Web3 - The Next Iteration of Web

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In last few months if you have not heard the term Web3 that may mean you are not following tech but it surely means you are not on Twitter. Web3 is the thing! Let me repeat, Web3 is the thing. There is certain inherent coolness to it. Let me explain it through this tweet which did not go viral, not that my other tweets go viral, none of my tweets go viral tbh and this one did neither -

So in this post, we are going to make sense of what is Web3 so that next time around you can charm your way through any nerd talk.?

Also, I had earlier created "Everything Web3" presentation covering everything this blog has + few of my thoughts on what are the promising emerging areas in Web3 where we will see some legit action,

Click on the below for the presentation -

Now, continuing our conversation -

Before we jump directly into Web3, is there something like Web1 and Web2?

The answer is ‘Yes’.

You can define Web1 as the early stages of internet evolution. Probably, 1980s to eary 2000s. Web1 was about static websites, email/chat, directories, portals. Web1 was internet services built on open protocols like HTTP, SMTP, etc. We got companies like Google, Yahoo, MSN during this era.

After this came the Web2 era from the early 2000s to more or less today. Web2 created closed ecosystems and big tech companies like Facebook, Google, Amazon. Web2 development also got a boost from the rise of mobile computing. Open protocols could not match the functionality that Web2 could offer. Hence, Web2 essentially became the internet for all practical purposes.?

So, if Web2 was working fine, why do we need Web3 in the first place?

Somewhere down the line, Web2 became little evil.

The defining feature of Web2 was centralization. Imagine you are an active user on IG. You create content and share the same on the platform. You interact with other Users and Content on the platform. All these create a lot of values and almost all of these value is captured by IG. Creators get ‘likes’ instead of a share of the value generated on the platform.

On Web2 platforms, Users don’t own their own data or identity. You can be de-platformed and you can’t do anything about it. If you have spent a great time in creating your following on platform X but you still have to start from scratch on platform Y. Your identity is not interoperable.

A user on Web2 is a mere tourist who does not own anything but pays rent. Thanks to centralization, Users are always at the mercy of the Web2 platforms. They can change the rules of the game as they like.

As noted by Chris Dixon in his blog, Web2 companies start by attracting users and promising cooperation with the Developers/Creators. Once they reach the critical mass needed for network effects flywheel to start spinning, their priorities change. Now, their objective is to extract the Users and compete with the Developers/Creators.??

Hence, the centralization has gone bad. This is exactly what Web3 wants to solve.?

The Web3 branding happened very recently. But, all these started with 2009 Satoshi Nakamoto’s whitepaper introducing?Bitcoin. It proposed a decentralized peer-to-peer payment system. Centralized authority is needed to create consensus in the system. Consensus means there should be one version of the truth and everyone should agree to it. If you remove the centralized authority, how do you ensure one version of agreed-upon truth? Bitcoin achieves this through a consensus mechanism called ‘Proof of Work’. Hence, one important part of Web3 is the ability to come to one version of truth by using a consensus mechanism.

There are nodes in the system which runs the proof of work mechanism and maintain the agreed-upon blockchain. There are developers and users also who provide value to the blockchain protocol. Why would all the stakeholders involved in the protocol work in the first place? Hence, the incentives! For example, Bitcoin protocol issues tokens that are Bitcoin Currency to miners. Tokens work as an incentive mechanism in Web3 protocols. Hence, another most important aspect of Web3 is aligned-incentives through the issue of tokens.?

So, in short - Web2 is feudalism and Web3 is sovereignty.

Before we go any further, here are links to earlier writings that explain certain Web3 related concepts in more depth -

Bitcoin Protocol,?NFTs,?Gov & Crypto,?DAOs,?Metaverse

Now, let’s take a look at Blockchain tech stack -

Layer 0?- Hardware & Networking - Computers, TCP/IP

Layer 1?- Consensus & Compute - Bitcoin, Ethereum, Solana

Layer 2?- Smart Contracts - Code that exists on blockchain which interacts with stakeholders and wallets

Layer 3?- Client & User Interface - Metamask, Phantom, OpenSea

Hence -

Web1: Read

Web2: Read + Write

Web3: Read + Write + Own

(Btw, Not clear who came up with the above phrase, if you know please tell me, would give credits)

I hope this gives you a fair idea of what Web3 stands for. Still, let me try to become all philosophical and write a few lines on the long-term vision for Web3.?

We talked about evils of Web2 at the start of this post. Companies that have been really successful in Web2 started with the promise of removing the middle-men and gatekeepers until they themselves became one.

Hence, what Web3 wants to create is the next iteration of Web that is decentralized, directly connects Users with Creators, and has built-in ownership & economic incentives.

Now, in order to give you guys an idea of where are we with Web3, please see the below meme -?

lol, again back to the serious stuff -

It would not be fair on my part to close this post without talking about some legit questions/criticism that Web3 has received. One example is this tweet from Jack -?

Regarding Web3 criticism, the Co-founder of Signal - Moxie Marlinspike wrote a really insightful post. Hence, rather than writing myself, I would really like you all to take a?look at this, because Web3 is after all all about composability, right? right? Also, continuing the conversation, take a look at?Vitalik’s response?to Moxie criticism of Web3.

Continuing the tradition of closing the post with a meme -

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About Author

Prerak is currently working as Management Consulting Intern at Deloitte. He is also an MBA student at MDI Gurgaon and a Chartered Accountant. He began his career in Corporate working on Corp Fin - Internal Controls. He is passionate about Startups, Tech and VC. Some of his content you can find here. Usually, he can be found Brewing Coffee on French Press & Reading.