Web 3.0 is the concept of a World Wide Web built on blockchain architecture where the control and monetization of content, social media, data storage, and other web-based applications are decentralized. The new World Wide Web, or Web 3.0, will use blockchain-based applications that will utilize decentralization, NFTs, and cryptocurrencies to combat the centralized control of other web-based applications by a few “Big Tech'' companies. Web 3.0 aims to give individuals more power over their data, increased privacy, and the ability to profit from their online activities.
The World Wide Web was invented by Tim Berners-Lee in 1989 while he was working as a computer scientist at CERN. The web was originally created to meet the demand for automatic information-sharing between scientists around the world. In 1993, CERN released the Web protocol and related code to the public, allowing royalty-free use. Web 1.0 was born, where thousands of content creators created their own personal web pages, which consisted mainly of static pages hosted by ISP-run web servers or free web hosting services. Users in the Web 1.0 era were primarily consumers of content, lacking the ability to actively interact with the static web pages. HTML, the initial programming language used in Web 1.0, had severe limitations, including the inability to add dynamically generated content to pages as all HTML code was limited to static pages. HTML also had security vulnerabilities, was limited in displaying content in an aesthetically pleasing manner, and the code was difficult to learn.
From the early 2000s to 2020, Web 2.0 was dominated by “Big Tech” companies such as Youtube, Facebook, Amazon, Apple, Microsoft, Twitter, Instagram, and Spotify. In the Web 2.0 era, users of various Big Tech platforms have little privacy or control over their data, the content that they publish, and the content they see. These companies exercise full control of all aspects of each users’ experience, although they don’t produce the content. In fact, Big Tech companies like YouTube, Instagram, and Amazon have become gatekeepers, actively managing access to billions of potential consumers. In the UK, the Competition and Markets Authority estimated that Alphabet (“Google”) alone has controlled 89%-93% of the search advertising market, effectively having a monopoly. In addition, Google has used its market share to maximize its own profit while restraining competition in conduct that violates antitrust and competition laws. While businesses or content producers could try to avoid using Big Tech platforms, having a sustainable business without the utilization of their platforms has become improbable.
Furthermore, some Big Tech companies monetize user content and behavior on their platforms, taking a large percentage or all of the money generated from each user. In addition to users losing privacy over their data and not profiting from their content, many Big Tech platforms have engaged in controversial content moderation. Censorship, the banning of certain types of speech, or the perceived emphasis or de-emphasis of certain user-generated content by Big Tech companies on their platforms has led many to accuse Big Tech of using their power to push forth their ideologies or political biases.
In 2009, the first successful decentralized digital currency, Bitcoin, was released. In 2015, Ethereum became the first successful blockchain that allowed users to build complex decentralized applications that could power video games, lending, and non-fungible tokens (NFTs). After Ethereum, many other blockchains were released offering similar smart contract functionality, such as Cardano and Solana. Decentralized blockchains like Cardano with smart contract ability not only allow the transfer of tokens or coins, but could also use blockchain technology to power platforms of user-generated content similar to the Web 2.0 applications, but controlled by individual users and content creators instead of Big Tech.
Just as Bitcoin aims to eliminate the power of governments and central banks over money and DeFi aims to eliminate the financial intermediaries for financial services, Web 3.0 aims to cut out the Big Tech intermediaries. Today, Web 3.0 platforms are proliferating and being launched through the Genius X accelerator program and many other platforms or blockchains.
Web 3.0 essentially takes many of the technologies made possible by the Internet and attempts to use blockchain technology to decentralize control. In addition, Web 3.0 typically has the benefit of significantly lower cost and higher profit for content creators and users. One example is the music streaming services industry. Worldwide market share is dominated by a handful of companies, namely Spotify, Apple Music, and Amazon. These platforms have hundreds of millions of users. Thousands of artists currently have little to no power in negotiating how much they are paid per stream. Many artists already have agreements with record labels or distributors, who may be considered the “rights holders” of the artist’s music by Spotify. Since Spotify pays rightsholders directly, the artist has to split revenues first with Spotify, which could be taking a 25% commission, and then split remaining revenue with the record label or distributor. After all of these reductions, many artists are making less than $0.005 per stream.
A Web 3.0 decentralized application could potentially lower the cost for users and increase the profit for recording artists by allowing artists to sell their songs or albums as NFTs directly to the consumer, cutting out Spotify entirely. The NFT could also have additional perks for the holder such as discounts on future sales or tickets to live concerts, which creates longer term value for the NFT while also allowing buyers to monetize the NFT by selling it to others. In addition, the artists can set a higher royalty rate on each song or album, creating a long-term revenue source each time the NFT is sold. A Web 3.0 decentralized application (dApp) combined with NFTs could be used to effectively cut out music streaming services like Spotify or Apple Music, giving artists a much higher profit margin on their content. The artist could also sell tickets to future live or virtual concerts as NFTs, cutting out ticket sales and distribution companies, keeping a higher percentage of the profit from their performances.
Public blockchains like Cardano are tamper-proof, as NFTs enjoy the same security in transactions as Cardano’s native token. In addition, transactions are all verifiable by any party. Below are some key technical aspects of Web 3.0.
