By Sam Ancer
What is Web3?
Web3 refers to a new “version” of the internet. So far the internet has been divided into two sections in history, Web1 or Web 1.0 refers to the early internet, from the 90’s to around 2004-5. This was when platforms were quite simple and did not have many means of engaging with sites. Think early online shopping platforms and blogs, not much for community engagement or user uploaded content.
The “next stage” of the internet was Web2, this is the internet as we know it, with large sites like Facebook, Twitter, Google and so on controlling a large portion of the online space. Web2 is a more interactive space, where user content is the main form of internet engagement. Web2 sites often make their money through data distribution, offering free services in exchange for your information.
Web3 is a decentralised version of our current existing internet, supported by blockchain technology (potentially) as a way of moving away from the monoliths that control the internet. The central idea would be that all content, engagement, data, is represented on the blockchain, and that you have a single account that can access all sites across the web. This way you are able to trade your data on your terms, on a decentralised platform. So essentially Web3 is a catch all for various technologies across the block chain, including cryptocurrencies, NFT’s, metaverses, and more.
What is the block chain?
A block chain is a way of storing data that is supposed to be more secure than conventional data tables.
Block chains are made up of several ‘nodes’ spread across the world on servers, a node is filled with data, and once it is filled it is then locked and added to the rest of the chain. All of this information is duplicated across various servers so that if anything happens there are redundancies that are able to confirm the correct data set.
It also stops any people with bad intentions from messing with the data. The block chain allows for decentralised systems to operate securely without the need of a 3rd party to oversee and regulate what happens, since every process is recorded and preserved on the block chain.
So to summarise a block chain is a way of holding data so that it can’t be corrupted or lost on a decentralised system.
Benefits of Web3?
Since Web3’s entire goal is to give people control of their data and content, if it works in an ideal case scenario, it could do a lot to remove the large scale organisations that have a vice-like grip on the internet.
By giving people control of their data and allowing for a trade and exchange system of data then people can choose who has access to their data. It could also theoretically streamline the online experience, with only one log-in being necessary to access the whole web.
Another potential benefit is that if people can control access to their data they would theoretically be able to profit off of said data, essentially creating a fair exchange where instead of a platform like Facebook or Twitter selling your data for a profit, you can dictate where your data goes, if it goes anywhere.
Concerns around Web3
While there are many who sing the praises of Web3 there are concerns that it is just a marketing buzzword for tech companies and venture capitalists to secure funding. These concerns are based on several reasons, firstly is the environmental impact of systems that are needed to support the blockchain, primarily Proof of Work systems.
While we will get into Proof of Work in more detail it is worth noting that Bitcoin, the largest crypto, uses more energy than a small country and in fact its energy consumption could be compared to a country like Argentina. In fact crypto mining has become such an issue for electric grids, that countries like Kazakhstan have banned crypto mining because of its strain on electric grids.
There are other concerns surrounding Web3, namely that the large web companies like Meta, Google and Amazon may be able to undermine the goals of a free and fair web with their considerable wealth and desire to maintain their position of control.
This can be highlighted by the fact that Microstrategy, a business solutions company based in Virginia in the United States holds about 121 044 bitcoin, or approximately $3.15 billion dollars worth of bitcoin.
Proof of Work vs Proof of Stake?
Proof of Work is a way of ensuring a decent amount of energy and computing power is used to prevent bad actors from sending either spam emails or performing denial of service attacks (ddos). It’s also used to prove good faith since someone would have to be committed to the blockchain in order to participate.
This is done by providing complex puzzles that need to be solved, and whoever solves the puzzle is awarded a bitcoin. In this way, the more you provide to the servers the greater computational power you can give, the more likely you are able to solve the puzzle. But a big problem with Proof of Work models right now is that they use up a lot of energy, and so they aren’t that environmentally friendly. Bitcoin, one of the largest examples of Proof of Work blockchain technology, is said to consume as much power as a medium sized country.
Proof of Stake is a different way of providing commitment to the crypto blockchain, using a coin validation system. Members of the database provide coins as collateral and can then be given an opportunity to mine for coins. The coins are awarded randomly instead of having a competition like proof of work. Basically the more you invest within the network the more likely you are going to be rewarded. Proof of Stake needs less computing power and energy than Proof of Work which means that not only is it less environmentally costly it also has a lower barrier to entry.
The only large concern is that if someone owns around 51% of the blockchain, then they will be able to alter the chain without issue. But, these concerns aren’t particularly realistic, because if someone were to do that they would be undermining the value of their own investment. This means that it is more worth your while to work towards the good of the entire network in Proof of Stake.
So while Proof of Work is more secure it does seem that the scalability concerns may swing in favour of Proof of Stake, legislation in the European Union is pointing this way with some groups wanting to make Proof of Work systems illegal. Ethereum is making the move away from Proof of Work to Proof of Stake but this will only be completed towards the end of 2023.
Is Web3 the future or a fad?
While a decentralised internet sounds promising there are some worries about how realistic the possibility of Web3 actually is. One issue is that a lot of the established organisations that are in control of the internet as part of Web2 are already making moves to take centre stage of Web3 technology. Twitter has embraced NFT’s. Meta, the owner of Facebook, WhatsApp and Instagram are making moves on creating their own Metaverse supported by the blockchain. Another concern is that some of the tech touted by Web3 is not scalable in the ways that would make sense, there is also the issue that consumers may not be as passionate about using their data and content to engage online.
However, the fact that the technology is not there now should not be a concern as there will always be advancements that will improve scalability and access. Also just because markets right now are happy with how things are, does not mean that it will always be the case. The verdict is still up in the air so it may be best to wait and see how Web3 comes together.