide a singular, consistent, platform-agnostic way to manage data across all systems, without the need for a corporation with its own interests and agendas getting involved. 

If you're curious, the term itself is largely believed to have been coined by Gavin Wood, creator of the Ethereum cryptocurrency and founder of the Web3 Foundation. The moniker has been around for several years, particularly if you count mentions of 'Web 3.0', but it was really only in 2021 when it started gaining traction, largely due to the high-profile names that suddenly seemed interested in its success or failure. We'll talk more about them below.

What are its possible benefits?

The primary benefit of this idea is that it would give control of a user's data back to that user. Web3's backers see us as currently being at the mercy of major online power brokers like Twitter, Google, and anyone else that collates, catalogues, and exploits our data for their own purposes and profits. Anyone that's ever been served a creepily well-targeted ad should be familiar with that sinking feeling that makes everyone wonder just how much the companies they interact with online -- and even the ones they don't -- know about us.

Web3 promises to reduce this worry by placing the control of your data and all of your created and owned digital assets firmly back in your own grasp. It will do this by assigning you, and all of those assets, unique digital tokens that can be tracked across the entire internet by Web3's fundamental infrastructure. This would function, once again, in much the same way that the central ledgers that make cryptocurrency possible track each bitcoin, ether, or dogecoin across the globe as they pass from owner to owner. 

Unlike the current web, that ledger would be controlled by all and available to all, while still maintaining each user's personal privacy. This last point is of paramount importance, as it would mean the other people you interact with online would be able to leverage that central ledger to verify the authenticity of you and your assets, without them being able to access any of your data or assets without proper authorization. 

SEE: Facebook: Here comes the AI of the Metaverse

Ultimately, Web3's ideal form would be a sort of utopian internet that treated all users, all data, all networks, and all stakeholders equally. You'd have just as much right to your own information as Verizon or Comcast, and just as much chance to profit from it as they currently do.

Of course, that is the ideal form of the concept. Anyone old enough to remember the original, idealized concept of social networking should be able to see how well online ideals match up against online realities. All they'd need to do is contrast those original promises of positive connectivity and collaborative progress with the dystopian realities many of us are now facing. Sure, you might be better able to keep up with the goings-on of your cousin's bakery or your friend's baby nowadays, but you'll have to sift through fake news, disinformation campaigns, cyberbullying, and every other foul thing that has bubbled up during the Web 2.0 era.

What sort of risks and pitfalls does it include?

Let's be clear about something; we're talking about a proposed revamp of literally the entire internet here. The single thing that has, arguably, had the most impact on humanity over the past several decades would be getting completely redesigned if Web3's enthusiasts have their way. As with anything as staggeringly complex as this proposal, the potential pitfalls one could dream up spiral beyond comprehension almost immediately. That said, it's still important to examine a few of the most likely issues that could arise from a transition to Web3.

Regulation

The current internet is, for good or ill, regulated in various ways in various jurisdictions. Arguments over how good a job the various regulatory bodies are doing aside, they generally exist to protect the web's users from constantly being subjected to things like hacking, fraud, theft, harassment, the dissemination of child abuse imagery, unfair business practices, and other cybercrimes. Some believe the individualization of all web users provided by Web3's ideals could balloon all of these malicious activities and spawn entirely new ones. The reason for this fear is the utterly anonymous nature of Web3's underlying infrastructure. Just as cryptocurrency has been used to support criminal activity by providing an anonymized method of payment that's beholden to no government or bank, so Web3's tokenized system could also help criminals remain untraceable by any governmental or law enforcement authorities.

Of course, as with any tool, it's all about the people that use it. Citizens living under repressive regimes could benefit greatly from the type of anonymity that could also enable any of the aforementioned crimes. The question here, as with so many other human endeavors, is do the potential benefits outweigh the potential costs?

Environmental impact

One of the biggest complaints about cryptocurrency and blockchain technology has been its impact on the environment. While the connection might not be immediately clear, the reason for the potentially massive environmental impact of these two technologies is their reliance on 'mining'.

Without going into a level of detail that would require a second explainer of its own, cryptocurrency and blockchains generally rely on massive banks of processors -- mostly off-the-shelf video cards -- to handle the technological workloads that enable their decentralized operation. These power-hungry devices have caused such a stir that countries like Sweden are looking at outlawing large-scale mining operations, while others, like El Salvador, are seeking power sources as unconventional as volcanos to encourage mining operations without them becoming a huge drain on their local grids.

