Is Web 3.0 the Next Internet Revolution?
Web 3.0, more colloquially known as Web3, is having a moment right now. While many people are still unfamiliar with the term, Web3 was coined in 2014 and has seen immense traction since then. It seems to be the topic of discussion everywhere, from politicians and lobbyists to technology companies and venture capitalists. While they speak and debate on the merits and pitfalls of a potential new world wide web, some of us are still wondering just what in the world Web3 is.
A good place to begin is by understanding why this particular iteration of the web is the third. Many of us have experienced only one world wide web that we know and love, streamlined through our lives as technology evolved. So, understandably, an Internet number three may come as a bit of a surprise. To summarize the first two versions, Wired.com writes that “Web 1.0 was the era of decentralized, open protocols, in which most online activities involved navigating to individual static webpages. Web 2.0, which we’re living through now, is the era of centralization, in which a huge share of communication and commerce takes place on closed platforms owned by a handful of super-powerful corporations… subject to the nominal control of centralized government regulators.”
While many of us have been around for both of these internet iterations, we may not have all realized their definitive differences. Essentially, Web 1.0 was the earliest era of web access, where we would go to individual, static websites to consume content from a small number of content creators. The websites were individual showcases of information, with a particular target per website. One website may have allowed you to play Flash-based games, while another showed news about your favorite movie stars.
According to Gizmodo, “sites displayed news and information, and maybe you had your own personal little corner of the World Wide Web to show off your personal interests and hobbies.” There wasn’t the interconnectivity or centralized approach to it all, as we took our tasks one step and website at a time. And, importantly, our data was not yet owned by a small oligopoly of technology companies. These were the pre-Google, ask Jeeves, etc. days when there was no major search engine that had indexed most websites.
A perfect example of a Web 1.0 website is this (still active) Dole/Kemp campaign page from 1996:
Source: Dole/Kemp, 1996. Main page
As previously stated, we currently live in the era of Web 2.0. According to Fortune, Web 2.0 is “app-based and easy to use. We can talk to our friends and coworkers, purchase our groceries and clothing, and get our news.” The article also recognizes that in Web 2.0, “our lives are ruled by trillion-dollar companies.” These titans of the internet that we know today – companies like Google, Facebook, Amazon – have, over time, made the internet more of a one (or few) stop shop. And many of these big-name tech companies thrive off using our personal data to generate revenues from targeted advertisements based on our usage.
With the rise of cryptocurrencies and decentralized technologies has come an explosion of areas on the internet promoting their usage. The New York Times elaborates on this, stating, “there are now thousands of different blockchain-based tokens, circulating continuously on venues with varying degrees of regulation and oversight.” The Times goes on to explain that “this is what is known as ‘Web 3.0’, the name adopted for a decentralized internet run on crypto tokens.” The idea is that this iteration of the internet will democratize the way we utilize the web by displacing intermediaries and replacing them with the users themselves. An example of this would be how Facebook currently acts as a central repository for all user data and determines what they may do with said data, while a Web3 website would not have a centralized host collecting and profiting off of this information.
The key to this decentralization, according to Gizmodo, is blockchain technology that creates publicly available ledgers of record. The concept behind this is that all of your internet activity is handled through the secure processes of the blockchain, providing all with more privacy and transparency. In theory, Web3 is to shift the power dynamics of the internet from the trillion-dollar tech giants to the users who empower them. Yahoo! News explains that the decentralized networks and reliance on the blockchain for verification would allow participants to essentially own the sites and apps they use as the consumers (decentralized networks), rather than large corporations, would govern the services. By there being no corporate entity or centralized agency, the decentralized network of computers hosting the data would be the authority figure, with that participating network being able to vote on the governing decisions of the sites.
Today, Web 3.0 is still more of a working concept. It is a mixture of a broad and evolving range of buzz-worthy technology terms like NFTs and metaverse. Our best definition includes websites already powered by these decentralized and blockchain technologies. While these websites may feel like a typical web experience to the everyday user, these websites are being powered behind the scenes by blockchain technology across numerous computers owned by separate entities as opposed to the standard server farm practices of the current Web 2.0 giants. It is tougher to define conclusively as it is still being created and evolving into itself. Without a more fleshed out, widely adopted use case, we are still watching Web 3.0’s development, and, as it was with Web 2.0, many investors and technology companies are seeing the potential opportunities to come with this development.
There have been plenty of pundits, investors, and other talking heads speaking about Web 3.0 and the opportunities to come with the budding industry. But just how much of this opportunity is available to investors today? And do we believe that big tech will really give up their dominant control over users? Advocates believe this will happen, but we have already seen significant investments into these spaces by tech giants. More than likely, Web 3.0 will continue to develop as more of a combination of the previous versions of the internet. And if the proliferation of Web 2.0 is a pattern to follow, we know that venture capitalists and private equity have found or will find their way into the mix.
Last year was a defining year for Crypto startups, which may be a helpful indicator of the direction of Web 3.0. With a boom in investment from institutions into crypto and decentralized-technology companies hoping to become central pieces of the new world wide web, the future of this industry has some serious dollars betting on its potential. According to Forbes, a few high-level metrics may help illustrate just how much of an impact was made in the Web 3.0 industry in 2021:
- VCs deployed $30B+ globally in 2021 into crypto startups.
- There are 65+ crypto unicorns (companies valued at over $1B), with over 40 of them created in 2021. There were close to 50 crypto startups that raised over $100M in 2021.
- Total crypto market cap exceeded $3T.
The empowerment of Web 3.0 may come from these blockchain and crypto technologies, and last year was one of the more exciting years for the Crypto space.
Source: New York Times
With all of this new investment into a budding area, there is tremendous competition, which means there is a greater risk of potentially backing the wrong horse. While all investing comes with risk, investors must be wary of this and attempt to minimize this risk by carefully considering opportunities before them. As was the case with Web 2.0, many companies came and went, burning the capital invested in them, but many others thrived and created outsized returns for their investors, as is the potential that Web 3.0 brings. Other potential risks include the failure of broad adoption and potential regulatory hurdles that may come up as Web 3.0 continues its development.
But with such uncertainties, some may find new opportunities. Those looking to gain exposure may turn to public companies already investing in the space, as well as potential private investments through institutional venture capital and private equity funds that are allocating to Web 3.0 companies.
Dole/Kemp, 1996. Main page.
Medium, January 2018. “Why the Web 3.0 Matters and you should know about it.”
Wired, November 2021. “What Is Web3, Anyway?”
New York Times, December 2021. “Venture Capital Funding for Crypto Companies Is Surging.”
New York Times, December 2021. “Welcome to Web3. What’s That?”
Fortune, December 2021. “Investors are betting $27 billion that Web3 is the future of the internet.”
Gizmodo, December 2021. “What Is Web3 and Why Should You Care?”
Yahoo! News, December 2021. “What is Web3, the new version of the internet everyone is talking about?”
Forbes, January 2022. “An Overview Of Web3 Venture Capital Activity In 2021.”