Is web3 the future of the internet? Exploring the possibilities
The internet is poised for a major evolution. As web3 gains momentum, people are imagining a potential next phase of the internet built on blockchain technology and decentralized networks. But is web3 truly the inevitable future, or just overhyped speculation? Let’s explore the possibilities.
Introduction
It’s January 2024, and web3 is on everyone’s lips. The past year saw an explosion of interest and investment in this proposed next iteration of the internet. But what exactly is web3? Is it a true technological revolution or a passing fad?
In this article, we’ll examine what web3 represents, weigh up the potential benefits and challenges, and consider whether web3 could genuinely become the standard for how we interact online in the future.
While uncertainties remain, understanding the web3 landscape is crucial for technologists, businesses, and anyone invested in the internet’s evolution. The decisions made today around blockchain adoption could profoundly impact the web’s structure for decades to come.
Let’s dive in and unpack the key opportunities and obstacles facing a potential web3 future.
Defining web3: The basics
Before speculating on web3’s future, we need clarity on what it is.
The core premise of web3 is decentralization. Rather than accessing apps and services running on centralized servers owned by large tech firms, users would primarily interact with decentralized apps and organizations built on blockchains.
Blockchain is a distributed ledger technology that has several key features:
- Data is decentralized across many computers on a peer-to-peer network, avoiding central points of control.
- Cryptography and computational consensus ensure security and data integrity without third-party intermediaries.
- Transactions occur transparently and permanently on an immutable ledger.
By incorporating decentralized and trustless blockchain architectures, web3 proposes a model where no single entity or platform owner mediates online activity.
Web3 suggests a shift in online power and incentives, back towards users. Users could control their own data, digital assets, and identity. The financial upside generated by user activities and contributions could flow back to participants, rather than accruing mainly to centralized platforms and advertisers.
Key components of web3
While still embryonic, several important components are emerging in the evolving web3 landscape:
Decentralized apps (dApps)
- Apps built on blockchains, removing centralized intermediaries and giving users more control.
Decentralized autonomous organizations (DAOs)
- Member-owned collectives with governance handled transparently via blockchain and smart contracts.
Cryptocurrencies and tokens
- Enable new blockchain-based economic models and incentivization mechanisms.
Non-fungible tokens (NFTs)
- Allow unique digital ownership and scarcity for assets like art, collectibles, avatars.
Metaverse environments
- Persistent 3D virtual worlds interconnecting could adopt web3 cryptographic standards.
Artificial intelligence (AI)
- Could automate processes and enable machine-driven interactions across web3.
This mix of technologies offers radical new possibilities for how both businesses and regular internet users might operate in future.
The evolution of web ideals
Before evaluating web3 specifically, it helps to understand the shifting aspirations that have guided the internet’s progression.
Web 1.0 – Open information
The early web centered around accessing information. Text and images could be instantly viewed by anyone across the world. It was a major leap forward in openness and access to knowledge.
However, publishing required technical expertise, and websites were largely static.
Web 2.0 – Participation and connectedness
Web 2.0 brought in user-generated content, interaction, and collaboration. Blogs, social media, wikis, and comments transformed people from passive consumers into active creators and participants.
But this participation largely occurred within walled gardens like Facebook and Twitter. critics argue a few tech giants now dominate the landscape and control user data.
Web3 – Decentralization and incentives
Web3 aims to combine openness and participation with decentralization. Backers believe blockchains and tokens create opportunities for more democratic control, ownership, and value distribution online.
The ideals behind each web transition reflect their creators’ hopes. But high-minded ambitions often clash with commercial realities. Have the dominant platforms over-consolidated power and profits? Let’s analyze the case for web3 as a solution.
The case for web3 – Benefits and motivations
For supporters, web3 offers a path to reset the internet’s balance of power and create a more open, permissionless, user-driven ecosystem. What might a web3 future fix or improve?
1. Reduced dominance of tech gatekeepers
A key promise of web3 is dispersing control away from the tech giants who dominate web 2.0.
Today, meta platforms like Facebook and Google not only influence online information flows but are now designing both hardware and virtual worlds. Some see this as dangerous overreach.
Web3 aims to wrest back control through decentralized protocols, consensus mechanisms, and other more democratic structures. DAOs exemplify decentralized governance controlled by users.
