Coinbase has recently introduced a new service called “Wallet as a Service” that aims to simplify the adoption of cryptocurrencies for businesses.
It seems like everyone is talking about Web3 these days.
But what does it mean? What makes it different from the Internet we know? And why should we care?
Today we’ll break down what Web3 is, how it might change the Internet, and where it’s headed.
The Internet in 1, 2, 3
As the name suggests, Web3 is the third evolution of the Internet.
Web 1.0 represents the early days of the Internet, with static pages that were identical for every user. Wikipedia is a simple example. You can read content and click to other pages, but that’s about it.
Web 2.0 started around 2004 and represents most sites today. The shift from Web 1.0 moved from read-only pages to giving users the ability to create and share their own content. Facebook, YouTube, and blogs are examples of Web 2.0.
Web3 is a new term, and only a few sites have implemented its ideas. But with Web3, you own the content you create, cutting out middlemen like YouTube or Facebook. And large companies won’t own your data.
At its heart, Web3 is based on three core ideas: decentralization, trust, and ownership.
Decentralization: Power to the people
Decentralization is the biggest selling point of Web3.
In many ways, this principle echoes the original promises of the Internet. In the early 1990s, most websites were owned by individuals or small companies. They’d need to host it themselves on their own computers, but it couldn’t be taken down or blocked.
But with the advent of Web 2.0, bigger companies started owning more and more of the Internet. Those companies include conglomerates like Alphabet (Google), Meta (Facebook), Apple, Amazon, Netflix, and Microsoft. Today, those six companies account for more than half of all Internet traffic. More importantly, users don’t own their data. These brands do.
Web3 is a return to the original idea of a free Internet, run by everyday people instead of a few big corporations. A technology called blockchain links together thousands or even millions of computers. Without a single person in charge, Web3 works to make the Internet a democracy once again.
Trust: Moving beyond passwords
On its face, the blockchain might sound dangerous. You trust your bank to keep your account safe. But if your money is stored across millions of computers, what’s to prevent someone from claiming it belongs to them?
This is the second core principle of Web3: trust. Blockchain technology has built-in systems for robust, trustworthy security. For example, there is no backdoor on the blockchain. A bank employee with admin access could log into your account without knowing your password, but that’s impossible on the blockchain.
Another security feature is that each block of data links to all previous data, creating an ongoing chain (hence the name). So if someone wanted to claim they owned your account, they’d need to hack every record ever created—an impossible task. And they’d need to do it across 51% of all machines on the blockchain ecosystem, spread around the world, all at the same moment.
It’s easy to see why blockchain can be far more secure than a single bank server. And security on the blockchain does this while protecting your identity. Your bank needs to know who you are in the real world, but Web3 can keep your accounts completely secure without knowing more than your anonymous digital identity.
Ownership: Yours, mine, and ours
The trust built into Web3 technologies makes it easy to define ownership like never before on the Internet.
Computers created a world where copies are free and indistinguishable from the original, and Web 2.0 made ownership online almost a misnomer. Despite company’s best efforts, digital piracy and copyright infringement have flourished.
But Web3 technologies bring a new solution—certificates of authenticiy that live on the blockchain. This means secure, decentralized proof of ownership that doesn’t rely on a country’s copyright laws, called non-fungible tokens, or NFTs.
But it’s not just digital assets. One of the greatest ironies of digital ownership is that personal data suddenly became valuable, yet it doesn’t belong to us. Web3 may create a world where we do own our identity online. We can protect it, share it, or even sell it—on our own terms.
And finally, Web3’s decentralized frameworks mean the individual users own the network itself. Rather than just being users, Web3 offers a world where everyone is also a shareholder that receives benefits from participating and has a say in how the platform operates.
Weak links in the blockchain
While these technologies are promising, Web3 still has a few challenges to overcome.
High-profile critics like Elon Musk and Twitter founder Jack Dorsey are quick to point out that Web3 ideas are just that—ideas. There aren’t many examples of Web3 working in the real world, and it’s hard to predict how this new infrastructure will appeal to the average Internet user.
Also, current blockchain technology doesn’t scale well enough to immediately replace the systems we use now, like digital payment systems or the Internet. There’s a lot of work that needs to happen before Web3 goes mainstream.
There’s also an environmental concern. Bitcoin’s blockchain system alone uses seven times more electricity every year than all of Google’s global operations.
Another issue is that organizations own most of today’s blockchain systems. It’s hard to call a technology decentralized when a small group decides how it operates, even if it runs on computers around the world.
And finally, Web3 technologies are new and largely unregulated. But since anonymous, decentralized systems are perfect tools for criminals, it’s likely governments will limit them or require identity verification, meaning average law-abiding Internet users won’t enjoy true Web3 anonymity.
The future of Web3
In the 1990s, some saw the Internet as a revolutionary technology, while others dismissed it as a quick fad. Only decades later have we been able to see its true potential.
The same may be true of Web3. It’s mostly a philosophy at this point, and no one can predict what it will look like in the coming years.
It’s also guaranteed to change and adapt to new technologies, just as Web 2.0 both influenced and was influenced by the mobile revolution. Web3’s growth will be closely related to today’s burgeoning innovations like the metaverse, artificial intelligence, and augmented reality.
But there’s one undeniable fact: Web3 has become the latest fascination of the tech world. New companies are exploring ways to leverage its power, with the help of over $88 billion in venture capital. Even old-school industry leader are experimenting with Web3 principles.
And wherever Web3 takes us, we’re ready.