Web3 is the business model of a decentralized new virtual world
PremiumIt allows peer-to-peer value exchange and shared ownership without any need of intermediation
Helium is a wi-fi network, owned by everyone and powered by cryptocurrency. You sign up, plug a device into your router, and offer to share your excess wi-fi capacity with others. In return you get Helium crypto tokens; the more your personal hotspot is used, the more tokens you earn, and these can be used to access wi-fi services elsewhere. Helium, which calls itself ‘the people’s network’, decentralizes wi-fi, a service traditionally provided by large telecom and fibre companies.
Arcade City is a decentralised taxi service, built in Austin by an ex-Uber driver who also happens to be a software engineer. Fed up with what he thought was the unfair treatment of its drivers, he created this to take on his ex-employer. Built on a blockchain and powered by digital cryptocurrency, it was designed for ownership by a cooperative of drivers. An Israeli startup La Zooz’ is attempting to do the same by using blockchain technology to create a self-managed ride-sharing platform, by connecting drivers with empty seats and would-be passengers in real time; again, this service not owned by the app founders, but by its community of users. It rewards drivers with tokens called Zooz, which they can use to get a ride from someone else in the community.
Axie Infinity is a video game popular in Asia, especially in the Philippines. If you crack some in-game goals, you get rewarded with NFTs and crypto coins, which can be redeemed for real money. Players ‘build’ the game as they go along, ‘breeding’ characters called Axies, which can battle other players’ Axies. Players can also buy virtual territory in NFT form and earn tradable token money called SLP. Also referred to as ‘Pokemon on the blockchain’, there are Filipinos who make a living by playing this game. These decentralized ‘play-to-earn’ games have set off a revolution in the gaming world.
These are real world examples of what people vaguely refer to as Web3. While some of them are yet to take off, the common theme is clear: they are decentralized, owned by the user community, use blockchain technology, and are powered by cryptocurrency. Web3 has become an elastic term being used for anything. Pure crypto plays used it to make themselves sound more respectable, minting NFTs of bored mammals is seen as a Web3 idea, and so is buying virtual land or holding fashion shows in the metaverse.
Yes, Web3 is all of this, but also much more. Web 1.0 was about reading static content pages on MSN, Yahoo or AOL, and started in the 1990s. Web 2.0 burst forth in 2005 with Facebook, Twitter, YouTube and the like, and is about people creating and posting their own content, going beyond just passive reading. Web3 (for some reason the suffix ‘3.0’ is considered unfashionable) goes beyond your active participation by letting you own and build pieces of it through ownership tokens and blockchain enablers, thus spreading ownership around, unlike the highly centralized models of Web 2.0. So, if Web 1.0 was about ‘read’, Web 2.0 is ‘read and write’ and Web3 will let you ‘read, write and own’. As crypto investor Li Jin and writer Katie Parrott said: “If the pre-internet/web1 era favoured publishers, and the web2 era favoured the platforms, the next generation of innovations—collectively known as web3—is all about tilting the scales of power and ownership back toward creators and users." Web3 has ascended the hype curve rapidly, with an estimated venture capital inflow of $27 billion in 2021, Facebook rechristening itself Meta and Jack Dorsey declaring his intent by renaming his company Square to Block.
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Beyond the hype, Web3 in my view is a new business model. Much like Web1 was advertising led and Web2 is data monetization led, Web3 will be led by peer-to-peer value exchange and ownership. Web3 is open, built as it is with open-source software by an open community of developers. It is trustless, as transactions and interactions can happen without the need of a central authority. It is permissionless, since you do not need the consent of a controlling entity like Facebook or Google to engage. It is ubiquitous, with the internet available everywhere to everyone, even to machines. And, finally, it is honcho-free, as users participate as equals in a project’s governance and ownership through crypto-tokens as proof-of-stake. In a sense, it is like going back to early human settlements, with all transactions happening peer-to-peer with easy mutual trust and locally minted currency. Blockchains provide the decentralized foundation of trust for this new old world, and Web3 is the business model driving it.
Jaspreet Bindra is the founder of Tech Whisperer Ltd, a digital transformation and technology advisory practice