It’s time to define Web3 in a way that people actually understand
December 15, 2022
By Alan Vey, Founder & CEO, Aventus
The Web is the avenue through which most businesses scale operations and innovate. The majority of people are familiar with Web1 and Web2. However, now Web3 is suddenly here, and it’s clear it’s not going anywhere.
But what exactly is Web3? There are a lot of different definitions, but they usually use extremely technical terms that most people aren’t familiar with, so it remains elusive.
The Evolution of the Web
You can think about the Web like this:
Web1 was ‘read’ – it allowed users to access data that was hosted on the network. This is where concepts like email, open networks, desktop browser access and the green shoots of e-commerce were born.
Web2 added ‘write’, which enabled user-generated content to be shared, allowing for the explosion of social networks like Facebook, Twitter and Instagram.
Now, Web3 adds ‘own’. For the first time, users have the ability to truly own in a digital context via verifiable decentralised blockchain networks (rather than just having a digital representation of physical ownership).
But these concepts around the value-add of Web3 are still somewhat abstract, so let’s break it down further:
In order to truly understand Web3, understanding its foundations is crucial. The infrastructure, or ‘engine’, of Web3 is the blockchain.
Blockchain is a system in which a record of transactions is maintained across computers that are linked in a peer-to-peer network. It removes the need to trust a central party through its characteristics of decentralisation, meaning no single entity owns it, and immutability – meaning you cannot change the data that is recorded on the blockchain.
Just like the TCP / IP infrastructure that sits behind the internet, users might not even notice the blockchain. If the applications built on blockchains are user-friendly and intuitive, people will not give the underlying infrastructure another thought.
Because of these characteristics, the potential uses for blockchain are huge. The most common and well-known way blockchain has been used so far, beyond crypto currencies, is for decentralised finance (DeFi). In centralised finance, money is held by banks and other third parties who facilitate money movement between parties. Each third party charges a fee for its services.
Decentralised finance eliminates the need for third parties like banks and brokers to facilitate financial transactions via blockchain technology, using independent verifiers (sometimes called validators) to validate transactions.
But the product that blockchain enables is so much more than financial assets. As a whole, the product is tokenisation – the process of converting something of value into a token that’s usable on a blockchain application. A token is essentially a digital representation of that value.
This encompasses everything from DeFi, cryptocurrencies and NFTs, to less well-known sectors like supply chain management, legal contracts and data collection.
Practically anything can be tokenised if it is considered an asset that can be owned and has value, and can be incorporated into a larger asset market (e.g. medical records, supply chain cargo pods).
And the potential is huge. According to Boston Consulting Group, around 10% of global GDP will be tokenised by 2030, which is conservatively a $16T opportunity.
But how will users access or experience these products? Most likely, through the metaverse.
A metaverse is a collective virtual shared space, created by the convergence of virtually enhanced physical and digital reality. It is an independent virtual economy, enabled by tokenisation and a variety of other technologies.
Just like we moved from computer mice, keyboards and desktops in Web1 to smartphones and touchscreen devices in Web2, the move to Web3 will see more interaction with virtual reality (VR) and augmented reality (AR) in the metaverse.
The metaverse won’t completely replace the way we interact with the Web currently through smartphones, for example, – just like there are still uses for desktops and keyboards. But we will see more and more people interacting with and in the metaverse over the coming decade – in fact, Gartner expects that by 2026, 25% of people will spend at least one hour a day in a metaverse for work, shopping, education, social media and entertainment.
It’s natural human instinct to be resistant to change, especially in the face of uncertain political and economic landscapes. But with large enterprises from Nike to Shell beginning to realise its benefits, VC investments in the industry exceeding $18B in the first half of 2022, and the global Web3 market size expected to reach $81.5B by 2030, it’s clear Web3 isn’t going anywhere.
Ignoring Web3 is like saying you were going to ignore Facebook back in the early 2000s. You were free to make that choice, if you wanted, but it wouldn’t have changed the fact that it was going to change the fundamental fabric of society for good. Just like Web3 will. So the sooner you understand it, the better.