Just from the way it’s spelled, you can tell that “web3″ is a geeky new technology you’ll barely be able to understand. But don’t sweat it. You’ve got plenty of time.
Web3 is about building a new class of decentralized online services based on the same technologies found in cryptocurrencies like Bitcoin. While it’s one of the hottest topics in tech, real-world products and services based on web3 technologies are largely nonexistent and are probably years away.
Gregory Raiz, managing director of business accelerator Techstars Boston, said that it might take a decade for web3 to achieve its full potential.
But Raiz has just launched a new program to back 12 web3 startups in Greater Boston. And he has plenty of company. According to the newsletter Wu Blockchain, venture funds poured $3.67 billion into web3 startup companies last month, and $4.45 billion in May.
Despite the recent collapse in the value of Bitcoin and other cryptocurrencies, web3 hasn’t lost much of its luster, because it’s not about developing new forms of highly speculative digital money. Instead, it’s about building new online institutions and businesses that give greater control to end users rather than massive corporations.
In “Web 1.0″ we had the early, primitive browsers, and pages cobbled together crudely with HTML code. With “Web 2.0″ we got more powerful desktop computers connected to massive data centers in the Internet cloud. Now we can play sophisticated games, stream movies and music, and communicate via social networks.
But these capabilities are mostly controlled by giant companies like Facebook, Apple, Amazon, and Google. The people running these companies decide what users can and can’t say or do on their networks. They scoop up the information we share to generate immensely profitable personalized advertisements, but pay us nothing for the data we provide.
Web3 promises to break up these data monopolies. “You can have platforms that are distributed,” said Raiz. “You don’t have a central gatekeeper.”
Instead, we’d rely on decentralized networks running on computers dispersed all over the world and operated by volunteers. These networks would store our messages and images on secure blockchains like Algorand, which was developed by researchers at the Massachusetts Institute of Technology to efficiently handle vast amounts of data. All data would be protected by “smart contracts” that would use software rather than human moderators to decide what you can or can’t say on the network. Terms of the smart contracts would be clearly defined and equally applied to all users. No more complaints about unfair censorship of controversial opinions.
That’s the idea, anyway. The personal information we’d share with social media companies would also be stored on blockchains and protected by smart contracts. We would decide exactly what to share and with whom. And the contract could require that when the network sells our data to marketing companies or uses it to generate profitable personalized ads, the users would get a large cut of the profits.
“It’s making us wealthy, rather than some obnoxious guy in Silicon Valley,” said web3 maven Michael Troiano, a partner at Boston VC firm G20 Ventures.
The same tools could transform online media and entertainment. Musicians could abandon Spotify or Apple Music, which collect a sizable share of the profits when a song is sold. In a web3 world, they could rely on a blockchain covered by a smart contract. You couldn’t play a song without paying for it, and most of the money could be funneled directly to the artist.
Currently, web3 services for consumers exist as prototypes, or not at all.
“There isn’t anything at this point that would make you say, ‘This is really neat. I’ll go there,’ ” said Martha Bennett, an analyst with Forrester Research.
In March, Bennett published a report urging corporate executives to be extremely skeptical about investing in web3 projects. She cited a long list of potential problems. For instance, Facebook has spent over $16 billion in the United States alone on massive data centers to run its social network. It’s hard to see how a web3 network, run as a community project on thousands of small computers scattered all over the world, could possibly compete. “Community-based environments just don’t scale,” Bennett warned.
In addition, blockchains are designed to prevent users from altering the data, in order to provide greater security. But that also means that there’d be no easy way for the user of a blockchain-based social network to delete or edit embarrassing posts. (Molly White, a Massachusetts-based software engineer and prominent critic of web3 and blockchain tech, has also raised this issue.)
In theory, web3 users could demand payment for the use of personal data. But how would people set a suitable price for their data? What’s it worth to provide a corporation with someone’s name, address, and phone number, or a list of your favorite movies? Hardly anyone has any idea how to set the right price, and few of us will want to be bothered.
And what happens if something goes wrong with a distributed web3 online service? Precisely because it’s so decentralized, there’s no central authority to complain to. In a web3 world, customer service could be even lousier than it is today.
It’s possible that all these problems can be solved. Investors are certainly throwing enough money at them. But if you’re hoping for life-changing web3 innovations, get comfortable. You’ll be waiting quite a while.