However, skeptics argue the grip of big tech can’t easily be loosened. Network effects and resources still afford them great influence. Unfettered decentralization could also lead to its own problems.
2. User control of personal data and digital identity
Under web2, personal data is largely in platform owners’ hands. Web3’s decentralized approach aspires to give users more ownership over their data, digital assets, and identity.
Blockchains provide new data storage and verification methods beyond centralized silos. Through cryptographic keys and wallets, users control access to their information.
Self-sovereign digital identity could be transformative. Imagine seamlessly proving who you are online without usernames or passwords.
3. Censorship resistance and resilience
Blockchains have no central point of control. Their decentralized structure theoretically makes them harder to censor or shut down.
To web3 advocates, this safeguards free speech and avoids overreach by governments or platforms. Content moderation would fall to users and DAOs rather than executives.
However, total censorship resistance is questionable. Major web3 onramps and networks remain vulnerable, as blockchain analysis can still identify users.
4. New creator and gig economy incentives
Web2’s ad model incentivizes tracking user attention and data collection. Web3 claims to offer superior incentives by tokenizing online participation.
Creators can tokenize their content, output, and community roles. Ownership rights and scarcity allow new revenue streams. Similar dynamics apply for online work and gig platforms.
However, some see current NFT and crypto models as speculative hype, unlikely to benefit small players long-term. Large intermediaries could still capture much of the value.
5. User and community ownership
DAOs allow decentralized crowdfunding and management of online projects, where users collectively own and govern the platforms they contribute to.
This helps align incentives around delivering value to communities, rather than serving outside shareholders. It’s an alternative to the typical web2 startup path.
But can decentralized structures truly cope with complex decision-making at scale? Factions and gridlock could hinder progress.
6. Interoperable ecosystems
Walled gardens currently inhibit the flow of users and data between platforms. Web3 envisions greater interconnectivity.
Shared standards like cryptocurrency wallets and NFTs create portability. Transactions flow freely rather than stopping at the boundaries of silos.
However, for full interoperability between dApps, significant technical challenges remain around scalability and communication between blockchains.
7. New business models
Web3 opens up innovative monetization models using crypto transactions, decentralized marketplaces, tokenized incentives and assets.
Efforts like play-to-earn gaming, decentralized cloud storage, and fractionalized ownership illustrate what’s possible.
But web3 business models remain largely untested. Their long-term sustainability is unclear, as regulatory treatments evolve.
8. More transparent and trustworthy interactions
By making interactions and transactions traceable on public blockchains, web3 boosts transparency and accountability. Code drives outcomes.
Trust shifts from fallible intermediaries to decentralized network effects and cryptography. However, faith in flawless code may also be misplaced.
9. Global participation on more equal terms
Web3 fans highlight its potential to reduce barriers to online participation faced by disadvantaged demographic groups and developing nations.
Requirements such as formal identification, bank accounts, and platform approval could be superseded by permissionless blockchain ecosystem access.
However, those lacking digital literacy and crypto assets could remain marginalized. Web3’s ultimate accessibility for underserved groups is uncertain.
Challenges confronting a web3 future
Web3 proposes provocative solutions to contemporary digital ills. But transforming vision into reality would entail confronting hard trade-offs and obstacles.
1. Technological limitations
To reach web-scale as the default internet infrastructure, web3 stack must overcome issues like:
- Scalability – Most blockchains still support only a fraction of web2’s transactions per second. Significant upgrades are essential.
- User experience – Smooth onboarding to decentralized apps remains clumsy for average users. Interface and wallet management advances are needed.
- Speed and cost – Blockchain interactions are still slower and pricier than centralized incumbents. Improving transaction throughput and reducing gas fees are priorities.
- Interoperability – Seamless cross-chain connections and data transfer remain elusive, inhibiting unified web3 ecosystems.
- Security – Hacks and vulnerabilities in smart contracts and protocols present obstacles to mainstream trust and adoption.
- Overcoming these technical obstacles is critical for web3 to become intuitive and accessible at scale.
2. Developer and workforce skills
- Web3 requires software developers to reskill into freshly complex areas like cryptography, consensus algorithms, wallets, and decentralized data models.
