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You can hardly escape the buzz surrounding NFTs, cryptocurrencies, and Web3. Some say these technologies will revolutionize every aspect of society. Others say it’s a pipe dream.
Since most entrepreneurs aren’t focused on technology, mastering Web3 and what it means for your business in the future can be challenging, especially when it’s still in the spotlight.
If you don’t know what Web3 is or why it matters, you’re not alone. The term was coined by the co-founder of Ethereum and is actually quite vague. However, fans of the topic say that Web3 is the future of the Internet, and there are two main ways of defining it.
Related: Why Web 3.0 will revolutionize the attention economy
The potential future of Web3
A 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 can put a question mark on entrepreneurs. For simplicity, a blockchain is a digital ledger. It arranges information in a publicly visible digital chain of “blocks”. This is the basis of the famous cryptocurrency. However, it has the potential to be used in various applications.
The second potential future for Web3 is more controversial and complex. Enthusiasts say Web3 will lead to a decentralized internet entirely owned by users, not companies. Blockchain and its many applications can help enable such a future. But critics say the same has been said about cryptocurrency itself, which so far has not materialized.
Cryptocurrencies were created and branded to give individuals control over their finances. So far, it has not revolutionized the world of finance, but has become a high-risk speculative investment category with no consumer protections. Instead of promoting fairness, the world of cryptocurrencies and NFTs is rife with scams and unpredictability.
With a single bitcoin costing more than most Americans earn in a year, there are bound to be questions to ask, who the hell is cryptocurrency empowerment and financial freedom. But keep in mind that even though we’ve been in crypto for a few years, it’s still a relatively young industry with a lot of room to grow.
Related: 3 Reasons the World Will Never Go Back to Crypto
What does decentralization mean?
According to some Web3 proponents, the Internet is currently owned by a handful of companies. Think big companies like Meta, Amazon, and Google. They call it “electronic feudalism.” Essentially, they claim that we’re all “digitalizing” the virtual assets of Mark Zuckerberg and other tech giants.
Web3, they say, is the solution, putting the power back to the user. Here’s what a hypothetical decentralized social platform would look like: instead of an IPO, the platform would create cryptocurrency tokens that would then be airdropped to early users. People are rewarded for spreading the virus or using a platform with a token that may also double as a governance token. Users can use tokens to vote on important platform decisions, including content moderation and other broad policy issues.
Essentially, users will collectively make the rules, rather than companies deciding how the platform operates and how users live under the influence of their decisions.
Wait, what happened to Web1 and Web2?
To some, we seem to go straight from zero to three. Fortunately, Web1 and Web2 are easier to understand than Web3. This is partly because Web3 is still largely speculative, while the first two have been implemented.
Web1 was the first iteration of the internet, when your computer yelled at you almost every time you went online. Think of the slow, static web pages of the 1990s. The Internet of that era was primarily used to digitize and share existing media such as books, magazines, and newspapers. By the late 90s, blogs were born, a new opportunity for the Internet-savvy to interact with the masses.
Web1 also runs on open source protocols. 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 “read/write” on a wider scale. It has grown from a place where ordinary users log in to read content to an accessible platform that allows more users to create, share and store unique information, photos and videos.
With the rise of sites like Facebook (now Meta) and YouTube, this era eventually gave birth to transformative technologies such as e-commerce, social media, and the content creator economy.
Web3 advocates essentially hope to bring the community-managed open source nature of Web1 to the complexity of Web2 through blockchain technology.
Related: Understanding Noise in Web3
Controversy surrounding Web3
There is a lot of ideological and practical struggle around Web3. Some, like Elon Musk, say it’s just a buzzword. However, he does not rule out its future.
Critics say that incentivizing users to use tokens to take digital action could create a situation where malicious actors seek participation at all costs. However, it can be shown that many social media users are already doing this even without tokens. It may just be a side effect of mass internet usage.
Philosophical issues aside, many have questions about the viability of a decentralized modern internet built on blockchain. Ethereum, on which many potential Web3 projects are based, is extremely inefficient.
It has high environmental costs and is expensive to operate at scale. This means that for many small businesses, adopting it is simply not feasible right now.
While many are working to build applications on top of Ethereum to make it work better, some critics question why we should invest resources and talent to solve the huge problems that come with such an inefficient foundation.
Also, a key feature of blockchain is that it stores information publicly, so all users can see it. In some cases, this is a beneficial innovation; however, in some applications, allowing all network users to view anyone’s full transaction history would be detrimental—and possibly even dangerous.
Related: From Web 2.0 to Web 3.0: How These Entrepreneurs Made the Shift
What does Web3 mean for your business?
Currently, Web3 is largely hypothetical. This means that no one is completely wrong or right. We don’t yet know what it will be, or if it will be.
Some say it will create a fair and community-governed digital future. Others, like former Twitter CEO Jack Dorsey, Say It just leads to another centralized authority.
There are malicious actors out there who are using these futuristic buzzwords to hurt people.For example, the recent British Army social account hacked Promote scam NFTs.according to a Federal Trade Commission reportAmericans have lost more than $1 billion to cryptocurrency scammers this year alone.
As a business owner, it’s critical that you have a basic understanding of Web3’s potential so you can make an informed decision to take advantage of any technological advancement and avoid falling into the trap of being hyped.