SEE: Cryptocurrency leaders see exponential growth; banks embrace crypto as an asset class

Keep in mind, this level of impact is already being caused by just the relatively miniscule portion of online transactions represented by blockchain-based technologies such as cryptocurrency and non-fungible tokens (NFTs). In order to power the tokenization of the entire internet, it's possible that existing mining operations would need to be expanded exponentially, exploding the carbon footprint represented by blockchain operations.

Alternatives could be found, however. Ethereum, for instance, is attempting to move away from mining entirely, transitioning to a new system that would use the cryptographic nature of existing coins to verify future transactions. However, this will drastically limit the production of new ether coins, and might not be directly applicable to the requirements of Web3 as it's essentially being created from scratch. In short, it will have no in-place cryptographic ledger to draw from. If an alternative method of handling tokenization can't be found, it's entirely possible that the internet would end up being just as much of an environmental villain as things like big oil and factory farming. 

Security

This might seem like a strange worry. After all, if Web3 is so intrinsically related to cryptographic tokens, shouldn't the general security situation be improved? Indeed, some proponents think it will be. However, it's extremely important to remember that, ultimately, all online security relies on one very fallible factor: human beings

The retention of the keys to the tokens that would power Web3 will be, by design, in the hands of each user. Should one of those users be suckered in by a phishing scam, or bamboozled by a malicious mobile app, they could potentially expose themselves to identity theft and fraud just as easily as they can today. If they hand over one of those cryptographic keys, it would be no different -- and possibly even worse -- than if they divulged a credit card or social security number. 

Of course, new methods of verification and authorization could be devised to combat scenarios like this. But, you have to wonder if there's any real benefit in taking the hackers vs citizens arms race down this path if it just means growing the relative complexity for both sides, without offering any real benefit to the average netizen who's just out there trying to buy their grandpa a mug. 

Innovation

On the surface, decentralization may seem like it could jumpstart innovation. After all, instead of just a few minds at a handful of companies working on a given platform, millions of minds could be bent toward the same problem, all developing their own solutions and paths forward. But, anyone who has ever been forced to work on a team project during their school years should be able to see how quickly this kind of collaborative planning can go spectacularly wrong when just a few more people are involved. Now, imagine that number expanded by six or seven figures.

A recent piece on Web3 was published by Moxie Marlinspike -- creator and, until recently, CEO of the Signal messaging app -- on his Moxie.org blog. It may provide the best comparison of the chilling effect that decentralization can have on technological standardization and, subsequently, progress. The author, who should know a thing or two about digital messaging, compares email, a platform that was originally designed to function as a decentralized tool run by each and every user, to the much more modern messaging platform WhatsApp. He notes that "After 30+ years, email is still unencrypted; meanwhile WhatsApp went from unencrypted to full e2ee in a year."

SEE: Innovation is hard. Here are five ways to make it easier

A similar comparison between the lingering lack of ability to share video via a standardized format over the venerable IRC chat protocol versus Slack's rapidly developed ability to let users easily and quickly create customized, standardized emoji highlights a nearly-identical form of paralysis brought on by the seeming inability of decentralized platforms to just settle on something and move forward with it.

In short, all these examples speak to the classic problem of there being too many cooks in the kitchen. Certainly Web3 would open things up to new voices with ideas that could revolutionize the internet as we know it. But, if those voices are just a few in a sea of millions, if not billions, of individuals...how could we ever filter out the noise to hear them and make their ideas work for the whole? As Moxie puts it: "If something is truly decentralized, it becomes very difficult to change, and often remains stuck in time. That is a problem for technology, because the rest of the ecosystem is moving very quickly, and if you don't keep up you will fail." 

Why is Web3 so controversial?

In addition to the potential environmental impact and other issues we've already discussed, there is also a very vocal group of people that see Web3 as nothing more than the internet trading one set of overlords for another. 

The most high-profile example of this, so far, was Jack Dorsey's Twitter tirade in which he outlined his belief that Web3 is nothing more than a way for venture capitalists to replace the likes of Google and Facebook as the autocrats of the web. 

Dorsey remains a massive proponent of the potential of blockchain technology -- as evidenced by his recent decision to rename his Square mobile payment company "Block", to represent its commitment to blockchain tech. However, he also believes that the still-nebulous idea of Web3 is being primarily driven by venture capital firms and the army of lobbyists they are currently fielding to soften regulators up to the ideas behind their specific vision of Web3. 

If Dorsey's stance could be summed up in a single tweet, it would probably be the one he dropped on December 20, 2021

"You don't own 'web3.' 

 The VCs and their LPs do. It will never escape their incentives. It's ultimately a centralized entity with a different label. 

