Five percent of people — the vocal 5% who dominate Twitter and other social media — are obsessed with “Web3.” Another 5% are sick of hearing about it, leaving around 90% of people with no idea what those nerds are talking about.
If you’re in that 90%, and just want to understand what the fuss is all about, this is for you.
First some relevant context. I’ll be brief.
The Industrial Revolution was brought about by machines that did work people had done for centuries… better, faster, and cheaper than people ever could. The wealth those machines created was concentrated in the hands of a very few… Robber Barons, we called them, even after they were guilted and shamed into plowing much of that wealth back into society.
When machines had absorbed most of the manual labor, people realized information about that work could be even more valuable than the work itself. A new class of machines — computers — were created to manage this information. They were room-filling behemoths, once again controlled by the very few. In time computers grew smaller, giving birth to the PC, and distributing the power to manage information. Networks emerged to help people share this information, and eventually those networks were combined to create the Internet. Power became more distributed. The pendulum swung, and as the 20th century drew to a close, the promise of Utopian equality and harmony seemed almost within reach.
Then in rapid succession came the World Wide Web, the .com bubble, the shift toward cloud architecture, the rise of social media (a.k.a. “Web 2.0,") and the crypto craze. Taken together this is a mind-boggling, society-changing progression of technology, unleashed over just the life of your average grad student. It’s connected us, of course, helping lift billions from extreme poverty and creating wealth on a massive scale. But that wealth is now — once again — concentrated in the hands of the very few.
A swarm of unintended consequences cloud the way forward. We’ve altered the planet we depend on in ways we can’t agree on, in part because we’ve drawn societal, cultural, and economic fault lines between haves and have-nots in the new economy. Erosion in the foundation of compromise — objective truth — makes it impossible to work past strong feelings and tribal loyalties. Democracy itself is under threat at home, with autocrats on the rise around the world. One could be forgiven for feeling burned by it all, and anxious about what comes next.
And what comes next is Web3.
Wikipedia defines Web3 as “an idea for a version of the Internet that is decentralized and based on public blockchains.” Other, equally useless definitions include:
Got it? Didn’t think so.
I’ll start with an analogy: If the Internet is Iron Man, blockchain is Captain America, NFTs are Thor, and decentralized applications are The Hulk… Web3 is The Avengers. It includes all the heroes from other stories, but brings them together to create something different, fundamentally new, and (hopefully) better.
It’s hard to describe The Avengers absent a description of its individual team members, which I’ll do below. But if The Avengers is “a collection of the Earth’s mightiest heroes, brought together to defeat an unprecedented threat to humanity,” then…
Web3 is a collection of the the 21st century’s most impactful technologies, combined to offer humanity the chance for a more fair and people-centric future.
Let’s take a closer look at these technologies, with an eye toward how bringing them together creates something new, and worth getting excited about.
The foundation of Web3 is the global network of people and machines. Today the majority of people connect to or depend on the Internet, a still-recent invention so central to modern life most of us take it for granted. Billions use it daily to connect, communicate, train, and transact. It’s transformed the flow of goods, services, capital, and life itself in developed nations, with one noteworthy exception: money.
You can move information about money on the Internet, but you can’t move money itself. Or at least you couldn’t, before the invention of Bitcoin.
Bitcoin is digital cash. It can’t be copied, counterfeited, or even created past the numerical limit set by its inventor. It can be bought, earned, and exchanged, though, with the caveat that its value can change dramatically and unexpectedly, at least over short timeframes.
Over the longer run, its value pretty much goes up. A Bitcoin was worth about $435 at the end of 2015, 6 years after the anonymous white paper that brought it about. Today a single Bitcoin is worth over $60,000, a rate of return that’s spawned not only an army of true believers, but thousands of similarly designed “cryptocurrencies.” All are built on similar systems, centered on a distributed ledger that makes the flow of value between numbered accounts open and immutable (more or less) through a system called the blockchain.
Like the Internet, the blockchain is built on a set of common standards. Its integrity is ensured by ongoing maintenance of the records necessary to complete any transaction, which — amazingly — include a compressed or “hashed” copy of every transaction that preceded it. No state, person, or institution owns the blockchain (again like the Internet,) and the burden of its operation is born by independent parties, compensated for their efforts through a kind of tax on all transactions.
