What Web3 is and how it works

It exists in an embryonic stage only. It is not clear how it will evolve, how far it will spread, or even if it will fulfil its promises. In spite of this, Web3 is one of the most discussed terms in recent months (along with “metaverse”, “NFT” and several other digital terms).

In short, Web3 allows all interested users to take part in the digital economy and the platform governance. It gives us back the power that was taken away from us by the big Web 2.0 giants. Here is how it was born, how it is evolving and some examples of where it could take us.

You have to take a step back to understand it. In the second half of the 1990s, along with the commercial spread of the internet, we started to surf the net thanks to the first incarnation of the web. Websites were not interactive, you could not comment or share anything anywhere (you could, however, already send links by email). We had static websites of companies and newspapers or in some cases amateur websites.

You have to take a step back to understand it. In the second half of the 1990s, along with the commercial spread of the internet, we started to surf the net thanks to the first incarnation of the web. Websites were not interactive, you could not comment or share anything anywhere (you could, however, already send links by email). We had static websites of companies and newspapers or in some cases amateur websites.

Thanks to this form of the internet, blogs, forums and platforms such as Tumblr were born. It allows anyone to participate in the collective creation of the web. All this reaches its peak – for better or worse – with social networks. Facebook, Twitter and Instagram are, in a way, the final stage of Web 2.0. They allow active participation and content exchange in the simplest and most immediate possible way. However, at the same time, they lock us into their walled gardens, collect a lot of private data about us and then shower us with advertising based on it. It is all free, but we are products sold to advertisers, with no say in the matter.

This is above all the point Web3 wants to work on. Besides reading and writing, this third generation gives us the opportunity to “own” shares in the platforms we participate in. The more shares we own, the more say we have in the decisions to be taken regarding the platform governance in question. What’s more, since these shares take the form of cryptocurrencies, if the platform we participate in is successful, and therefore more people want to buy them, they will increase in value, allowing those who own the most (or previously invested in them) to earn money.

“Investors choose what happens on the decentralised internet, while Twitter, Facebook, Google and a small number of other companies choose what happens on the main network”, Brian Brooks – founder of the blockchain company Bitfury – explained in a hearing at the US Congress. It is in this sense that Web3 is decentralised: power and control are distributed to anyone who wants to take part in it.

A couple of examples may help. For instance, Reddit is considering the implementation of tokens (Community Points) to be distributed to the most active users (or those who produce the most popular content). The more tokens you have, the more say you have in the platform’s decisions. Using the blockchain, it would be possible to sell your tokens to others as well.

Another Web3 example, closely linked to the blockchain, is Axie Infinity. A game which allows you to collect, breed, train and fight little monsters (yes, Pokémon-style). However, to own these “Axies”, you have to buy them via cryptocurrency, just as you have to buy accessories or powers to make them stronger. Axie Infinity is also a form of investment, since – unlike traditional games – those who win battles win prizes in special cryptocurrencies too.

In this and similar games you can then resell your characters, rent them out to other players who do not have the required start-up capital (by earning a share of their victories) and more. It is an example of Web3 because, besides being based on blockchain and cryptocurrencies, it allows you to be fully part of the videogame economy.

In other cases, we are faced with a participation economy. Filecoin is a blockchain-linked programme that allows people to share a free part of their hard disk, so that others can save here (and in several other copies) the data they would otherwise upload to the centralised cloud. Those who offer their space receive cryptocurrencies in return, which they can then exchange on the free market.

These are all embryonic, but already active examples of Web3: a network that thus enables participation in the network economy and governance. However, looking ahead, the full Web3’s potential will be revealed when – and if – all the individual platforms that make up the third generation of the internet are connected together.

In this way, it would be possible, for example, to use the tokens gained by making our hard disk available on Filecoin to buy “Axies” and win battles, and then sell them in exchange for Community Points that make us increasingly active on Reddit. A fully decentralised, single economic ecosystem that we can be part of by moving from one side of Web3 to the other as easily as we surf the net with any browser today.

By the way, some browsers, such as Opera or Brave, are internally implementing cryptocurrencies, and seem to want to act as a battering ram to simplify and spread the use of Web3. So, when will this third version of the web take over from the second? Things are actually not that simple.

Who might be interested in taking part, economically and beyond, in this type of web? Cryptocurrency enthusiasts, privacy advocates, nerds and even speculators. And the remaining 99% of internet users? The truth is that, for them, the centralisation of Facebook & Co. is extremely convenient: they can use the tool easily and never think about it again.

For this reason, the most likely development is that Web3 will not replace Web 2.0, but will complement it. It will be a more evolved – and more complex – form anyone who wants to get involved in a more integral way and become part of a new economic system can participate in.

There is one last aspect. As Twitter founder Jack Dorsey recently pointed out, many Web3 companies are financially supported by the usual venture capitalists, who have invested hundreds of millions of dollars in these projects. And so, inevitably, the decision-making power is likely to end up in the hands of a few people, who will firmly hold the reins of Web3. Has the decentralised network already started to centralise? 

Opening image: courtesy Robynne Hu, Unsplash