Web 3.0: The Future of Internet is Decentralized
When you hear about web3, you’ll notice that cryptocurrency is often part of the conversation. This is because cryptocurrency plays a big role in many of these protocols. It provides a financial incentive (tokens) for anyone who wants to participate in creating, governing, contributing to, or improving one of the projects themselves.
These protocols may often offer a variety of different services like compute, storage, bandwidth, identity, hosting, and other web services commonly provided by cloud providers in the past.
People can make a living by participating in the protocol in various ways, in both technical and non-technical levels. In this, like in many forms of decentralization, you’ll see those unnecessary and often inefficient intermediaries are cut out.
Understanding The Evolution of the Web
The web has evolved a lot over the years, and its applications of it today are almost unrecognizable from its early days. The evolution of the web is often partitioned into three separate stages: Web 1.0, Web 2.0, and Web 3.0.
What is Web 1.0?
Web 1.0 was the first iteration of the web. Most participants were consumers of content, and the creators were typically developers who build websites that contained information served up mainly in text or image format. Web 1.0 lasted approximately from 1991 to 2004.
Web 2.0 Monetization and Security
In the web2 world, many popular apps are following a common pattern in their life cycles. Think of some of the apps that you use on a daily basis, and how the following examples might apply to them.
Monetization of Apps
Imagine the early days of popular applications like Instagram, Twitter, LinkedIn, or YouTube and how different they are today. The process usually goes something like this:
· Company launches an app
· It onboards as many users as possible
· Then it monetizes its user base
When a developer or company launches a popular app, the user experience is often very slick as the app continues rising in popularity. This is the reason they are able to gain traction quickly in the first place.
At first, many software companies do not worry about monetization. They strictly focus on growth and on locking in new users — but eventually, they have to start turning a profit.
Security and privacy
Web2 applications repeatedly experience data breaches. There are even websites dedicated to keeping up with these breaches and telling you when your data has been compromised.
In web2, you don’t have any control over your data or how it is stored. In fact, companies often track and save user data without their users’ consent. All of this data is then owned and controlled by the companies in charge of these platforms.
Users who live in countries where they have to worry about the negative consequences of free speech are also at risk.
Governments will often shut down servers or seize bank accounts if they believe a person is voicing an opinion that goes against their propaganda. With centralized servers, it is easy for governments to intervene, control, or shut down applications as they see fit.
Because banks are also digital and under centralized control, governments often intervene there as well. They can shut down access to bank accounts or limit access to funds during times of volatility, extreme inflation, or other political unrest.
Web3 aims to solve many of these shortcomings by fundamentally rethinking how we architect and interact with applications from the ground up.
What is Web 3.0?
There are a few fundamental differences between web2 and web3, but decentralization is at its core. Web3 enhances the internet as we know it today with a few other added characteristics. web3 is:
· Distributed and robust
Native built-in payments
In web3, developers don’t usually build and deploy applications that run on a single server or that store their data in a single database (usually hosted on and managed by a single cloud provider).
Instead, web3 applications either run on blockchains, decentralized networks of many peer-to-peer nodes (servers), or a combination of the two that forms a cryptoeconomic protocol. These apps are often referred to as dapps (decentralized apps), and you will see that term used often in the web3 space.
To achieve a stable and secure decentralized network, network participants (developers) are incentivized and compete to provide the highest quality services to anyone using the service.
Many web infrastructure protocols like Filecoin, Livepeer, Arweave, and The Graph (which is what I work with at Edge & Node) have issued utility tokens that govern how the protocol functions. These tokens also reward participants at many levels of the network. Even native blockchain protocols like Ethereum operate in this manner.
Tokens also introduce a native payment layer that is completely borderless and frictionless. Companies like Stripe and PayPal have created billions of dollars of value in enabling electronic payments.
These systems are overly complex and still do not enable true international interoperability between participants. They also require you to hand over your sensitive information and personal data in order to use them.
Crypto wallets like MetaMask and Torus enable you to integrate easy, anonymous, and secure international payments and transactions into web3 applications.
Networks like Solana offer several hundred digit millisecond latency and transaction costs of a small fraction of a penny. Unlike the current financial system, users do not have to go through the traditional numerous, friction-filled steps to interact with and participate in the network. All they need to do is download or install a wallet, and they can start sending and receiving payments without any gatekeeping.
DAOs: A new way of building companies
Tokens also bring about the idea of tokenization and the realization of a token economy.
Take, for example, the current state of building a software company. Someone comes up with an idea, but in order to start building, they need money in order to support themselves.
To get the money, they take on venture capital and give away a percentage of the company. This investment immediately introduces misaligned incentives that will, in the long run, not align well with building out the best user experience.
Imagine, instead, that a new and exciting project is announced that solves a real problem. Anyone can participate in building it or investing in it from day one. The company announces the release of x number of tokens, gives 10% to the early builders, puts 10% for sale to the public, and sets the rest aside for future payment of contributors and funding of the project.
Stakeholders can use their tokens to vote on changes to the future of the project, and the people who helped build the project can sell some of their holdings to make money after the tokens have been released.
People who believe in the project can buy and hold ownership, and people who think the project is headed in the wrong direction can signal this by selling their stake.
Because blockchain data is all completely public and open, purchasers have complete transparency over what is happening. This is in contrast to buying equity in private or centralized businesses where many things are often cloaked in secrecy.
This is already happening in the web3 space.