What is Web3?
Web3 is a term that’s become more common over the last year, particularly among tech entrepreneurs and investors. It’s meant to convey the emergence of a 3rd era of web applications and the dynamics associated with them. In this context, Web1 was the first iteration of the web, where users mostly consumed content, reading static pages that were connected through hyperlinks. In this era there was limited interaction between a user and site or among different users. Web2 changed this dynamic, with the mainstream emergence of user generated content and greater interaction between users. Average people were now regularly posting on forums, live chatting on messaging services, or creating other forms of content for people to engage with. With Web2, the mainstream internet was more of a two way street, with users able to both read information as well as contribute their own.
Progression of the web, distilled to a tweet. Chris Dixon is a partner at Andreessen Horowitz focused on crypto
Web3 represents a movement toward a new class of internet applications, in which users will not only contribute, but also have a greater degree of control over the content they produce, the products/services they consume, and how their personal data is used. In more practical terms, Web3 enthusiasts want to replace the current dynamics of Web2, wherein:
Your social graph (connections/data/posts/etc.) is controlled by Facebook, Twitter, Snapchat, Tik-Tok
Finance & payments are largely controlled by banks and large intermediaries
Creators are at the mercy of platforms where their content is hosted
Users have to actively opt OUT of having their personal data monetized and sold
The promise of Web3 is that these dynamics can be improved by building new applications on top of decentralized blockchain protocols. The “decentralized” piece of this equation is critical to shift power away from platforms and back to users. Instead of data sitting on central servers owned by companies like Facebook, Amazon or Bank of America, it is cryptographically secured on a neutral blockchain, where access is only available via a private key, owned by the user. A user can selectively grant access, but by default a third party can’t see (or buy/sell) your information. This is not purely theoretical. There are examples of Web3 applications already live today, primarily focused around financial applications, typically referred to as “DeFi”, or “decentralized finance”. With DeFi apps like UniSwap, Aave, Compound or MakerDao, users access the service by connecting their crypto wallets (Web3 equivalent of logging in), and granting selective access to the application. For example, if you want to trade Ether in your wallet for another cryptocurrency, the app will communicate with your wallet, requesting access to the portion of Ether you’ve elected to trade. The DeFi app can see the balance assets in the wallet, but does not have permission to control them in any way.
The next logical question, of course, is “in what context (or for what services/products) does this dynamic actually make sense?” That discussion I will save for another post.