Web3: What is it, when will it be here, and how much is hype?

Web3 promises a return to the early ideals of the internet: a utopia of transparency and self-ownership. But how well does it actually work in practice? And what does decentralisation even mean?

There's a new buzzword flying about, and if you're even tangentially on the outskirts of the tech world, you've probably heard about it: Web3, the supposed third version of the World Wide Web.

Web 1.0 is how we now think of the earliest public versions of the internet, from the 1990s to the mid-2000s, when most users were consumers of content rather than producers. The rise of smartphones and social media ushered in Web 2.0, focused on user-generated content uploaded to platforms like Twitter, YouTube and Facebook.

Before we go any further, it's important to distinguish between Web 3.0 and Web3. Despite Web 1.0 and Web 2.0 sharing a naming scheme, Web3 is only loosely connected to Web 3.0, a different concept revolving around making all online data machine-readable.

Critics say that power in Web 2.0 is too centralised in the hands of a few companies, mostly tech giants. Web3 is about taking that power back, via decentralisation and new technologies like the blockchain. But how realistic is that?

The answer depends on who you talk to. Some technologists are bullish about a blockchain-led future, but others say their utopian vision is nothing but hype.

The promise

As my colleague John Leonard wrote in 2019, ‘The upswell of revolutionary idealism that greeted Bitcoin had its roots in the birth of the web two decades earlier. In 1996's A Declaration of the Independence of Cyberspace, John Perry Barlow wrote of a digital utopia free from intrusions by governments of the industrial world, but by 2009 that dream was gone. Then along came Bitcoin and its promise to make government obsolete, and the passion reignited.'

If you replace ‘Bitcoin' with ‘blockchain' (and many people already incorrectly use them synonymously), that passage can equally apply to Web3. The concept appeals to the libertarian ideals from the foundation of the internet, promising to take power - largely in the form of data control - away from Big Tech and give it back to the people. Transparency and data privacy are some of Web3's key goals.

Elle Sia, an investment director at DigiStrats, explains: "Decentralisation removes the middleman, and this generally means reducing friction and cost. Creators and consumers can now benefit from the economy and ecosystems that would be nothing without them...

"Big tech firms will simply have to adapt, organically or through acquisitions, in order to not be left behind. They will slowly lose their best talent as more attention and capital flow to Web3. It will be interesting to see who can adapt and who won't."

But what is decentralisation all about?

The tech

Blockchain is at the heart of most Web3 concepts: an electronic distributed ledger, stored across multiple nodes around the world. With no central governing authority and multiple sources of record, it is incredibly difficult to compromise and makes stored data very secure.

But, blockchain is far from perfect. Storing large amounts of data on it is very resource-intensive, making it inefficient to use as a personal data silo. Much like NFTs, any personal data stored ‘on' a blockchain will almost certainly be saved elsewhere; the blockchain simply points to a location where it can be found.

Add to that the fact that there isn't just one blockchain, but many hundreds (and that number is growing quickly), making any sort of cohesion difficult to achieve. As Richard Bartle, senior lecturer at the University of Essex, says:

"On the practical side, keeping track of all those blockchains is a task that is going to grow relentlessly. I can see blockchain technology having plenty of uses in the next iteration of the Internet, but building the next generation out of it would be like trying to build an economy out of potlatches."

Blockchain doesn't have to be the building block of Web3, which after all is a concept, not a technology. A decentralised internet could take many other forms. One example is the Solid Project, led by Sir Tim Berners-Lee: a specification that allows people to store their own personal data in a decentralised data store called a Pod. The idea is that anything you do online - from a Google document to a comment on someone else's social media post - belongs to you and is stored in your Pod. Web apps would interact with the data in your Pod, but it would remain solely yours.

A drawback to Solid, at least in terms of decentralisation, is that Pods are still hosted on a server like Google Cloud or AWS. The Safe Network removes this entirely, envisioning a future where the spare capacity of peoples' computers and phones replaces the existing structure of the Web: taking it ‘off corporate servers, out of government control, and back into the hands of people'.

"We feel perpetually available - and private - data is a prerequisite for a decentralised web," says Jim Collinson, chief strategy officer of Maidsafe, founder of the Safe Network. "In fact, we think the Safe Network would be an ideal place for Solid Pods to reside, and in that respect the two projects go together nicely…and there are community efforts for just that!"

In fact, it's a fallacy to say that a new version of the internet should be built on blockchain at all.

The criticism

Criticisms of Web3 are widespread, ranging from the technology to the very concept of decentralisation itself. Some technologists even dispute the name.

The TCP/IP technology behind the internet - argues Ruben Verborgh, professor of decentralised web technology at Ghent University - is already decentralised, and blockchain goes against the read/write functionality at its heart.

"When we say the Internet (and Web) are decentralised, we mean that there is no single point of failure. Everyone can have their own data. When blockchain says it is decentralised, what they mean is that there is no central mediator. Everyone has the same copy of the data...

"On the Internet, I can store personal data. I can have my own website. I don't need anyone's permission. On the blockchain, my data is visible to everyone. I can't remove it. I can't write whatever I want, the chain needs to approve it.

