What is Web3 and why does it matter?

Web3 sounds a bit like a marketing concept, doesn’t it? 

Well, it is. But Web3 is a couple of other things. 

It’s an architecture, and it is also a philosophy. 

You will have likely heard the term Web3 recently, and if you haven’t, you will. This is an important evolution in the web, communication, and our digital relationships.

This movement began with a lot of talk about blockchain. Then blockchain kind of went quiet during the 2018 crypto winter. Then a bunch of innovations developed during crypto winter started to come into their own in 2020-2022. 

As the world has evolved over this tumultuous period, the need for certain things has come to the forefront. These are privacy, control over your data, and more agency in your digital interactions. 

Web2 has been quietly chipping away at these over the last 20 years as we have gone from users to being used. 

But in the midst of all this came Bitcoin, and this is where the story of Web3 began. 

A screenshot of the original Netscape home page. Image courtesy of the versionmuseaum.com

From the promise of Web1 to the disillusionment of Web2

Web3 is the next iteration of the internet infrastructure and the relationships that will define it. But this story began with Web1. 

Web1 was Netscape, open forums, a weird and wonderful place with no rules, and an open architecture. Those of you around the 90s will remember dial-up modems, slow load times, and cheesy graphics by today’s standards. 

Email took off with Hotmail, founded in 1996 for $300,000 and sold for $400 million two years later. And the origins of some of today’s biggest companies started in Web1. Linux arrived in 1991 and Netscape in 1994. Amazon, eBay, Craigslist, Google, Salesforce, and Paypal all started in the mid to late 90s. 

The naysayers said the web wouldn’t survive. Some said it was a flash in the pan. 

But the adoption rate followed the development and deployment of fiber optic cable and massive improvements in data transmission and storage. 

Businesses, founded in the Web1 era, grew into giant behemoths with vast control over the infrastructure. These and the ones that followed in the 2000s became siloed to gather your data. Then they used your data to sell you ads, control your opinion and behavior for the benefit of their shareholders. This is how the vision of Web1 was corrupted into what became Web2. 

In the world of Web 2, the individual became the product. Eventually, Web2 started choosing whom they liked and whom they didn’t like. And pretty soon, canceling expanded from services and subscriptions to people. 

Bitcoin and the birth of Web3

The release of Bitcoin created a quiet buzz amongst a small group of tech diehards. Over time it took on a life of its own. 

Bitcoin’s architecture was decentralized and distributed with a unique peer-to-peer element. It reimagined the centralized paradigm in Web2 back towards decentralized individual autonomy. 

And philosophically, it was about giving people more agency over their money, data, and interactions with each other. 

The vision of Web3 is like a redo of Web2 without all of the control of corporate overlords. It’s about governance and incentives. It’s about ownership rather than borrowing. Web3 is about creating and earning rather than free. Web3 is built around the idea of communities from Web1.

Web3 represents the potential for new relationships between people in the digital realm. And it is represented in over 19,000 crypto, token, and altcoin projects around the world. 

There are numerous companies participating in this evolution. And what they have in common is a belief in the incentive structures created in a blockchain infrastructure. 

And this is key to several elements of DeFi, the Metaverse, NFTs, and various other parts of the Web3 space. 

From Bitcoin to Ethereum and the blossoming Web3 playground

While Bitcoin is developing Web3-type elements with the Lightning Network and the Liquid Network, much of the wild experimentation has been carried out by other platforms. 

Ethereum was not the first experiment following Bitcoin, but it has become a playing field for Web3 activity. Driven by smart contracts, Ethereum represents Web3’s first value discovery playground. 

Ethereum is where smart contracts were primarily developed and blossomed. These are pivotal to numerous projects, including DEXs like Uniswap. Ethereum created a platform for the development of DeFi projects like Curve, Yearn, and Synthetix. Smart contracts also help make stablecoins work.

And those same stablecoins now operate across numerous chains

CryptoPunks and Crypto Kitties led to an explosion of NFT development. Then came the concept of the DAO. A DAO represents a unique operating entity centered around governance and incentives, all built around smart contracts and the blockchain. 

Then gaming, NFTs, blockchains, smart contracts, and governance all coalesced in the Metaverse. Like the DAO, the Metaverse showcases the core ideas around value, exploration, discovery, and evolution. The infrastructure that makes it all work is pure Web3. 

And while much of this innovation has been based on Ethereum, several other chains are exploring their own approaches. These include Cardano, Algorand, Solana, Tron, NEO, and many, many more. 

Eventually, individual chains will have bridges and cross-chain capability led by projects like Polkadot. 

Web3 may be in development, but it’s here to stay

As an architecture, Web3 is presented as a new way to interact. It’s more peer-to-peer. It’s censorship proof. And it creates new ways to explore value creation and exchange. Web3 reimagines control of your data from centralized in corporations to giving you control of it. 

But Web3 is still very much in development. 

As Yaniv Tal, founder of the Graph described the difference between Web2 and Web3, he highlighted various areas where Web 3 needs improvement

Web3 is fast. It has superior open-source architecture and is easier to put together. 

But scaling has lagged so far. 

And most importantly, the Web3 user experience is still very much in its infancy. 

But looking at the investment taking place in the space tells you that big money believes this is the future. Marc Andreessen was the founder of Netscape, the gateway into Web1, is heavily involved. He’s built a powerful career through Web2 and now his firm, a16z, is a giant investor in many aspects of Web3

And one of Web3’s leading investors at a16z is the inestimable Chris Dixon.

Web3 wants you

The 2020s are coalescing around a handful of important themes. One of them is privacy. Another is freedom of speech. Yet another is the agency of the individual. Or, said another way, the ability to control your personal and economic destiny. 

And all of these are coming to the fore, guided and shaped by Bitcoin, Ethereum, Cardano, and all of the other projects, companies, and individuals in the space. 

The price volatility in the main names is typically the focus of much mainstream attention. But they are missing the bigger picture. 

Creators are getting paid. You have more ways to explore and experience value creation. And you are getting to see the raw materials as they are shaped into a magnificent whole. 

As I’ve argued in our Crossing the Chasm piece, it’s time to put the cover on the tech. This is where the UX starts to shape the experience for a wider audience. 

And it’s where we start to take back control of our freedom, agency, and privacy. 

All you have to do is get a wallet, sign up for an account below, and get involved. 

 

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