What is Web3? And why are all the crypto people talking about it?

What is Web3 and what is its connection with the crypto world, Aaron Mak describes on Slate.

If you’ve been perusing cryptocurrency forums or video-game news recently—or spying everything from New York Times job listings to zany Twitter threads claiming that the traditional job interview is about to be replaced by blockchain-based “quests, adventures and courses to prove your worth”—you might have run into the term “Web3.” The term, obviously, refers to a third generation of the internet. But is it just jargon, the latest shibboleth among people who trade NFTs of cartoon apes for hundreds of thousands of dollars and are already designing their virtual homes in the metaverse? Or is Web3—and the less concentrated version of the internet it represents—something that those of us who thought we were still living on Web2 ought to know about? The answer to both is probably yes. The answers to your follow-up questions are below.

What, exactly, is Web3?

Web3 refers to a potential new iteration of the internet that runs on public blockchains, the record-keeping technology best known for facilitating cryptocurrency transactions. The appeal of Web3 is that it is decentralized, so that instead of users accessing the internet through services mediated by the likes of Google, Apple, or Facebook, it’s the individuals themselves who own and control pieces of the internet. Web3 does not require “permission,” meaning that central authorities don’t dictate who uses what services, nor is there a need for “trust,” referring to the idea that an intermediary does not need to facilitate virtual transactions between two or more parties. Web3 theoretically protects user privacy better as well, because it’s these authorities and intermediaries that are doing most of the data collection.

Of course, this is all an idealized vision of Web3 sketched out by blockchain developers and boosters for the future, so it might not be so egalitarian in practice. One element of Web3 that’s gaining a lot of traction is decentralized finance, also known as DeFi, which involves conducting IRL financial transactions on the blockchain without assistance from banks or the government.

Meanwhile, a number of large companies and venture capital firms are already investing huge sums to build Web3, and it’s hard to imagine that their involvement wouldn’t amount to some kind of centralized power.

What came before Web3?

Web1 and Web2 (more commonly known as Web 2.0) refer to older internet eras. Web1 covers the 1990s and early 2000s, which was more decentralized and had an emphasis on open-source protocols. It was more common during this time to see static pages, essentially sites that you can’t really interact with and aren’t regularly updated. Web2 covers the period from the early 2000s to today, in which Big Tech companies run the most popular hubs of internet activity. Another marker of this era is the rise of user-generated content on galaxy-sized platforms, like YouTube videos or Facebook posts, the stuff that fuels social media. The internet became a place of active participation rather than passive consumption.

OK, but Web3 is a crypto thing, right?

NFTs, digital currencies, and other blockchain entities are going to be crucial to Web3. For instance, Reddit is currently making Web3 inroads by trying to devise a way to use cryptocurrency tokens to allow users to essentially own portions of the communities they participate in on the site. The idea would be that users would use tokens known as “community points,” which they earn by posting on a certain subreddit. The user then accrues points based on how many upvotes or downvotes that post gets from other users. (It’s basically Reddit Karma on the blockchain.) Those points can essentially function as voting shares, allowing users who have made valued contributions to have more of a say when it comes to making decisions that will affect the community. Because those points exist on the blockchain, their owners have more control over them; they can’t easily be taken away and they follow you around. To be sure, this is only one use case, a kind of corporate version of a Web3 concept known as Decentralized Autonomous Organizations, or DAOs, which use tokens to make ownership and decision-making powers more equitable. One example of a DAO is Augur, a decentralized betting platform.

NFTs are also another cornerstone of Web3. They’re essentially one-of-a-kind cryptocurrency tokens; because each of them is unique, they’re typically used as certificates of ownership for virtual objects like artwork or basketball clips. (This is as opposed to a Bitcoin, one of which is interchangeable with any other Bitcoin.) If Web3 boosters are to be believed, the digital scarcity represented by NFTs will allow users of this new internet to exchange everything from video-game skins to medical records.

Why is there all this Web3 hype all of sudden?

Much of the excitement seems to be coming from the cryptocurrency community, which would obviously benefit from an internet that’s more reliant on their technology. Some of the buzz also has to do with a few notable companies, including Reddit, making moves to get a head start on developing Web3 services and platforms. In late October, CoinDesk reported that GameStop is trying to hire a “Head of Web3 Gaming” and software engineers for an unannounced NFT platform. There been a lot of discussion about Web3 could augment video games by, for example, allowing players to more easily buy and sell in-game items or earn tokens that will give them more power to determine how the game is run. However, the Verge also posited that GameStop might just be throwing around terms like “Web3” and “blockchain” in its job descriptions to inspire the same kind of viral support it enjoyed from alternative investors in January. A perhaps more consequential recent development was the venture capital firm Andreessen Horowitz’s Web3 lobbying push in Washington, D.C., in early October. The firm, which has invested heavily in cryptocurrency and other blockchain technologies, said it sent executives to Capitol Hill and the White House to promote Web3 as a solution to Silicon Valley consolidation and to propose regulations for the burgeoning virtual ecosystem.

The hype around Web3 is entirely measured and reasonable, right?

In late October, a 28-year-old artist posted a meme entitled, “Love in The Time of Web3,” which features a cartoon couple lying in bed and gazing at the prices of Bitcoin and Ethereum. After billionaire Elon Musk reposted the meme on Twitter and garnered hundreds of thousands of likes, the artist was able to turn the meme into an NFT and sell it for almost $20,000. In other news, there’s a group churning out NFTs attached to cartoon apes that aims to be a “Web3 streetwear band.” One of those cartoon apes recently sold for $3.4 million. So, to answer the question: No.

What does Web3 have to do with the metaverse?

First off, the metaverse essentially refers to a future internet that consists of three-dimensional spaces in virtual reality where users can interact with one another. It’s the reason why Facebook recently changed its name to “Meta.” Some technologists hope that Web3 will incubate a metaverse that is built using blockchain systems and open standards, and that is run by a network of computers around the world, instead of a few big companies. NFTs would facilitate commerce involving items in virtual reality, and traditional gatekeepers wouldn’t be able to dictate what can and can’t go into the metaverse. Facebook CEO Mark Zuckerberg seemed to promote these ideals when he waxed poetic in a public letter in October about how the metaverse won’t “be created by one company” and will establish “a massively larger creative economy than the one constrained by today’s platforms and their policies.” It all sounds nice, though given how hard Facebook has fought to maintain its dominance in the social media landscape, it seems likely that it will strive to be a powerful institution even in a potential Web3 era.