- For web3 to flourish, enough talented developers must pursue blockchain specialization. Educational institutions are responding via bootcamps and courses, but demand exceeds supply.
- Beyond coding, entire workforces will need upskilling as web3 reshapes business models, product features, operations, and customer experiences. Proactive training is essential.
3. Unclear legal and compliance treatments
- Applying existing laws and regulations to web3’s decentralized architecture is complex. Uncertainties around issues like data privacy, identity proofing, and cross-border operations abound.
- Until more jurisdictional clarity emerges, business risk appetites could be curtailed. Stricter regimes may also hinder permissionless innovation.
- But equally, totally unregulated web3 activity poses dangers. Fair balances are required to protect consumers without stifling progress.
4. Cybersecurity and fraud risks
- While web3 aspires to be trustless, its decentralized nature also expands the attack surface for cybercriminals. Users must be vigilant regarding:
- Malware infections
- Phishing attempts
- Scams and rug pulls
- Smart contract exploits
- Stolen keys/wallets
- Ongoing security education and protective innovations like decentralized identity will be needed to manage risks.
5. Exclusive rather than inclusive culture
- Some paint web3 as replacing today’s gatekeepers with new insider cliques and gatekeepers. Access to capital, knowledge, and networks may cluster power anew.
- If web3’s culture and assets remain dominated by crypto-savvy individuals, its potential will be stunted. Mainstream uptake is crucial.
- Maintaining ethical, inclusive norms will determine whether web3 avoids replicating existing inequalities or progresses society holistically.
6. Unproven sustainability
- Concerns exist around the climate impacts of crypto-mining and blockchain’s intensive computational overhead. As web3 expands, can environmental harm be avoided?
- Innovations like proof-of-stake consensus and renewable energy usage could mitigate downsides. But sustainability should remain front and center, not an afterthought.
7. Limits to decentralization
- Total decentralization may be impossible. As Balaji Srinivasan has explored, elements of coordination and influence seem inevitable, even in decentralized systems.
- Certain web3 architectures might only create “distributed oligopolies” where power consolidates across a handful of dominant entities, rather than single hegemons.
- Viable decentralization for web3 will entail carefully calibrating the levels across different functions and network layers.
8. Difficulties collecting tax revenue
- Web3’s anonymity and pseudonymity could enable tax evasion, threatening public revenues. However, transparent blockchains also aid monitoring illicit flows.
- Thoughtful policy is required to collect tax fairly without negating the benefits of web3 activity. It may require new fiscal models.
9. Public misunderstandings
- Many struggle to comprehend blockchain principles and web3 concepts. Lack of knowledge leads some to underestimate or dismiss web3 prematurely.
- Mainstream web3 clarity and simplicity will be key to counter skepticism. People must grasp benefits before voluntarily adopting a new paradigm.
The road to widespread web3 adoption
- Transitioning from vision to broad reality is web3’s biggest challenge. How might web3 advocates spur adoption?
1. Killer apps to demonstrate clear benefits
- What will be web3’s search engine, email, or mobile app moment? Applications exhibiting unambiguous utility have the best chance to garner mainstream use.
- Highlighting successful web3 adaptations of familiar activities like messaging or socializing will accelerate comprehension.
2. Seamless user experiences
- Minimizing blockchain complexities is paramount. Accessing web3 should be as intuitive as web2 apps today, with streamlined onboarding.
- Design friction and knowledge gaps must be eliminated to avoid excluding the less tech-savvy. Usability should be a core focus.
3. Measured regulatory evolution
- Carefully evolving laws and policies to sensibly govern web3 activities will provide the legal clarity institutions need.
- Regulators must balance openness to innovation against managing foreseeable risks. Consultation with technologists will be key.
4. Improved scalability and cost-efficiency
- Upgrades enabling faster, cheaper transactions will remove practical stumbling blocks to usage. Potential solutions include layer-2 networks, sharding, and proof-of-stake consensus innovations.
- With expanded capacity, web3 can hope to match the convenience of today’s user experiences.
5. Participation incentives via micropayments
- Models enabling small crypto payments for participation and contribution could drive engagement.
- Users must feel web3 provides value for time spent, via activities like commenting, sharing data, reviewing businesses, etc.