- Interoperability— One of the criticisms of Big Tech is lack of interoperability. For example, many Big Tech companies have been accused of having a “walled garden” around their product, which is a network that controls the user’s access to their platform’s content and service. Apple’s App Store and Google’s Play Store are two examples of walled gardens, where the interoperability of both applications are limited. Let’s say you have a mobile phone that uses the Android OS and buy an app on the Google Play Store, but later decide to switch to one of Apple’s iPhones. Your purchase of an app, even if it’s made by the same company, won’t likely transfer over Why? The purchases you made originally on your Google Play account for Google can’t be transferred to Apple where your purchases are linked to your Apple ID account. You’ll be forced to repurchase the same application in Apple’s App store. In Web 3.0, interoperability is made possible through tools like sidechains, which are protocols that allow tokens and other digital assets from one blockchain to be used in a separate blockchain and then later moved back to the original blockchain when needed. Sidechains like Milkomeda bring down walled gardens that Web 2.0 companies enforce on users to make higher profits because they allow interoperability of assets built on separate blockchains like Cardano and Ethereum.
- Permissionless—Public blockchains are permissionless, meaning everyone can access them. Currently Web 2.0 companies like Facebook, Twitter, and Instagram can restrict or ban individuals based on nationality, government sanctions, or any other company criteria. Everyone would be able to access and use Web 3.0 decentralized platforms without restriction.
- Self-governance —Apple’s App Store and Google’s Play Store are governed by the corporation, not the hundreds of millions of people who use their platforms. With public blockchains like Cardano, decentralized applications (dApps), tokens, and sidechains can be made without restriction by the community, who essentially “own” the blockchain. If the Apple App Store and Google Play Store were separate decentralized public blockchains instead of proprietary technology platforms owned by corporations, users could enable interoperability between the two application stores without needing the consent or approval of the developers of each platform.
- Security and Privacy—Big Tech hacks happen frequently, with consumers’ personal data being leaked or stolen. While hacks have happened on dApps due to smart contract code vulnerabilities costing loss of users’ funds, overall blockchains that rely on Proof-of-Work and Proof-of-Stake consensus mechanisms have typically been better than Big Tech at security.
- User ownership of data—Big Tech companies like Facebook sell user data to advertisers and marketers for profit, typically with no profit going to the user. With decentralized identities, users can be given more control over what information is released to applications they use.
There are many applications of Web 3.0:
- Decentralized storage—Instead of storing personal or public data on the services of Web 2.0 companies like Amazon Web Services, options like Iagon are using blockchain technology to create a peer-to-peer network of decentralized cloud storage and computing resources that can’t be modified or deleted by a central authority.
- Decentralized Social Media—Instead of being controlled by Big Tech, platforms such as Smart Places Protocol are creating decentralized social networks where users will be able to profit from their own interactions.
- Metaverse—The metaverse is a compilation of digital worlds where people can meet, chat, shop, play games, and even buy virtual land. There are many potential use cases in the metaverse, such as artists having concerts using augmented or virtual reality technology or landlords renting their digital land to advertisers. Many of these metaverses connect to the real world allowing users to interact in the metaverse with real-world implications, such as shopping or ordering food.
- Lower costs through elimination of intermediaries—Big Tech extracts a high take rate from user content, taking 100% of profit for themselves or a large share. Research shows that some platforms like Facebook, Twitter, and Instagram keep around 100% of revenue made by monetizing user content on their platforms. Youtube keeps 45% of revenue and the Apple App store keeps up to 30% of revenue made from user content. OpenSea, a Web 3.0 company that utilizes blockchain technology to create a NFT marketplace, has a take rate of 2.5%, allowing users to keep the majority of the revenue generated from their content.
- Decentralized Identity—Users can have decentralized identities (DIDs) that are tamper-proof based on blockchain technology and can be used across borders while giving users control over what personal information about them is shared.
- Criminal law - Many countries have laws against activities related to harassment, threats of violence, and certain types of speech. Previously, centralized Web 2.0 companies could moderate content or censor content according to the laws of the countries in which they have operations. However, decentralized Web 3.0 applications by design may be difficult to censor. To have decentralized governance, some dApps have integrated decentralized autonomous organizations (DAOs) to handle future decisions on technology and development of the platform. In addition, if the code is open-source, it may be useless for governments to target the developers, when another entity can fork the blockchain, removing any updates that add censorship.
- Anti-money laundering (AML) laws and investor protections—While the permissionless nature of Web 3.0 applications open up the participation of hundreds of millions of people, it also enhances the ability of fraud and other criminal acts. In the United States, the Securities Exchanges Commission has authority to investigate and criminally prosecute investment scams or similar fraudulent activity to protect investors. These protections may not exist or be hard to enforce on Web 3.0 due to decentralization and pseudonymity granted by public blockchains.
- Security—While blockchain-based applications are considered secure, who is responsible when a hack happens and users lose their funds? There are still questions on how cryptocurrencies should be monitored and who is liable when funds are stolen.
Web 3.0 has huge economic benefits, as it speeds up the internationalization of different countries' businesses and economies, breaking down political, economic, and commercial barriers. However, Web 3.0 can also combine other aspects, bringing together different cultures, beliefs, and norms.
Should developers be allowed to censor speech or activities according to their personal beliefs or their country’s laws? Should developers be forced to implement Know-Your-Customer (KYC) and AML regulations of certain countries while ignoring other countries’ preferences? As with other blockchain-based projects, Web 3.0 companies face the ethical question of building applications with no safeguards or rules.
In addition, the decentralization of Web 3.0 may be limited, as described by Moxie Marlinspike, the creator of Signal. Many crypto wallets like MetaMask and other dapps have to interact with the blockchain via a node that’s running remotely on a server. Since most individuals don’t run their own servers, companies sell API access to an Ethereum node. Many dApps and crypto wallets like MetaMask exclusively use two companies, Infura or Alchemy, in order to interact with the blockchain. This presents significant centralization risk as these companies can be regulated by government entities.
There are many benefits to Web 3.0, but many questions remain around security, protection for the end-user, and if Web 3.0 can ever really be decentralized.