Web3, also known as the decentralized web, is a new and emerging space that aims to create a more equitable version of the internet where ownership belongs to users instead of a few companies. While it has faced its fair share of challenges, major companies, governments, and individuals are still bullish on the long-term applications of Web3 technologies.
When Web3 started gaining traction, the ethos was WAGMI - "We're all gonna make it ." The most prominent proponents of the technology promised a more equitable web where builders better represent the whole of society, emphasizing the inclusion of female, non-binary, and BIPOC voices. In short, Web3 was going to be all about inclusion and community. Unfortunately, since then, the entire Web3 space has experienced a real fall from grace. In 2022, several major crypto lenders filed for bankruptcy. In the worst cases, the executives were charged with fraud. The meltdown of one lender, FTX, created a domino effect reminiscent of the beginning of the great depression when everyone rushed to withdraw their savings simultaneously, causing an even bigger market crash. The end result is that trillions of dollars in value have been lost since the height of a massive crypto rally in 2021.
Yet, despite these challenges, there is good reason to believe that we're just getting started with Web3. Major companies are still pouring into the Web3 space. The demand for Web3 developers has increased despite the market downturn. Governments are introducing legislation to regulate cryptocurrencies and assets, indicating that they think it's here to stay. Major brands are launching NFT projects and acquiring companies with Web3 capabilities. New and innovative products and services are being developed weekly. And significant progress has been made in reducing blockchain energy use, which is good for the planet and makes the technology more viable from a cost perspective.
So, if it's not a technological utopia where all will be right with the world, what exactly is Web3? Simply put, it's a new decentralized version of the internet where ownership belongs to the users instead of a few companies. In Web3, everyone has access to software infrastructure and can build on top of each other. In short, it's the next, but certainly not last, iteration of the internet.
The Pros
Web3 is built upon blockchain technology and is different from the internet we all know and love in 4 main ways.
Decentralized (not controlled by a handful of corporations)
Permissionless (anyone can build if they have an internet connection and know-how)
Immutable (once a transaction is recorded on the blockchain, it cannot be altered)
Transparent (blockchain transactions are visible to all)
And while it’s not immune to hacking, you could also argue that Web3 is more secure than the status quo. In a traditional website, the data is stored on centralized servers, making it vulnerable to hacking and data breaches. In contrast, Web3 utilizes decentralized networks of nodes, making it more difficult for hackers to compromise the integrity of the data.
The Cons
But it's not all rainbows and unicorns on the horizon. There are a number of existing issues with Web3 that we need to overcome before we can expect mainstream adoption.
A commonly noted issue is the cost and unpredictability of gas fees (i.e., the energy cost the user pays for each transaction which fluctuates with blockchain usage).
Given the transparent and immutable nature of Web3, users should be cautious about what personal data they are willing to commit to the blockchain. Having too much personal information on-chain could have serious consequences if it falls into the hands of the wrong people.
The decentralized nature of Web3 means that you control your data. And with great power comes great responsibility. Self-custody of your wallet means you can buy, sell, and trade with whomever you choose at an agreed-upon price. However, if you get scammed, no financial institution will support you in getting your money back.
But in my opinion, the biggest issue is the steep entry barrier for new users. To participate, you must first create a crypto wallet. Then if you want to purchase something, you need to exchange some of your hard-earned cash for cryptocurrency and move it into the wallet you created. And you're going to pay those gas fees for each transaction. That process is clunky and expects a lot from people who might need help understanding what Web3 is.
The Opportunities
For creators, the pros of Web3 include data ownership, individuals being paid for their contributions, projects being built by communities for communities, permissionless access, and a creative and technological renaissance.
For brands, one of the biggest draws to Web3 is the community-building aspect. Companies want to create communities around their brands and have full control over their access to those communities independent of algorithms or paid advertising spending. Social tokens will likely be the next evolution of marketing campaigns.
For Governments, banking institutions, and any organization that stores confidential data, the most significant benefit of Web3 is security. In a traditional website, the data is stored on centralized servers, making it vulnerable to hacking and data breaches. In contrast, Web3 utilizes decentralized networks of nodes, making it more difficult for hackers to compromise the integrity of the data.
Like all new technologies, Web3 will continue to experience its fair share of false starts before really taking off. But I expect that in the not-too-distant future, blockchain technology will be the foundation for many of the digital tools and applications we use. However, we might not realize it at first. The most useful Web3 applications won't be advertised as such. They will just be intuitive & useful apps that happen to be built using blockchain technology.