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The Internet’s Next Leap: Diving into Web3 and Decentralization

10 Mins

June 28, 2024

If you’re passionate about digital currencies and NFTs, you’ve undoubtedly heard of “Web3” (or Web 3.0). This term represents the next evolution of the web, where blockchain technology takes center stage.

Unfortunately, you’ve probably also witnessed the term being overused and stripped of its meaning. Even Elon Musk has called it a marketing buzzword, and Jack Dorsey has dismissed it as a gimmick pushed by venture capitalists.

Yet, when used correctly, Web3 is a term rich with substance. Often misattributed to Polkadot founder and Ethereum co-founder Gavin Wood, it’s actually WIRED’s Gilad Edelman who aptly described it in a 2021 interview with Wood as “a decentralized online ecosystem based on the blockchain.”

That’s a precise definition, far from the vague tech jargon you might find in many company whitepapers (yes, I’m talking about you, “digital transformation”).

Web3 is not just a concept but a blueprint for a new digital era. But what does it really entail? And how does it stand apart from its predecessors?

What is Web3?

Web3, also known as Web 3.0, is the next generation of the internet, utilizing blockchain technology and digital currency tokens to create a decentralized web. Unlike today's centralized internet, Web3 operates on networks maintained by numerous individual users rather than large corporations.

The Web3 Foundation, established by Gavin Wood, defines Web3 as “a decentralized and fair internet where users control their own data, identity, and destiny.” Similarly, Investopedia describes it as the next iteration of the web “built upon the core concepts of decentralization, openness, and greater user utility.” Common themes include decentralization through blockchain and enhanced user control.

A picture of Polkadot founder and Ethereum co-founder Gavin Wood.
"Web3" was coined by Gavin Wood, the mastermind behind Polkadot and Ethereum co-founder.
(Image Source - forkast)

Web3 goes beyond introducing new features; it enhances them far beyond what we've known. To understand Web3, it's helpful to look at its predecessors, Web 1.0 and Web 2.0.

Chris Dixon, a tech entrepreneur and Web3 advocate, explained this well on the Tim Ferris podcast. Web 1.0 was the "read-only" web, where static pages provided information with little interaction. Web 2.0 brought the "read-write" web, enabling social media and user-generated content but leading to centralized control.

Now, Web3 is emerging as the "read-write-own" web. It empowers users to have more control over their digital lives, owning their data, assets, and online identities. Web3 is about creating a fairer, user-focused internet.

As we move into the era of Web3, we're not just advancing technology. We're embracing a future with more control, freedom, and an internet that truly belongs to us.

Web 1.0 (1990 - 2005)

Invented by Sir Tim Berners-Lee, Web 1.0 marked the dawn of the World Wide Web that captivated us in the mid-90s. According to Chris Dixon, it was the "killer app" built on the pre-existing internet. Web 1.0 was characterized by its read-only content, where users consumed information rather than creating it.

A screenshot of the early eBay site.
Launched in 1995, eBay stands as a shining example of Web 1.0 success.
(Image Source - Link)

While this era, which Dixon describes as a "golden age" of innovation, laid the groundwork for the internet, the products of that time were quite limited in scope.

Web 2.0 (2005 - Present)

With the advent of Web 2.0, social media platforms like Facebook (launched in 2004) and Twitter (in 2006) began to dominate. Content creation shifted to users, leading to the rise of collaborative websites like wikis. This participative web allowed users to both consume and create content. Despite its user-centric facade, Web 2.0 became highly centralized, controlled by a handful of tech giants. As Dixon notes, “Five-plus companies kind of control the internet.” Emily Taylor of Slate encapsulates this by saying, "Omnes cives Googlani sumus" – "We are all Google citizens now."

Web3 (Present - ???)

Dixon defines Web3 as “an internet owned by users and builders, orchestrated with tokens.”

Let's break it down: Web3 products are developed from the bottom-up, empowering users and builders rather than being controlled by centralized entities. While platforms resembling Facebook or Twitter can exist in Web3, they are not owned by traditional companies. Instead, the value and control lie with the users.

A screenshot of a Chris Dixon tweet comparing web1, web2, and web3.
According to Dixon, Web3 empowers users not only to consume and create content but, most importantly, to own it.
(Image Source - X)

A prime example of this decentralized model is the DAO—Decentralized Autonomous Organization. DAOs are networks where members can make decisions and vote without ever meeting or revealing their identities. They provide a glimpse into the future of Web3.

What fundamentally changes in Web3 is the distribution of value and ownership through tokens. Unlike Web 2.0, where companies profit from user-generated content, Web3 directly rewards creators. Tokens are the key to this shift, giving users control.

