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Enter Web3, or why the capital is ‘no longer the scarce resource’


By Olya Green

Why should we care about the emerging Web 3.0.? And how creating new value and capital assets is becoming available to pretty much anyone who has the resource launch a tokenized asset on the blockchain?

The trigger for Web3

To understand the ever-changing nature of the Internet, let’s recall the basics that initially define the world wide web. As a whole, the Internet is merely a software-based protocol connecting desktop and mobile devices globally. This software is the product of human design, therefore it has an infinite scope for experiment, provided that the incentives for the user adoption are in place. Back in the 80s, when the first era of the Web sparked, the Internet protocol was open-source and controlled by the community in the sense that anyone could set their rules and build potentially anything. The amount of generated gigabytes of information has surged accordingly, and the Big Four, or GAFA, figured it to be the most valuable asset having started to capitalize over. Collecting personal user data for further ad-sales became the modus-operandi, while users completely abandoned privacy concerns for more competitive and sophisticated apps. By circa 2016, the vision for transparent and user-centered Web has yet again stirred the minds of developers. With the advance of distributed ledger technology, this vision started to come together, and developers flooded in to build decentralized peer-to-peer networks, giving rise to Web3 tech stack.

Overall, to draw the line between the three Internets, we suggest these two distinctive features:

  • The mode of content generation.

While in Web 1.0 the content was generated by the website admins, Web 2.0 allowed for the user to do so, yet still moderated by the admins, and Web 3.0 content would be both generated and modified solely by the user in private and transparent mode.

  • The ability to hold state.

The previous iterations of Web were essentially stateless, i.e. participants can’t hold and transfer their own state and the value it creates, or transfer it from one to another. In 2009 Bitcoin gave us a way to hold state, and we now have a way for each participant of the network to hold and transfer state in a digitally native way.

The idea of decentralized peer-to-peer network was up in the air, and distributed ledger technology with its inherent ability to exclude middleman seemed to be a perfect tool to leverage. If Bitcoin was the first-ever p2p money without banks mediation, the very same technology could now allow us to rebuild the existing p2p services in a new manner, like, for instance, a social media platform without Facebook governance.

It’s worth pointing out that the evolution to Web3 is an ongoing process, and most likely is to be entirely re-designed in the coming decades, triggered by the build-up of crypto networks that combine the most progressive features of the first two internet eras, namely:

  • Decentralization

  • Community-governance

  • With capabilities exceeding those of the most advanced centralized counterparts

What is Web3 exactly?

By nature, Web 3 is a certain type of data architecture based on decentralized p2p interaction, or, in other words, a fully distributed data architecture. These have been known since the 1990’s with file sharing platforms like BitTorrent. Now Blockchain has taken p2p architectures to the next level by injecting cryptography and incentive mechanisms.


1.jpeg

The ongoing shift from centralized to distributed data architecture.

Web 3 key features

To recap, Web3 is a tech stack set built to restructure the control over the internet. Its core attributes are as follows:

  • A new state layer, or a stateful protocol, that allows to transfer value.

  • Removes middlemen and incentivizes users to contribute.

  • Native economic value can be created and transferred by any participant.

Web3 decentralized stack

Let’s have a quick look at this modular framework for Web3 stack comprised of seven layers and modular components that allow for the state to be preserved across all the participants. State Layer, or the blockchain infrastructure, is at the core of this structure preserving the state of everything else that happens below, allowing any prospective participant to join the system, as long as they obey the rules of the network. This layer can either be public or private with every next layer from hereon — from Computation to Application — built on, or compatible with those layers below.


The underlying principle here is that a newly launched dApp does not need to rewrite its entire stack, if it wants to change the state layer, allowing each layer to preserve the value it creates, which ultimately allows to keep up healthy competition, and be sure that no one would be able to rearrange the rules of the game as it happened back in the 2000s with the earlier version of open protocol.

Why is Web3 better than Web2?

  • Today, a handful of companies control the platforms we use to search for information, store our personal data, and communicate publicly and privately. Web3 changes that by handing over those centralized powers to users.

