You may have heard about Web3 if you hang around any crypto, developer or technical circles. The term did become extremely popular in 2021, and you may be wondering if you missed something. So what exactly is Web3, and how did we get here?
In 2014, the co-founder of Ethereum, Gavin Wood, coined the term Web3. Web3 refers to the vision of a new, better internet where users have the power of ownership through the use of blockchains, cryptocurrencies, and NFTs. Let’s take a look at how the web evolved to Web3.
History of the World Wide Web
Web 1.0 (1990 - 2004)
In 1989, a British scientist named Tim Berners-Lee, who worked at CERN, invented the World Wide Web (WWW). His purpose was to create a decentralized protocol that let information be shared with anyone from anywhere on Earth.
Most of us believe that the web was invented and has remained a core part of our daily life. However, in reality, the web we use in present-day life is vastly different from how it was created.
Berners-Lee’s creation of the WWW is what came to be known as Web 1.0 in modern terminology, known as the read-only web. This meant that the web was primarily company-owned static websites with no user interactions. Users could only read web content, which occurred between 1990 and 2004.
Web 2.0 (2004 - now)
In 2004, social media platforms started emerging, with MySpace being the first social media platform to reach a million monthly active users. In contrast to read-only websites during the Web 1.0 era, social media platforms allowed users to write on the web. Companies also began sharing user-generated content to interact with users. As the number of Web users grew, large companies started controlling disproportionate amounts of traffic, which resulted in the new idea of generating revenue based on advertisement.
Most of the Web in present-day relies on users trusting private companies to act in the users’ best interests, known as Web 2.0. Web3.0 eliminates governing bodies from the web and becomes decentralised.
There isn’t a set definition of Web3 exactly, but there are a few core principles that Web3 is based on.
Decentralization & Ownership
Instead of private companies owning large parts of the Web, ownership is distributed amongst users and creators. For example, if you purchased a game such as Luxor on Yahoo! Games in 2010, the purchase would be tied to your account. In May 2016, Yahoo! Games was completely dissolved, leaving users without access to any previously purchased games. Web3 solves this issue by providing users with direct ownership of digital assets without relying on trust with private companies through what’s known as Non-Fungible Tokens (NFTs). Even the initial creator of the digital asset won’t be able to take away your ownership like it was with Web2. Once you own a digital asset, you can sell or trade your asset in an open market and regain the asset’s value.
As a result of Web3, management of the Web is decentralised and does not require large corporate bodies such as Meta or Google.
Every user has equal rights to participate in Web3 and does not require permission. Furthermore, unlike Web2, which requires the support of a trusted mediator, decentralised management makes Web3 more democratic by reducing the control of the web by large corporations.
For example, Twitter banned Donald Trump from the platform in January 2021. With Web3, users cannot be banned.
With Web2, payment gateways exclude users without bank accounts, and certain payments are restricted geographically. In Web3, users can make payments without relying on the financial infrastructure of banks and payment processors through cryptocurrencies such as Ethereum to send money from one wallet to another.
In addition to direct payments from one account to another, Web3 requires no personal data from any user and can’t prevent charges.
Despite the lack of governing authority, everything on the blockchain is completely public yet anonymous at the same time.
What’s different and important about Web3?
A blockchain is a shared database between computer networks. Unlike tables that store information in columns and rows, a blockchain stores information in the format of blocks.
The blockchain data structure creates an irreversible timeline, and each block has a timestamp of when exactly it was added to the chain. This significantly impacted the rise of cryptocurrencies and blockchain to keep track of all the transactions made. Each block has a storage capacity; after a block is created, it gets linked to the previously filled block. This creates a chain of blocks, hence the name Blockchain.
Why it’s important:
Blockchain is the base of Web3 technologies that are widely used including cryptocurrencies and NFTs. Blockchains have enhanced security compared to Web2. By creating a timeline of data that is irreversible that is completely public, Blockchain prevents users from committing fraudulent activities. Despite data being fully public, blockchain simultaneously enhances user privacy as each user’s personal information is fully anonymous.
Unlike Bitcoin, which is a cryptocurrency, Ethereum is a platform on the blockchain. Bitcoin was not programmable and had limitations as to what could be done with it since it was nothing more than a cryptocurrency. In 2015, Ethereum was launched to upgrade the limitations that Bitcoin had, and became the first blockchain programmable. This allows developers to build peer-to-peer apps, also known as decentralised apps (DApps), on the Ethereum blockchain — using Ethereum’s programming language, Solidity. Ethereum uses a specific token called Ether (ETH) to process transactions.
Why it’s important:
The Ethereum protocol itself exists solely for the purpose of keeping the continuous, uninterrupted, and immutable operation of this special state machine; It’s the environment in which all Ethereum accounts and smart contracts live. At any given block in the chain, Ethereum has one and only one ‘canonical’ state, and the EVM is what defines the rules for computing a new valid state from block to block.
The purpose of the Ethereum protocol is to keep a continuous, immutable and uninterrupted operation of a special state machine — known as the Ethereum Virtual Machine (EVM). EVM allows any user to create their own decentralised apps (DApps) such as games, services, and trade of goods and services, and smart contracts without any downtime, fraudulent activity, authority, or interference from a third party.