In DAOs, governance tokens and smart contracts enable member participation. Governance tokens allow holders to vote on decisions, with voting power proportional to tokens held. Smart contracts are self-executing codes that facilitate trustless transactions, ensuring rules are followed and votes are counted accurately.

Web3 is not just a technological upgrade; it's a paradigm shift towards a more equitable and user-focused internet. As we transition into this new era, we embrace a web where users truly own their digital experiences.

Tokens: Web3’s Driving Force

If the World Wide Web was the game-changer that transformed the internet, then blockchain tokens are the revolutionary force behind Web3. Dr. Shermin Voshmgir, Director of the Cryptoeconomic Research Lab at the Vienna University of Economics and Business, champions this view.

“We're just at the beginning,” Voshmgir shared in a lecture at the Token Engineering Global Gathering. Despite the trillions of dollars in market capitalization for digital assets, Voshmgir compares the current state of blockchain tokens to the early days of Web 1.0, when people were just beginning to experiment with hypertext. “People knew how to create websites but they didn't know what to put on them,” she said. “So they said ‘Hello world’.”

An image of many digital currency logos, including Bitcoin and Ethereum.
Cryptocurrencies are merely one of the many potential applications of blockchain tokens.

Similarly, we’re still uncovering the true potential of blockchain tokens, which Voshmgir calls “rights management tools.” While cryptocurrencies are popular and fungible, non-fungible tokens (NFTs) have recently gained attention. “We're still in the very early stages of creating tokens and figuring out what we can do with them,” Voshmgir noted.

Tokens are crucial for Web3 because they fundamentally reshape social and economic dynamics by creating new incentives. Voshmgir describes tokens as tools that can “steer” human coordination.

One significant way they do this is through value creation. Currently, individual value creation often focuses on private goods, while public goods, like healthcare, are managed by

institutions funded by taxpayers. Tokens have the potential to bridge this gap by incentivizing individual actions towards collective goals. For instance, PlanetWatch, an initiative to combat global pollution, rewards users with tokens for monitoring local air quality.

The variety of blockchain tokens—such as DeFi coins, governance tokens, and more—is vast and complex, making it impossible to cover all permutations in a single article.

However, for understanding Web3, it’s enough to know that if blockchain is the infrastructure of the decentralized web’s next phase, then tokens are the vital force that coordinates and drives action.

Exploring the Future of Web3: Perspectives and Potential Pathways

Opinions on Web3 vary widely, sparking debates that mirror past technological shifts. Some dismiss it, echoing sentiments likened to early cloud computing skeptics facing an inevitable digital revolution. Others embrace Web3 fervently but grapple over its evolution—questions of blockchain’s centrality, the paradox of decentralization amid centralized blockchains, and the rise of dominant use cases like DAOs and DeFi.

Yet amidst these divergences lies the pulse of innovation—where programmers, developers, and entrepreneurs shape the contours of tomorrow. Their dialogues unveil the complexities and promise of Web3, painting a vivid landscape of technological advancement and societal change.

For those captivated by the future, these conversations are essential. They illuminate not just the technology itself, but the profound shifts it promises across industries and communities. In decoding Web3, look beyond the debates; seek the voices molding its reality—the architects of our digital tomorrow.

Web 3.0 FAQs (Frequently Asked Questions)

How is Web 3.0 different from Web 2.0 and Web 1.0?

In the evolving landscape of the internet, Web3 stands as a beacon of empowerment for users and creators alike. It’s a realm where ownership reigns supreme—where digital content isn’t just consumed but owned, where creators monetize their artistry, and where participation isn’t just welcomed, but financially rewarded.

Think of it this way: Web1.0 was like peering through a window, where interaction was minimal and passive. Web2.0 opened the door, inviting participation, but the rewards often stayed out of reach. Now, with Web3, that door swings wide open, offering a platform where ownership and creativity converge, empowering individuals to not only shape their digital presence but also reap the tangible rewards of their contributions.

It’s a paradigm shift where digital art isn’t just admired but becomes a valuable asset, where every interaction holds the potential for economic empowerment. In this new era of the internet, Web3 isn’t just a technology—it’s a promise of a more inclusive, creative, and economically vibrant digital world.

What are examples of Web 1.0 companies?

Some examples of Web 1.0 companies include:

- Apple

- Google

- Microsoft

- Amazon

- IBM

- eBay

What are examples of Web 2.0 companies?

Some examples of Web 2.0 companies include:

- Facebook (Meta)

- Twitter (X)

- YouTube

- Wikipedia

- Amazon

- Yelp!

What are examples of Web 3.0 companies?

Some examples of Web 3.0 companies include:

- TransFi

- Binance

- Chainalysis

- Coinbase

- OpenSea

- Ripple

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