"So very different things, and the 'Web3' label has nothing to do with the World Wide Web. The name was just stolen for marketing reasons."

Matthew Rosenfeld (aka Moxie Marlinspike), founder of Signal, points out that there are practical reasons for centralisation to exist:

"After 30+ years, email is still unencrypted; meanwhile WhatsApp went from unencrypted to full e2ee [end-to-end encryption] in a year. People are still trying to standardise sharing a video reliably over IRC; meanwhile, Slack lets you create custom reaction emoji based on your face."

Put another way, decentralisation can and does slow technological advancement. We can look at decentralised autonomous organisations (DAOs), which are largely built on blockchain, for an example directly related to Web3.

Before a DAO can implement a change, that change needs majority support from the members. Getting them all to vote, and especially getting them to the point of a majority, can be time-consuming, especially when compared to a decision made by central authority.

The result of the DAO decision process is, to be fair, open, transparent and democratic, but it can also be extremely slow. There is also no way to speed it up: even if a critical vulnerability is spotted in a DAO's code, it can't be fixed until the majority vote in favour.

Hilary Omitogun, UX researcher at Meta, expects the coming years to see a period of coexistence between centralised entities and decentralised systems.

"In the near future, I don't think decentralisation will completely get rid of big tech firms. I think it will be Web2 and Web3 coexisting, sort of a mix of both. This means there'd be decentralisation but not completely where private centralised companies are kicked out.

"In fact, the Web3 space still relies on some centralised companies for blockchain-based activities. A lot of people are also still gravitating toward centralised products like Binance and will continue to do so for a while, because these products are relatively easy to use."

The reality

Web3, blockchain, and related technologies like smart contracts, have great potential and are likely to disrupt many markets and sectors. But their use today is limited; few mainstream applications exist outside of cryptocurrencies, and many people have reservations about the concept at all. It's easy to get caught in the hype, but there are challenges to adoption on both a social and technical level.

Omitogun, who lives in Lagos, acknowledges the benefits a decentralised system could bring, but points out there are real issues to overcome.

"On one hand, the Web3 space offers non-traditional earning opportunities for people in countries with a high unemployment rate like Nigeria. However, a lot of Web3 projects/apps/products are complex, which makes it difficult for people with no technical background to use.

"Builders in the Web3 space need to start considering the human factor. For Web3 to be successful, it should be easy for anyone at all to use."

Jim Collinson of Maidsafe has a similar view:

"The technical challenges remain privacy and scalability, and we are working hard on both. The real social challenges are how we make sure, collectively, we are building an inclusive, accessible, and open decentralised Internet that is there to serve humanity… and not just repeating the mistakes of the past."

The past informs the future

What are those mistakes? Primarily, how power has centralised around a few major firms in Web 2.0. Some stakeholders are concerned that Web3 could mimic that landscape, with venture capital replacing Amazon, Meta, Microsoft and Google.

VC firms have long fuelled the tech industry, providing funding and advice to startups that could be the next Instagram. It's natural for them to now turn their eyes to Web3 - investing more than $30 billion in crypto startups alone last year.

Why is this dangerous? Because Web3 is now focusing on digital scarcity through tokenisation, rather than the principles of openness and transparency. In other words, a power imbalance - between those with tokens and those without - and thus centralisation, is already being built into its foundations.

Twitter CEO Jack Dorsey caught flack for pointing out VC's involvement in Web3 last year:

The principles of openness, universal access to knowledge, and respect for the right to privacy should define Web3. Critics like Collinson believe VCs are instead taking the space to one with "a tech-first, profit-seeking approach," defined by digital scarcity.

"Digital scarcity seems entirely antithetical to the foundations of the Web, and therefore a poor choice for the underpinnings a new Internet. As the basis, though, for controlling data, the flow of information, and therefore power? Well, I can see why that might produce a gold rush of investment, and why that has a tendency towards centralisation - economic, or otherwise."

Sia - whose employer DigiStrats is an investor in early stage Web3 projects - understandably takes a different view. She points out that VCs have a role to play, and attempts are being made to avoid centralising power:

"If you're a new Web3 founder, it helps to have someone provide the capital, advice and network to help you accelerate and scale quickly.

"Most [Web3] projects allocate 15-25 per cent of their token supply to multiple investors, so each investor really holds less. I don't think this is a large enough amount to say that powers are centralised to any one party."

Scepticism about the new Web is understandable. The current trajectory of tokenisation and scarcity, if it continues, could lead Web3 to accelerate the Web 2.0 trend towards hyper-capitalism. The tech industry's challenge now is to understand and support the promise of decentralisation: of free and open access to knowledge, of a right to privacy and data ownership, and transparency at the heart.

Web3 and its related technologies have great potential to change the face of the internet. Huge amounts of money are being thrown at development and it will not take long for these efforts to bear fruit, although mainstream adoption is likely to take some years. For now we believe that the concept and promise of Web3 - while much-discussed - is still very much in its infancy and suffers from an excess of hype today.