 Know what you're getting into…"  

How does the general public actually feel about Web3?

The vast majority of the general populace is, very likely, completely unaware of even the concept of Web3. However, the reactions of the portions that have run up against its proposed existence have been…less than positive. 

The best divining rod, to this point, has been the veritable onslaught of companies attempting to get their fingers into NFTs. While the level of tokenization that would power Web3 remains largely a pipe dream today, NFTs represent a very similar, very extant form of token that is already in wide scale use. And, well, most people seem to kind of hate them

Why do they engender such vitriol? The reasons vary from person to person, but the biggest tends to be most critics finding their basic concept idiotic. To these people, NFTs are the digital equivalent of a banana duct-taped to a wall: something literally anyone can own at little or no cost, while you pay for the idea of its ownership. 

Actually, they might be even worse. Someone only spent $120,000 on the aforementioned banana – before it was subsequently eaten. But, someone spent many, many times that -- $3.4 million, specifically -- on one of the now-infamous Bored Ape images that have come to be a sort of face of NFTs as a whole. Meanwhile, if you give me three seconds I'd be happy to right click on any of the millions of copies of that same image and save it for you. I'll only charge you a few thousands bucks! 

Sarcasm aside, the rise of NFTs has created a perfect storm that combines a lack of understanding over what the point of them is with a tireless level of profiteering by many. The truth seems to be that most of these companies don't themselves understand why you'd pay for their NFT launches, but if you're willing to shell out for them, they'll keep selling them. 

Of course, not everyone is willing. Of the many public revolts over NFTs, two of the most high-profile have come from the gaming community, specifically from Discord and Square Enix. For Discord, its very brief trip into Web3 territory involved its CEO Jason Citron tweeting out a screenshot suggesting that his company might soon bring Web3 technologies into its platform. The reaction was a large enough exodus of paid users that Citron took to Twitter once again to promise that Discord had no plans to launch Web3 tech just two days later.

SEE: Discord pauses move into crypto and NFTs after users cancel subscriptions

Meanwhile, Square Enix appears to be taking the opposite approach, acknowledging the distaste a large portion of its user base has for NFTs, but reiterating plans to move ahead with them anyway. 

Still, it seems that many of the companies that stand to profit from the proliferation of NFTs have yet to land upon a truly compelling reason to explain to most people why these things need to exist in the first place, let alone cost millions of dollars. 

How likely is Web3 to happen – and, if so, when?

This is a hard one to nail down, and depends entirely on what your definition of the still-nebulous concept of Web3 looks like. If you're asking whether there will be a third major iteration of the internet, the answer is absolutely. That is, of course, assuming that you ascribe to the belief that the history of the web can be divided into such monolithic parts. Many believe its evolution has been far more nuanced than anything that can be described by simple version numbers. 

The question is, what will this third-wave internet look like? Venture capital firms like Andreesen Horowitz would have you believe it will be a globally diverse collective of individuals, with all of them coming together in  a new form of cyberspace that allows each and every user to be their own Sergey Brin, Mark Zuckerberg or Jeff Bezos. On this idyllic web, you'll control your own data, profit from the sale of all of your information, and remain secure behind the numerous tokenization schemes.

Is everything likely to progress exactly like this? No, not at all. There are massive regulatory hurdles, technological limitations, and simple logistical obstacles to be overcome before anything even remotely resembling the blockchain-based Web3 they envision can come to be. 

Even if we were to somehow come up with a way that Web3's required tech could be made to work quickly, without devastating the progress we've made in reducing carbon emissions, and in a way that could benefit everyone, there's still another sticking point: the internet's current supposed overlords aren't going to be happy with the idea of losing control. 

Facebook, Google, Twitter, Verizon, Comcast, AT&T, and a massive list of other stakeholders are all too willing to go to the mat for their bottom lines; a simple glance at the war over net neutrality should evince that. Imagine, instead, if it wasn't just a single regulatory factor at play, but the basic, fundamental structure of the entire internet ecosystem. You wouldn't be able to take three strides around the US capitol without stepping on a lobbyist if these internet giants caught even a whiff of losing their respective kingdoms entirely. 

Nonetheless, the internet will continue to evolve, over the years and decades. And that is the timeframe we're looking at here. Web 2.0 has been around, by most accounts, for the better part of 20 years now. You'd be hard pressed to find many direct resemblances between the internet most of us use today and the one we used in the early 2000s. Yet, we're still technically in the same era. A true sea change that warrants rolling the version over to a "3" might come eventually, but it won't be fast, and it most likely won't even resemble what anyone is envisioning right now. 

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