What all entrepreneurs should know about Web3

by Janice Allen
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You can hardly escape the hustle and bustle around NFTs, cryptocurrency and Web3. Some say these technologies will revolutionize every aspect of society. Others say this is a utopia.

With most entrepreneurs not focused on technology, understanding Web3 and what the future holds for your business can be challenging, especially when it’s still in the spotlight.

If you have no idea what Web3 is or why it’s important, you’re not alone. The term was coined by the co-founder of Ethereum and is actually quite vague. But enthusiasts on the subject say that Web3 is the future of the Internet and that there are two ways to define it.

Related: Why Web 3.0 Will Dramatically Change the Current State of the Attention Economy

The potential future of Web3

One potential Web3 future is a blockchain-integrated internet. Cryptocurrencies and NFTs will be built into the platforms we use every day.

Now, blockchain is another hot topic that may raise some question marks for entrepreneurs. To keep it simple, a blockchain is a digital ledger. It arranges information in a digital chain of ‘blocks’ visible to the public. This is famously what cryptocurrency is built on. However, it can potentially be used for a wide variety of applications.

Web3’s second potential future is a bit more controversial and complex. Enthusiasts say Web3 will lead to a completely decentralized Internet owned by users, not companies. Blockchain and its many applications can help create such a future. But critics say the same has been said about cryptocurrency itself, and so far it hasn’t worked out.

Cryptocurrency was created and branded as a way to give individuals power over their own finances. So far, instead of revolutionizing the financial world, it has become a high-risk speculative asset class with no consumer protections. Instead of promoting fairness, the world of cryptocurrency and NFTs is plagued by scams and unpredictability.

Since a single Bitcoin costs more than most Americans make in a year, there are certainly questions about who exactly gives cryptocurrency power and financial freedom. But keep in mind that while we’ve been in crypto for several years now, it’s still a relatively young industry, with a lot of room to grow.

Related: 3 Reasons Why The World Will Never Go Back To Crypto

What does decentralization mean?

According to some Web3 proponents, the Internet is currently in the hands of a small handful of companies. Think of large companies such as Meta, Amazon and Google. They call this ‘e-feudalism’. Essentially, they claim that we are all “digital toiling” on the virtual properties of Mark Zuckerberg and other tech giants.

Web3 is the solution, they say, and gives power back to users. Here’s a look at what a hypothetical decentralized social platform might look like: Instead of going public, the platform would create cryptocurrency tokens, which they would then broadcast to early users. People would be rewarded if they go viral or use the platform with tokens, which could potentially be used as governance tokens as well. Users can use tokens to vote on important platform decisions, from content moderation and other large-scale policy issues.

Instead of a company deciding how a platform works and users live with the impact of their decisions, users will collectively make the rules.

Wait, what happened to Web1 and Web2?

To some, it may seem like we went straight from zero to three. Fortunately, Web1 and Web2 are much easier to understand than Web3. This is partly because Web3 is still largely speculative, while the first two have already been realized.

Web1 is the first version of the Internet where your computer yelled at you practically every time you went online. Think of the slow, static web pages of the 1990s. The internet of that time was mainly used for digitizing and sharing existing media, such as books, magazines and newspapers. Towards the end of the 90s, the blog was born and for the internet connoisseurs it was a new opportunity to connect with the masses.

Web1 also ran on an open source protocol. This is an aspect that Web3 evangelists want to come back to.

The evolution of Web2 began in the early 2000s when the Internet began to become “read/write” on a larger scale. It had evolved from a place where the average user signed up to view content to an accessible platform where more users could create, share and store unique information, photos and videos.

With the rise of sites like Facebook (now Meta) and YouTube, this era eventually spawned transformative technology such as e-commerce, social media, and the economy of content creation.

Proponents of Web3 essentially want to infuse the complexity of Web2 with the community-driven open-source nature of Web1 – via blockchain technology.

Related: Meaning of the Noise in Web3

Controversies surrounding Web3

There are many ideological and practical battles surrounding Web3. Some, like Elon Musk, say it’s just a buzzword right now. However, he does not rule out his future.

Critics say encouraging users to take digital actions with tokens could create a situation where bad-faith actors seek involvement at all costs. However, it can be argued that even without tokens, many social media users are already doing that. This may just be a side effect of massive internet use.

Outside of philosophical questions, many have questions about how feasible a decentralized modern internet built on blockchain actually is. Ethereum, on which many potential Web3 projects are based, is incredibly inefficient.

It has high environmental costs and is expensive to operate on a large scale. This means that it is simply not feasible for many smaller companies to adopt now.

While many are working to build apps on top of Ethereum to make it work better, some critics wonder why we are putting resources and talent into solving the huge problems of such an inefficient foundation.

Another important feature of blockchain is that it stores information publicly for all users to see. In some cases this is a useful innovation; however, in some applications it would be a disadvantage to let all network users see everyone’s entire transaction history – and it could even be dangerous.

Related: From Web 2.0 to Web 3.0: How These Entrepreneurs Made the Switch

What does Web3 mean for your company?

At this point, Web3 is largely hypothetical. This means that no one is exactly wrong or right about it. We don’t know yet what it will be or if it will be anything at all.

Some say it will create a fair and community-led digital future. Others, such as former Twitter CEO Jack Dorsey, say that it will only lead to an alternative centralized authority.

There are some malicious actors who use these futuristic buzzwords to harm people. For example, the British military’s social accounts were recently… hacked to promote scam NFTs. according to an FTC reportAmericans have lost more than a billion dollars to crypto scammers this year alone.

It’s critical as a business owner that you have a basic understanding of Web3’s potential so you can make smart decisions to take advantage of technological advancements and avoid the pitfalls of getting caught up in the hype.


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