  • Web3 introduces the Internet where money and p2p payments are natively digital.

  • The central point of control is completely eliminated: no need to trust Google-like middle-men anymore — the trustless mode where user data is protected is taking over. No government or corporation is able to delete or harm the data any more.

  • No more servers that belong to Amazon and store billions of giga-bytes of user personal data to feed the advertising machine. Instead, users are fully entitled to exercise control over their data stored safely and transparently by virtue of cryptographic encryption.

  • Since the data is distributed and decentralized, there is less space for data breach and all sorts of leaks — now a hacker would need to bring down the entire network, which is becoming way more difficult.

  • Web2 apps are tied up to a certain operational system (iOS or Android) and therefore limited by its capabilities. This adds up to the effort and expenses of developers, and eliminates the potential of certain products (for instance, many crypto wallets are not available on iOS). Web3 introduces an ultimate compatibility and interoperability — dApps are universal and easy to customize, and potentially could be launched on a wide array of devices — from a smartphone to the microwave.

  • Free access to the blockchain state layer allowing anyone to create the address and interact with the network.

  • And finally, Web3 eliminates the technological dystopia. No need to adhere to a certain network or Internet provider that also collect and analyze private data — users’ personal devices (crypto wallets and smartphones, VPNs and decentralized storages) will be storing and managing all the data.


dApps taking over Web2

dApps taking over Web2

What are the possible catalysts for Web3 to take-off at large?

Some might argue that Web3 has gone bad, however, if we start looking at the the adoption curve dynamically, not statically, and with a view to the future, the win of decentralized solutions is inevitable, simply due to the better performance and more efficient user incentive schemes. Surely, there is a number of adoption challenges stemming from the fact that the majority of decentralized platforms (at least for now) often launch at the R&D stage and without definite use cases. As a result, they need to go through two phases of market adoption: 1) product-market fit between the platform and the developers who will finish the platform and bootstrap the ecosystem, and 2) product-market fit between the platform/ecosystem and the end user. That’s why some might consistently underestimate the potential of decentralized solutions. As for the factors that contribute to the widespread adoption, we might single out a radically cheaper development cost along with creating applications clearly superior to the centralized providers.

How is #DeFi a core building block of Web3?

Since Web3’s major novelty stems from its inherent ability to hold and transfer value, it’s a logical leap to suggest that the framework and mechanisms for programmed sequence of monetary transfers, or programmed finance, would be at its core. As Ryan Zurer aptly put it in his keynote at Web3 Summit, it’s the world of #DeFi where the first dApp that is to drive mass adoption will bootstrap, and that’s all because of its inherent crypto-financial incentives.

In line with Gavin Wood’s vision for the Web3, the prerequisites for DeFi takeover are essentially these:

  • Re-building the Web in line with the principles of individual ownership over their assets and data requires introduction of native digital assets

  • The advances in DLT that enabled trustless p2p interactions in the realm of value transfer previously dominated by the authorities will eventually eliminate the governmental and/or corporate mediation layer

Further thoughts

As Jutta Steiner suggests, ‘…the advent of distributed consensus protocols has enabled trustless peer-to-peer transactions in places we have previously had to rely on central authorities to hold or transmit data or value’. Decentralized Web may still be making baby steps, however, even at this early stage it’s of utmost importance to set the tone for the blockchain movement as pursuing innovation over making profit. Or, as Vlad Zamfir summoned at Web3 Summit, ‘defend every layer’. A lot of other speakers also reflected on this idea specifically digging into the trend of the open-source technologies being captured or bought out by corporations. Ultimately, it appears that we’ve arrived at the next critical milestone in technological development that Gavin aptly defines as ‘the cost of freedom is constant vigilance’.

We will dwell on how and why #DeFi is setting the scene for decentralized Web to take off at large in our next post. In the meantime, feel free to share your thoughts in comments.

Asset management on Web 3.0. rails — one step closer to global financial inclusion?

Asset management on Web 3.0. rails — one step closer to global financial inclusion?

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