6. Ethical technology leadership
- Web3 coders and builders should emphasize fairness and transparency. Eliminating elements like crypto scams will boost perceptions.
- Developers are powerful in steering web3’s emergence. They should self-regulate with integrity rather than exploit loopholes.
7. Private key and identity management advances
- Secure yet straightforward identity verification and credential management will allay fears and friction around managing crypto keys/wallets.
- Biometrics and encrypted recovery options could make web3 responsibility intuitive. Users shouldn’t feel locked out of their assets.
8. Community governance resourcing
- Effective decentralized governance needs tools. DAOs will require well-designed coordination platforms to manage complex decisions at scale.
9. Sustainability and social responsibility
- Web3 must be energized by clean energy and high ideals. Applications should solve real problems, not just chase speculation.
- If web3 avoids skewing towards greed and living responsibly within planetary boundaries, its prospects brighten. Ethics matter.
Is web3 inevitable or likely? Industry opinions
Given the hurdles facing web3, some experts doubt large portions of the internet will ever decentralize. Others see it as almost inevitable. Let’s sample some perspectives.
“The world is never going to be fully decentralized because it doesn’t really make sense for everything to be decentralized. But a lot of things can be decentralized.”
Vitalik Buterin, Ethereum co-founder
“You don’t own “web3.” …It will never escape their incentives. It’s ultimately a centralized entity with a different label. … But I do think we will see a paradigm shift over the next decade. The next chapter of the internet will be defined by “decentralization” not “Web3” more important that we focus our energy on truly empowering more people.”
Jack Dorsey, Block CEO
“Is web3 a real thing or is it basically just a Ponzi scheme that’s going to end up hurting a lot of retail investors? We don’t know yet for sure. What we do know is there’s a lot of money and a lot of power that wants it to become a real thing. When you have that much money trying to will something into existence, often it can actually happen.”
Anonymous web3 developer
“Web3 doesn’t exist. It’s a vision…But where it’s going is a complete open economy. The closest analogy is a decentralized Amazon Web Services.”
Yat Siu, Animoca Brands co-founder
“Web3 represents a confluence, combining peer-to-peer connectivity and cryptography to decentralize power of all sorts…I think it’s happening no matter what.”
Joe Lubin, Ethereum and ConsenSys founder
“I don’t think web3 is going anywhere anytime soon. There’s too much money and power behind people who have an interest in pushing this. That means they’re going to develop web3 whether users want it or not.”
Molly White, web3 critic:
The path ahead
At this stage, it appears aspects of web3 acting as a successor to web2 are probable, but not guaranteed. Much depends on the purpose its applied for.
Certain functions like decentralized finance and creator economies seem primed for blockchain adoption. But large swaths of consumer internet activity may never warrant distributed architectures.
And let’s not forget web2’s giants have deep resources to defend their turf and co-opt elements of web3 if advantageous. Their command of today’s data and platforms confer influence.
Rather than a wholesale transition, hybridity seems the most likely path. Blockchain infiltrating existing operations in targeted ways, but not becoming the entirety of the internet’s base layer.
The ideal course could be allowing web3 and web2 models to coexist, playing to their relative strengths. As A16z partner Chris Dixon notes:
“The internet revolutionized many industries, but left some broken. Finance was one of them. Web3 has the potential to fix that.”
This indicates web3 may be most imminent in areas where centralization has most acutely caused problems, like Big Tech dominance and economic exclusion.
Other web functions currently performing adequately on web2 rails may only selectively integrate blockchain innovations. For instance, social networks adding crypto payment features, without wholly decentralizing.
Ultimately, web3 represents a path to re-architecting large swathes of digital life, not an overnight upheaval. Hype aside, its principles offer opportunities worth exploring to spur technology towards ethical ends, counter abuses, and expand possibilities.
Progress will demand inclusivity, enhanced user experiences, and sustainable economics. With wise shepherding, web3 could write an exciting new chapter in humanity’s online evolution. But nothing is predetermined. The choices made today set the stage.
The only certainty is that work remains to translate the vision into reality. But by bridging gaps and avoiding pitfalls, web3 hopes stand to brightly burn. The destination remains unclear, but the voyage has just begun.