What’s all this fuss about Web3?

What is Web 3.0 and how does it relate to Web1.0 and Web2.0?

In the most basic form, Web3.0 is the next major evolution of the web. But that being said, there is no foundation or governing entity ensuring a set of specifications or anything like that … Web3 is basically a loose definition encapsulating a collection of trends involving the web. It’s not like HTML5, where the W3C defines an exact set of specifications. To understand Web3 better, and what it means to you as a consumer or a software engineer, let’s first start by taking a quick look at Web1.0 and Web2.0 

Web1.0 is basically the early days of the internet. For those that are old enough, you will remember how websites used to be in the 90s and the early 2000s -- mostly static content that you consumed. If you are young and have no clue what those sites were like, go to the wayback machine and search for popular websites to see how they were in the 90s and 2000s. But to summarize, in the Web1 world, websites had no interactivity, they were basically read-only, and users were just consumers. The main problem with the first version of the web was that creating your own web page and contributing to this version of the web took a considerable amount of technological knowledge.

Then came Web2.0, which is the version we all currently use. If Web1.0 was read-only, Web2.0 essentially made it read and write. This was mainly due to the arrival of social networks — MySpace, Hi5 and eventually the big guns like Facebook, Twitter and YouTube. The big change in Web2.0 was that  it was based around content that the users generated, so as a consumer, instead of passively consuming content published by companies, you were dealing with dynamic content generated and shared by the consumers themselves… whether that meant sharing micro-updates in Twitter, or posting videos on YouTube or selling and buying stuff in an online marketplace like eBay. This meant that content creation was possible even without much technological knowledge. While this is generally a good thing, the problem is that the companies that own the platforms generally also own the data created by the users. They also take the data and use it to figure out consumption metrics, identify user trends and monetize that by selling it to advertisers for targeted advertising. In this version of the web, users are not just consumers, they are also also products, especially when thinking of ad revenue their content generates for the companies.

This brings us to Web3.0, which aims to solve some issues that Web2.0 has and to improve open some other things that it does great. The term Web3.0, was originally used in 2014 by Etherium co-creator Gavin Wood in a post on his blog, Insights into a Modern World, where he described it as a new, decentralized iteration of the web that runs on blockchain technology, which is an immutable ledger system used by cryptocurrencies to keep track of transactions. Web3 revolves around 3 fundamental pillars - content ownership, privacy and democracy.

Content Ownership

When you use a platform like Facebook or Youtube, your data is collected, owned, and monetized by these companies. The idea in Web3 is that you own your data within your wallet and engage with apps and other users through that wallet. And since you own your data, you will be able to monetize it yourself as well. 

Privacy

Since you use your wallet you also get privacy with it. The idea is that your wallet is your identity, and it isn't linked to your real identity. You log in with your wallet, interact with apps and users, then take your data with you when you log out. So even though someone may be able to see your activity, all they know is that the activity is from your wallet — they have no idea that you own that wallet. It’s like having a permanent VPN.

Democracy

This is probably the biggest concept in Web3, the idea that instead of major companies owning their apps and networks, they will instead be run by decentralized autonomous organizations, also referred to as DAOs. These organizations will be composed of users themselves, ones who possess governance tokens. In essence, users get to make decisions — to change rules and regulations, when to ban users, and other choices could be voted on by users of a decentralized service instead of decided unilaterally by the company that owns a website. This would take the power out of the hands of big tech companies and place it in the hands of users.

So all this is great, but could there be potential downsides to a private, decentralized internet where users own their data?

The main issue with Web3.0 is its decentralized nature. As I previously mentioned, decentralized autonomous organizations will govern this version of the web, but who gets to be part of these organizations? The simple answer is whoever possesses governance tokens. You may be thinking, well, how do you get governance tokens? The basic idea is that you either earn them based on participation, or they can be bought and sold. The latter is a potential problem. Since they can be sold and bought, there is nothing stopping one entity from buying up all the available tokens of a given platform, giving them a majority of the decision-making power of a given platform. This means that the decision-making power can be greatly skewed towards the ones that can afford it. Further iInequity issues can also arise with proof of stake (PoS), Web3.0’s consensus mechanism that validates updates to the blockchain. Proof of stake has validators stake cryptocurrency that they already own as collateral when updating new information to the blockchain. The more crypto you stake, the greater chance you have to update the blockchain and earn more currency as a reward. This means that the validators with the most money can keep getting richer.

In addition to that, the decentralized anonymous organization source codes for Web3.0 are publicly available, which makes them susceptible to cyber attacks. In 2016, a decentralized organization called TheDAO was hacked and 3.6 million Ethereum was stolen, which resulted in Ethereum splitting into Ethereum and Ethereum Classic. Decentralized finance is also a common vessel for fraud. According to Chainalysis, 14 billion dollars went to illegal addresses in 2021, which is the highest it has ever been, and 79% more than 2020.

So, what does all this mean for you as a software engineer?

First off, Metaverse and Web3.0 are not the same thing. I see quite a few devs who are learning to build apps for the Metaverse refer to it as Web3.0, but that is not accurate. Metaverse is a term used to describe immersive digital worlds, often experienced through VR. The main connection between the metaverse and Web3.0 is that various items in the metaverse could be NFTs, like your avatar, virtual real estate, and other items. That’s where the similarities end. In fact, metaverse is being pushed by big tech companies like Facebook and Microsoft whereas Web3.0 is a vision of the future of the web that is being championed by decentralized networks, open protocols, and the blockchain.

That being said, parts of what make Web3.0 are already in our daily lives — things like blockchain, cryptocurrency and NFTs. With NFTs, content owners have been able to greatly maximize their monetization returns compared to how much they lose to platforms like Facebook and YouTube right now.

In addition, as I mentioned earlier, identity in Web3.0 also works differently compared to traditional authentication protocols that we currently have in Web2.0, where users don’t have to divulge sensitive information like usernames, passwords or email addresses. 

However, the biggest shift you will like see with Web3.0 is the token economy. Web3.0 enables tokenized economic interactions without intermediaries. It provides a unique set of data, a universal state layer, the immutable “ledger” which is collectively managed by a network of untrusted computers. This unique state layer allows us to send digital values in the form of tokens entirely peer to peer (P2P), circumventing the double-spending problem, where you would have to pay for goods or service, but then also pay for companies like PayPal and Stripe for their facilitation of the transaction. 

When you look at this from the economy angle, you can think of Web1.0 as the information economy, Web2.0 as the platform economy and Web3.0 as the token economy. If you want to read up more about the token economy, I will link an article by Sherman Voshmgir in the description below that does an amazing job at explaining the concepts, far better than I would be able to do. 

From a software engineer’s perspective, you don’t really need to do anything drastic. The exact vision of Web3.0 will probably never come into fruition, but certain concepts will be gradually adopted and you will need to adapt to it. Consumers will not suddenly stop using sites like Facebook or YouTube or Amazon and adopt a new fully Web3.0 alternative. But, you may see these existing platforms adopt authentication and identity based on Web3.0. They may enable token-based transactions. They may introduce marketplaces (like NFTs) that allow the users to maximize their content monetization. So as a software engineer, it’s just like learning any new library, framework or concept. You aren’t going to be outdated, or your job isn’t suddenly going to be at risk.

That being said, the best thing you can do right now as a software engineer is to start reading up and learning the ideas, concepts, technologies and potential economy around Web3.0.