Web3: is decentralisation the future of the internet?
Web3 promises to usher in the next phase of online browsing by introducing blockchain into the mix. Is it third time a charm, or three strikes and you’re out?
Good things may often come in threes, but is the third of anything really the best?
After all, for every Return of the King, Radiohead's OK Computer, or third time lucky, there’s a Godfather 3, Oasis’ Be Here Now, or the dreaded third-wheel.
If we’re on the cusp of the third version of the internet after Webs 1.0 and 2.0, as some have professed, is there any guarantee that what comes next will be better?
Web 3.0 used to refer to the Semantic Web, a more machine-readable internet using metadata, machine learning, and natural language processing to provide more structure to content.
However, this definition has largely been discarded, presumably because this nebulous concept is already at its peak. Web3 now means moving the web to the crypto realm of blockchains, NFTs, IoT, decentralised finance (DeFi), decentralised apps (dApps) and smart contracts, beyond the control of the likes of Google, Apple, or Facebook – a utopian vision of conglomerations of individuals who own and control the internet, and are rewarded for doing the hard work.
This town ain’t big enough for the 3 of us
To the true believers at least, Web3 is the next phase of the internet. If Web 1.0 was the Wild-West era of anarchic, decentralised online activity based around static webpages, Web 2.0 was the age of civilising, bringing a more dynamic, interactive web, and making online video viable.
This came at the price of handing over much of online life to closed platforms owned by private corporations that made billions from monetising user data and attention. The public square became a series of tightly controlled, heavily monitored gated communities, and the creation funnel was inverted, as social media made users the drivers of online content.
And now, Web3 is upon us to shatter the monopolistic control of Web 2.0 and tilt the balance of power back in favour of the users, with more individual privacy and more structural transparency; a return to the Wild-West era, of user-driven content and moderation – frontier justice, so to speak – with all the advancements of the modern web intact.
Key to this decentralisation is blockchain, which creates a publicly visible and verifiable ledger, stored among several machines rather than a single central server. Web3 theoretically improves customer satisfaction and protects user privacy better because it’s these authorities and intermediaries that are doing most of the data collection.
The Ghost in the Machine
A rough sketch of Web3 was first published in 2014 by Gavin Wood, one of the chief architects of the Ethereum cryptocurrency, terming the notion a “Secure Social Operating System,” or, more tellingly, a “post-Snowden” web.
Decentralised systems are nothing new to the web, of course; ARPANET was established in 1969 as a network capable of surviving nuclear Armageddon, but the idea is older than that – an idea that could, perhaps, fundamentally change the way we organise society.
In 1967, philosopher Arthur Koestler postulated the existence of holons – entities which are both a whole and a part of a larger system – in his book The Ghost in the Machine. When combined, these form a “holarchy,” a neutral order, with no hierarchical structure. In biological organisms, from organs to cells to the individual molecules that make them up, each constituent part is its own system and part of a wider being, just as individual computers, local area networks and the internet itself are all systems in their own right.
In a holacracy, management is decentralised, where teams are composed of self-governing individuals with fluid responsibilities within a larger organisation. Web3 is a virtual holacracy, stripping away layers of bureaucratic decision-making and placing them directly in the hands of users, who will develop and maintain services in exchange for a voting stake in the direction of the network.
In this brave new world, the value generated will reward users with tokens, which can be staked as votes to steer the future of platforms, or used as currency. This is the thinking of Nader Al-Naji, former Google engineer and founder of Web3 social platform DeSo, where users are paid for participation and work.
If there’s any concrete example of a Web3-based holacracy, DAOs, or “decentralised autonomous organisations” are blockchain-based, algorithmically run enterprises, owned by stakeholders. Smart contracts – self-executing contracts existing on the blockchain – would manage the rules of any organisation, executing automatically when agreed-upon terms are met. In principle, these allow DAOs to operate in a transparent and secure manner, without the need for a central authority to manage the rules and enforce bylaws.
The DAO (that’s The DAO) was an open-source, Kickstarter-esque DeFi protocol which allowed investors to directly fund new enterprises through smart contracts and blockchain-based financial transactions, circumventing traditional banks. Stakeholders were welcome to the dividends of these investments, or the increased value of their staked tokens held in valuable enterprises.