The original Bitcoin white paper also defined how digital assets other than cash might be embedded in and protected by the blockchain… assets including art, books, articles, music, video, or even virtual experiences. It took a while for this idea to catch on, but when memes were added to the blockchain in 2016, people started trading them, and another pillar of Web3 slipped quietly into place.
NFTs (“Non-Fungible Tokens,” which are coded creations on the blockchain that can’t be copied or counterfeited) are a big deal because they’re the key to protecting creativity itself. This is especially important for the emerging creator economy, the class of businesses built by over 50 million independent content creators, curators, and community builders including social media influencers, bloggers, and videographers, plus the software and finance tools designed to help them with growth and monetization.
The creator economy isn’t just something we hope will happen, it’s something we need to happen. Remember those machines that started taking jobs from manual laborers back in the Industrial Revolution? They grew up, and got smarter. Today their robot progeny are taking over skilled and professional jobs as well, as anyone who’s ordered from a kiosk at McDonald’s, built a website on SquareSpace, or created a will on LegalZoom can tell you.
Which brings us to the fourth and final leg of the Web3 stool.
Facebook made news recently by changing its company name to Meta. Google did the same a while back, changing its company name to Alphabet. Both wanted to create some distinction between the applications they developed (Facebook, Google) and the companies that take huge profits from those applications (Meta, Alphabet.)
Take that idea one step further… to imagine a world-changing application, without a company taking profits from it? Open Source software took a step in that direction, delegating the work of software development to a community of volunteer contributors. Open source contributors are unpaid, but benefit either from using the software they help create, or by selling ancillary services around it.
dApps (“Decentralized Applications,” software that runs on the blockchain) take this one step further, creating systems of simple rules and instructions that function as software, without the need for a person, or a business, to run them. Unlike open source projects, the work required to build and operate dApps is paid for through the automatic creation and appreciation of a cryptocurrency specific to those applications, sometimes called a utility token.
The technical detail of how this happens isn’t important. What is important is how this subtle change in business model can change everything for users.
In the dApp version of Facebook, for example, there would be no Meta. Without the centralized entity to take profits from the application, its profits would be re-distributed in their entirety to the users of the platform. When you think about it, this makes sense. Facebook without users is worthless. Why shouldn’t users get to keep more, if not all, of the value they’re creating? On “dApp Facebook,” coming soon, they will.
Facebook, Google, YouTube, Twitter, Instagram, even Medium — where I’m writing this now — are all powered by the content their users share, search for, create, post, shoot, curate, or write. In the Web3 world, those users would get their fair share of the value they’re creating on these platforms, instead of 99% of it going to an elite cadre of hoodie-sporting, Silicon Valley billionaires.
It’s not just social media platforms. Banks have no money without our money, so they’d be impacted similarly. Insurance companies can’t manage risk without the people taking risks, and paying premiums, so count them threatened as well. Many of the businesses creating massive wealth right now could be decentralized — democratized, really — And that’s not to mention lawyers, accountants, and other service providers, many of which will soon start losing business to smart contracts on the blockchain.
The resulting redistribution of wealth — not by political means, which can be influenced by monied special interests, but by the forward progress of more efficient technology, which is much harder to resist — really could change everything.
Fewer mega-billionaires in private rockets, more real wage growth at the bottom of the ladder. Creator economics that make the creator economy a financially viable option, especially as the pace of robot job replacement accelerates. Less financial insecurity and anger among the masses, and less political influence among the vested elite.
With the combination of a global network, digital money, own-able creativity, and ownerless apps — what we collectively call Web3 — it’s all possible.
It just depends on what we do now.
Only a wild optimist would argue that Web3 is likely to wipe away the accumulating sins of the 21st Century, to put mankind firmly and finally on the path toward a fairer, cleaner, more stable society. It’s hard to imagine a world like that… a world where the profits of machine labor are shared in such a way as to eliminate poverty, disease, and despair; a world where the work of artists and explorers is highly valued and always protected, where we measure our lives by the good we do and not the goods we accumulate.
Even a die-hard cynic, though, would have to admit the outcome isn’t set, and that — at least for right now — the choice remains our own.
We’ve seen how fast things can change. It happens when the most powerful among us are willing to set selfish concerns aside in the moments that really matter, and act in the interest of all humanity.