The next generation of the Internet promises to embrace decentralization as a core feature. Many internet users anticipate a future where they can exercise full ownership over their data and monetize it. However, will Web3 live up to this expectation and more?
Since this year, Web3 has become a household term and continues to dominate headlines as a powerful innovation. Web3 is regarded as the next internet frontier, following two earlier iterations— Web 1.0 and Web 2.0.
What is Web3?
Web3 aims to address certain challenges, the chief of which is centralization. Thus, it embraces technologies like blockchain, cryptocurrency, NFTs, and augmented reality/virtual reality to decentralize the internet and enhance user experience. Ultimately, web3 proposes to change how the Internet is used globally.
The Web2 iteration ( the read-and-write model of the internet) opened up an avenue for more user interaction. However, it enabled monopoly from a few tech players who were also early adopters.
While these brands have inspired massive adoption through their products, they currently wield significant control and can shut out upcoming brands. In addition, they profit from the swathe of users' data and content, leaving the owners with no benefits.
Why is Web3 Important?
Meanwhile, web3 offers an alternative, enabling internet users to exercise control and ownership over data and content fully. Furthermore, they can monetize these assets, with all income accruing directly to them, barring third parties or middlemen. How does Web3 achieve this?
For example, people enjoy playing Fortnite and PUBG but cannot own items within the games. And according to GrandViewResearch, the traditional gaming market was valued at $195.65 billion in 2021, with an expected growth projection of $583.69 billion by 2030.
These numbers continue to increase, thanks to the over 2.5 billion gamers globally, yet none of the revenue accrues to gamers who spend hours playing. Although most gamers think that certain in-game items belong to them, this is not the case as developers can lock them out of using the items.
Ethereum founder, Vitalik Buterin, was a victim while playing the popular World of Warcraft game, in which he got locked out of his favorite character. And according to the crypto billionaire, it inspired him to create Ethereum, an early Web3 technology.
Web3 unlocks earning opportunities for traditional gamers through NFTs. In-game items and characters double as NFTs and possess economic value— users can trade them for crypto tokens. In this case, users completely own the assets, and ownership is registered on the blockchain. Thus, value accrues to gamers as well.
How Involved is Blockchain in Web3?
Web3 incorporates blockchain as a decentralized technology, represented by peer-to-peer networks. These networks are controlled by nodes run by individuals rather than servers belonging to a single entity. Blockchain has laid the foundation for emerging and existing Web3 innovations such as cryptocurrencies, NFTs, metaverse, dApps, smart contracts, and DAO (Decentralized Autonomous Organization).
With cryptocurrencies, users have an alternative to the overly centralized traditional finance, custodying financial assets in user-friendly wallets. They essentially become bankers themselves, with the blockchain serving as a digital ledger and enabling transparency.
Moreover, cryptocurrencies enable faster and fee-friendly transactions. The cryptocurrency market has exploded, hosting over 12,000 crypto assets. This provides an insight into how web3 has influenced the financial world, decentralizing access for retail users.
Is Web3 a Fad or Not?
People criticized early iterations of the internet when they initially emerged. Web3 has had its fair share of criticism since debuting on the global scene. Questions like "Is Web3 a bubble?" "Will Web3 Fade?" have surfaced. However, here's why Web3 will succeed.
Web1.0 was the first internet version but lacked user interaction, leading to web2. While web2 has expedited the internet's growth, it faces problems that Web3 and its accompanying technologies are designed to solve. Problems like single points of failure on centralized databases, censorship, one-way value distribution, and limited user interaction.
Internet users, especially creators, now crave platforms that provide them with additional value and benefits. Web2 platforms have failed to achieve this. Through Web3, users can fairly participate on blockchain networks and earn rewards for their contributions.
In addition, they can easily create dApps, copying the open source code of an existing dApp and attracting users using token incentives. Thus, the value and benefits that accrue are not one-sided.
Closing Thoughts
Unarguably, web3 is still in its early stages and faces a handful of risks, which has slowed adoption. For example, during network congestion on the Ethereum blockchain, transaction fees skyrocket, constituting a barrier to average users.
However, as earlier technologies witnessed, these are just teething problems. Interestingly, a transition to the PoS consensus mechanism (The Merge) later this year will address scalability issues on the Ethereum network. Ultimately, Web3 will enjoy more adoption, with primitives like blockchain and DAOs forming strong narratives as the world embraces a highly digital future.