The DAO launched in April 2016 with a sale of proprietary DAO tokens for Ether tokens (ETH). After three weeks, The DAO had over 11,000 investors and more than $150 million, containing approximately 14% of all Ether then in circulation.
However, in June 2016, a vulnerability in The DAO’s code saw millions of dollars of ETH stolen by parties unknown. This led to a fractious debate in the Ethereum community as to how to respond, with some users insisting that the integrity of the blockchain must be preserved, while others called for a “hard fork” to reverse the blockchain itself to correct the fraudulent transaction.
After much debate, the latter was agreed on, and The DAO’s transactions were rolled back to before the attack, and the stolen Ether reallocated. However, this meddling in the immutable blockchain caused quite a backlash in the community, resulting in the creation of two separate Ethereum networks: Ethereum, and Ethereum Classic.
Web3 is not without its critics, with web daddy Tim Berners-Lee saying it’s “not the web at all.” Even Elon Musk is a sceptic:
I’m not suggesting web3 is real – seems more marketing buzzword than reality right now – just wondering what the future will be like in 10, 20 or 30 years. 2051 sounds crazy futuristic!— Elon Musk (@elonmusk) December 20, 2021
As with every new world-changing technology, there comes a great deal of speculation and hype; just as the Metaverse is an attempt to foist rebranded VR into more and more spaces, Web3 is rehabilitating the crypto space, which has seen a cryptocurrency “bloodbath” in recent times and widespread fraud at one of the sector’s biggest exchanges.
“You will have a much harder time finding any definition that’s not so full of buzzwords that it becomes meaningless,” so says Molly White, creator of the website Web3 is Going Just Great, or, more bluntly, “an enormous grift that’s pouring lighter fluid on our already smoldering planet.”
Even for legitimate Web3 ventures, there’s still a risk of the value remaining concentrated very much in the hands of a crypto aristocracy. In fact, crypto wealth is even more concentrated than fiat money, with just 0.01% of crypto holders possessing over a quarter of currency, and with prices continuing to fluctuate wildly, new entrants have more to lose than early adopters.
Could this 0.01% use their money to wield more influence and reinforce the hierarchies Web3 aims to shatter? With enough crypto, one entity or person could have enough leverage to disproportionately shape the blockchain in their own interests – or cash out, as was the case with Pantera Capital, investors in Terraform Labs’ failed Luna project who, after a mere $1.7 million investment, snatched $170 million from the jaws of defeat shortly before the stablecoin’s collapse.
Ultimately, many of the issues that Web3 aims to tackle aren’t tech problems, but cultural ones, and adding blockchain won’t do anything to prevent greedy and unscrupulous characters from installing their own middleware that they can profit from.
And in the event of trouble, who do users turn to when, say, their crypto tokens or NFTs are snatched? The DAO’s response to its hack generated a great deal of controversy among users – could such drastic measures be taken again if billions more in tokens from millions more customers were compromised?
Even if Web 2.0’s gatekeeper enterprises are broken up, telcos will remain the providers of connectivity as the owners of the infrastructure. But is there room for telcos as we know them in a decentralised internet? Certainly, this new way of doing things could level the playing field, driving down prices for new entrants and disruptive innovators to offer advanced services to customers.
Decentralised networks make sense for telcos in principle, removing the need to invest in so much infrastructure, such as data centres, and distributing workloads would cut down on energy-intensive processing, while improving the overall reliability and resiliency of services.
But as with other emerging technologies like cryptocurrency and the Metaverse – what problem does this hope to solve and, what tangible benefit would it bring? Right now, very little close to what the crypto space has touted is in development, let alone in use, and many consumers and businesses remain sceptical over Web3’s true utility.
Having this pre-baked identity for Web3 is putting the cart before the horse, and in stark contrast to how the internet developed; no-one set out to create the web specifically, it evolved organically as new features were added to browsers until what we now know as Web 2.0 naturally coalesced.
Will this vacuum at the heart of Web3 force enterprises to piece together a compelling use case and gradually get customers on board, or will they barrel ahead with this untested tech and hope the pieces fall into place sooner rather than later?