Smart Contracts are programs built on a programmable blockchain such as Ethereum that run when conditions specified in the contract are met. Smart contracts are used to execute agreements between different parties on the blockchain without a governing body or loss of time. In addition, smart contracts can also automate workflows to trigger specific actions when conditions are met.
Why it’s important:
Smart contracts solve mistrust between a buyer and seller by having the lines of codes representing the contract completely public on the blockchain and accessible by everyone. This helps individuals to carry out transactions while:
- reducing the cost of transactions, by eliminating the requirement of a middleman/governing body
- reducing the time spent on executing a transaction by solving mistrust
- being autonomous, so the seller does not need to devote any time or effort into processing the transaction after creating the contract
Although smart contracts are not widely used yet, they have limitless possibilities in the future to solve a lot of the issues that customers experience on a daily life basis. For instance, it can take weeks for medical insurance to reimburse a claim, as it is a manual process for insurers to go through the receipt, identify the amount, check which insurance package is covered by the user, and check how much of the maximum benefit has been claimed and so on. This is highly inefficient and time-consuming. With the use of smart contracts, all of this can be automated and save significant time for both the insurer and the client.
Non-Fungible Tokens (NFTs) are unique digital assets that cannot be replaced. For example, cryptocurrencies such as Ethereum are fungible because you can exchange one ETH with another and end up with no change in your wallet since both are replaceable and exchangeable.
Why it’s important:
The non-fungible aspect of NFTs is what makes them extremely important in the digital world. Non-fungibility helps users identify original digital assets from the dupes, and identify who the owner of the original asset is. In 2021, with the rise of NFTs, Opensea, a marketplace for NFTs, surpassed US$14 billion in transactions. In the past, authenticity experts had to manually verify whether an art piece to be displayed in a museum is authentic. With NFTs, the authenticity of an art piece can be verified in a matter of seconds.
One common misconception is that NFTs are solely used to trade digital art pieces. In reality, NFTs are much more than that. NFTs can come in the form of event tickets for concerts, domain names, or as an access token to special communities. For example, French comic artist Booba provides buyers of his NFTs with exclusive access to clips of his works. https://nft.booba.store/.
Another example is Ethereum Name Service (ENS) Domains, where users can buy a web3 .eth domain as an NFT on the Ethereum blockchain.
Apart from selling and buying goods in the form of NFTs, institutions like Duke University also provide their students who take part in their FinTech courses with a certification in the form of an NFT. Certifications from top institutions as NFTs eliminate the risk of not knowing whether a certificate is original or counterfeit, which is beneficial for institutions and employers to vet candidates in an efficient manner.
Decentralized Autonomous Organizations (DAOs) are community-led entities with no governing bodies. They rely on the blockchain and smart contracts
Why it’s important:
DAOs transactions are recorded on the blockchain and rely on smart contracts, and therefore have the same benefits and impact as cryptocurrencies and smart contracts. Because DAOs do not rely on laws and allow groups of users to participate together in a decision-making process, this ensures that any decisions taken are based on democracy. DAOs can be used in a lot of ways where transparency may not be present with Web2. For example, DAOs allow communities to accept charitable donations where all members decide together where the donations should go. Furthermore, DAOs allow communities to purchase digital assets as one. For instance, the Jenny DAO purchased an NFT by Steve Aoki for US$1 million and required all members’ permission to do so.
Limitations of Web3
Although there are a lot of benefits to Web3, there are still limitations present that prevent many users from accessing it.
In Web3, users can connect to the blockchain by just signing in with Ethereum at zero cost. However, each transaction on the blockchain comes with a high transaction cost, known as gas fees, that prevent many users from using it — particularly users in developing nations where the relative gas fees are expensive. To address those issues, Ethereum carries out network upgrades and layer 2 scaling solutions, yet the adoption rate on layer 2 is still low.
Another issue that users experience with Web3 is that it requires a lot of comprehension of security, technical documentation, and the use of a poor user interface. To address this issue, several wallet providers such as Coinbase and Metamask are working to improve the user experience. However, there is still a lot of improvement to UX to be done before Web3 can be adopted by a greater number of people.
When Web 1.0 evolved into Web 2.0, it was a paradigm shift that required education tools to help users educate on all the changes involved. With billions of people on the planet and different modes of communication, educating everyone on Web3 is not as easy as it was previously. To address this issue, contributes to educating users around the world through a translation program that translates Ethereum content into as many languages as possible around the world to make Web3 education more accessible. Despite the efforts that Ethereum.org are making, there are still a lot of blockchains out there that lack enough sources to educate everyone. As of now, Ethereum has translated content into 46 languages with the aid of 3,500+ translators.
The Web3 ecosystem still relies on certain centralized infrastructures such as GitHub and Discord. To address this issue, Web3 companies are working on building reliable infrastructures that solely use Web3, but there is still a long way to go.
Web 3 at Expertime
As a digital consulting company, Web3 is a very exciting opportunity to learn new skills and rethink our ways and working. For several months now, our team is experimenting with various projects to deep dive into the Web3 ecosystem. We are sharing that experience with our clients and partners, and expect to launch live Web3 projects in the near future with an increase in the popularity of Web3.
Please feel free to contact us if you want to learn more about Web3, and have any ideas for a project that you want to discuss. We are only at the beginning of creating a better web with Web3, so what are you waiting for to join the journey with us ;)?