By Mackenzie Haugh
Editor’s note: This is the fourth entry in a new series called “Blockchain Basics.” Whether you’re a regulator or operator, knowing the basics of blockchain will help you make informed decisions as suppliers create using this technology. For more information or a more detailed explanation of blockchain in your jurisdiction or on your property, contact your GLI representative.
Since its invention in 1989, the World Wide Web has significantly changed how we communicate and exchange information. Its initial launch many now refer to as Web 1.0, but at the time, it was just the World Wide Web (www). That original version began evolving in 2004 and is what we know of the web today, but that evolution was fairly seamless and at the time wasn’t often referred to as an upgrade to the original. Looking back, many now refer to this as Web 2.0, and we need these definitions to better understand what Web3 (or Web 3.0) will be and why it’s different.
So again, Web 1.0 is the initial implementation of the www, and many refer to this as the “read-only” or “one-way” information phase. This is where web pages were developed with text and images, and search engines were created to allow better navigation and discovery of the information we sought. Basically, it was a digital version of encyclopedias with some primitive functions for human-to-human interaction. Web 2.0 then was that “two-way” or “read-write” evolution, which greatly enhanced our experiences and knowledge share. From blogs to social media and from PCs to mobile devices, users were able to connect with each other in a more meaningful and instant way. It encouraged more creation and contribution, especially since many platforms made it so convenient to do so. It also brought about the monetization of apps and services and focused on the power and ownership of data, which also led to more frequent cyberattacks and the need for heightened security and smarter user practices. It’s important to mention that Web 2.0 was more of an “expansion pack” on top of Web 1.0 since most of that original functionality is still largely available and utilized.
So now Web3. What is it? Well, it’s another great question with a wide variety of answers, mainly since it’s still being created and slowly launched in various pockets around the world. The interesting thing is, this is exactly the same way Web2 came to be. It wasn’t a giant launch/upgrade one day; it was incremental and seamless with constant change and upgrades. This is one reason why there’s so much variance when Web3 is defined, as some may be thinking about what it is now, while others are thinking about what it could be tomorrow.
What is being called Web3 is simply a change from a centralized solution to a decentralized one. In the internet we use today (Web2), content and applications are stored on a server or a cloud solution along with user data and other info. Someone “owns” it, and it’s “hosted.” By Web3 being a decentralized solution, it is now, of course, not single-source owned and, through blockchain, is permissionless and self-governing. Apps are no longer deployed on a server, but dapps (decentralized apps) are executed across peer-to-peer nodes.
You may be thinking, “so what? I’m not sure I know where things are hosted now, so what will this change really mean?” Good question. I’m glad you asked. It has the potential to change A LOT, but let’s look at a few key areas that will be impacted:
- Payments. In Web 2.0, payments are executed through a complicated system requiring payment providers and integrations. With a decentralized web, a native payment layer is naturally built-in, allowing crypto wallets to handle payments. My previous blog discussed the benefits of crypto with it being a true world currency that’s fast, traceable, and decentralized, so all those benefits now more easily integrate into your day-to-day web purchasing.
- Identity. Today, we have many sites and applications that require a username and password to access secure or sensitive info. In many cases, cybercriminals have motivated an evolution of sorts, prompting a need for strong passwords and multifactor authentication; however, this added security really doesn’t change the identity method. In Web3, identity will be tied to your digital wallet’s address. This will not only be much more secure than a username/password scenario, but it will also further allow the prevention of personal data from becoming public. Since only the wallet address is shared, no one will have access to your personal data and email address, which means no more selling/sharing of that email address, which means NO MORE SPAM! Great! And one more anticipated benefit is that your wallet address is unique and can be used across all of Web3, which means no more custom usernames or passwords to meet an individual sites’ requirements, which means no more frustration in trying to remember a particular username/password combination when logging in. Super Great!
- Economy. I’m sure you are all familiar with crowdsourcing, or its little sister, crowdfunding. Basically, they are ways to solve a big problem by distributing parts of the problem for many individuals to solve. In the case of crowdsourcing, the “problem” is usually data or content, and a good example is “Waze,” which encourages users to report traffic conditions/issues. In the case of crowdfunding, the “problem” is, well, funds and good examples are “Kickstarter” and “Go Fund Me,” which allow businesses to get needed funds in order to launch a product without needing their own or borrowed capital. Web3 will take these concepts to the next level and, through crypto tokens, allow entire businesses to fully launch in a rapid and agile way. Let’s say that someone has an idea for a product or solution and wants to create it. Much like with Kickstarter, they can post that idea and attract investors. But in Web3, you get investors who can receive a piece of the company (instead of stocks, they would get company-allocated “tokens”), and you can even get employees (developers) who want to contribute and are paid by those same tokens, realizing payment upon the selling of those. This is Kickstarter on steroids, and really allows for people who are passionate and committed to the idea/product to be involved from the ground up, steering their success in contrast to today, where often these are launched by investors who are driving the business possibly without that passion, which could lead to a different (less impactful) outcome.
- AI. Right now, AI is making great gains in machine learning through pattern recognition and projection. Anyone notice how much better some of the more popular voice assistants are now as opposed to when they launched? How many times would you ask them something only to get “I’m not sure” as a response? Some of them have truly evolved and are quite useful (so give them another try if you wrote them off a few years back; some are better than others, and I’m not naming names of course). Through Web3’s decentralized nature, AI can more rapidly develop, and this is an area that’s already benefiting from it today.
- Metaverse. And a Web3 discussion wouldn’t be complete without, of course, mentioning our good friend, the Metaverse, another term that has a vast array of definitions, depending on who you ask. To me, the Metaverse is just a digital world. Right now, these worlds are being built separately and really have no interaction or knowledge of each other. Facebook’s Meta has no integration with “Decentral Land,” and that’s how it wants it. Metaverse needs a decentralized solution (Web3) to survive, especially if they want to create an environment where people want to spend time. But what this is and where it goes is anyone’s guess. It’s interesting still how it’s being used now, and people are actually “living” in it, buying and selling land, watching a movie, spending time with friends and family, you name it. It’s not too far off from the world portrayed in Ready Player One, but let’s hope we don’t take it that far.
Now, hopefully, you can see more of the potential of what Web3 can bring and again understand why definitions tend to vary so much among the experts.
So, is Web3 all good? Well, that’s another healthy debate. The decentralized world gets a lot of press, good and bad. Because it’s in its infancy, there’s a lot of problems, many of which are related to the “economy” example I discussed earlier. NFT and Metaverse projects are collapsing before they are complete, leaving investors with significant losses. Blockchains are getting out of sync with real-world time, creating issues with reconciling transactions. Many of these issues are occurring because the technology is new; many don’t fully understand it yet; and we certainly haven’t built many rules or best practices around it. For me, those examples are obviously unfortunate for the humans on the losing side, but I feel that those losses/scenarios may be just as likely in our stock market today. As such, I feel the real concern is more of an environmental one. Decentralization and the complexity of blockchain require a lot of processing power. In other words, it takes a ton of our real-world resources to fuel this technology. I equate this to automobiles. We had to put rules in place a while back to ensure that auto manufacturers couldn’t make fuel-inefficient cars. What’s interesting is it took us about 100 years of manufacturing before seeing the need to do this! I feel we need to do the same with blockchain and set rules and standards around processing power requirements for transactions, but we need to do so MUCH more quickly. I fear if we don’t do that soon, then we will have too many solutions that are too resource heavy and will have too much infrastructure built around them to do anything about it.
Check back to our blog every month as we continue to help you build your basic knowledge of blockchain. Additionally, always feel free to contact your GLI representative. We’re here to help.< Back to All Blogs