For something that doesn’t exist yet, web3 sure is getting a lot of people riled up.
It’s on the tip of tongues these days in Silicon Valley. Tech scions are fighting about web3 on social media. Investors last year shoveled $30 billion into startups premised on it. And bright engineers are leaving cushy jobs at companies such as Facebook to get in early.
The very idea that there’s a new frontier on the internet even has people paying millions of dollars for digital tokens themed around cartoon apes.
But so far, web3 has been more like a buzzword that’s designed more to confuse than to illuminate, and it’s causing something like an identity crisis for the tech industry — with implications for the rest of us.
What is web3?
It’s short for Web 3.0. It’s sometimes spelled with a capital “W,” but usually not.
The thinking goes that Web 1.0 was the first World Wide Web that took off in popularity through web browsers in the 1990s, and that Web 2.0 followed a decade later with the rise of mega platforms like Google and Facebook.
Most mentions of web3 treat it as an umbrella term, a vision of the future of the internet where ownership and power are more widely distributed. This vision is based on transparent digital ledgers known as blockchains (the technology that underpins cryptocurrencies), and it supposes that Big Tech will be rivaled by more democratic forms of internet governance where you, the user, will get a say — maybe even a vote — in big decisions about how platforms run.
But that definition strikes many people as pretty vague.
Tech magnate Elon Musk, the world’s wealthiest person, was recently at a loss when he tried to figure out what web3 was. “Seems more marketing buzzword than reality right now,” he wrote on Twitter last month.
What’s wrong with the current web?
In short, many technologists (not to mention plenty of users) worry that a handful of tech CEOs have a lot of power. The likes of YouTube, Instagram and Twitter are the hosts for a huge proportion of online content, including political speech, and those companies get to decide who gets banned. They also hoard huge amounts of data and take an increasing share of Silicon Valley’s revenue.
It’s a situation that no one — except maybe stockholders — is really happy about, and it wasn’t supposed to be this way.
“We are creating a world where anyone, anywhere may express his or her beliefs, no matter how singular, without fear of being coerced into silence or conformity,” activist John Perry Barlow wrote in his 1996 “Declaration of the Independence of Cyberspace.”
Software engineers have been toying for years with alternatives. Think of the standardized, open nature of email, but for social media. So far, though, services like Mastodon, which is similar to Twitter but without a central server, haven’t caught fire. Twitter is tinkering with its own distributed social media project called Bluesky.
If web3 is unproved, why the optimism?
The cause of the optimism is the development of blockchain technology and cryptocurrencies. Bitcoin, Ethereum and other digital forms of money are the most concrete examples that exist of an all-online, no-one-in-charge, blockchain-based system.
And as the perceived value of those coins took off last year, with the total value of the market passing $3 trillion in November, so has the expectation that the decentralized model can be applied to other areas of online life. If Bitcoin can work, so the thinking goes, why not other blockchain-based financial products like insurance or loans?
“Crypto is not only the future of finance but, as with the internet in the early days, is poised to transform all aspects of our lives,” Andreessen Horowitz, a venture capital firm that’s betting big on web3, said last year.
The firm defines web3 as “the internet owned by the builders and users, orchestrated with tokens.” And a token, in this sense, is like a deed of ownership for a small piece of the internet, whether that’s an object in a video game or anything someone else might value, like art.
Maybe we’ll all soon own lots of tokens, each one for something different and all rising in value over time, or so the thinking goes.
So we’ll all get rich from tokens?
That’s what web3 evangelists say. But one high-profile tech founder recently threw cold water on all the preaching.
“You don’t own ‘web3,’” Jack Dorsey, co-founder of companies Twitter and Block, tweeted last month. Instead, he said, the investor class will own it, as usual. “It will never escape their incentives. It’s ultimately a centralized entity with a different label.”
Dorsey, who days earlier had been Exhibit A in a Wall Street Journal column about web3 “revolutionaries,” said in a burst of tweets that he had never been a part of web3 and he called for massive investment in free, open-source software. (Dorsey is nevertheless a Bitcoin booster who has said it may help to deliver “world peace.”)
His posts angered a few people. Marc Andreessen of Andreessen Horowitz blocked Dorsey on Twitter, causing a mini soap opera in the tech world.
But the early winners of web3 may in fact be big businesses. Non-fungible tokens that people are buying and selling as art — including those cartoon ape tokens — need to be traded in a marketplace somewhere, and OpenSea, one such marketplace, was recently valued at $13.3 billion. (Andreessen Horowitz is an OpenSea investor.)
A number of venture capital firms now specialize in crypto investments, and they put more money into cryptocurrency and blockchain startups last year than they ever had before, according to estimates from Crunchbase and Pitchbook, two research firms.
One venture capital firm, Coinbase Ventures, affiliated with cryptocurrency exchange Coinbase, made 100 different investments last year, according to Crunchbase. The startups include an Indonesian website for buying cryptocurrency and an online marketplace for buying video clips of gaming streamers. Like startups generally, most are just beginning to explore business models.
Where does web ‘democracy’ come in?
Remember those tokens we’re all reputedly going to have with web3? Each of those might come with voting rights.
The best example so far is a group that formed in November with the idea of crowdsourcing a pot of money to buy a rare copy of the U.S. Constitution at auction. The term for this kind of group is decentralized autonomous organization (DAO), and the group was called Constitution DAO. That off-the-wall caper failed, but if the group had succeeded, its plan was to vote on a plan to publicly display the document.
Another recently formed DAO plans to buy a golf course, with contributors getting voting rights as in a country club.
People are leaving Big Tech for this?
The appeal of web3 — the money or the idealistic talk, or both — is big enough that top engineers are jumping ship from so-called web2 companies.
Two of Facebook’s top engineers on its blockchain and digital currency project left the company to join Andreessen Horowitz’s crypto team in October, CNBC reported. They cited the investment firm’s track record of “advancing the entire crypto ecosystem” — a more expansive mission than they had at Facebook. And last month, a vice president at Facebook’s parent company Meta left for OpenSea.
It’s not exactly a brain drain, but the pace seems to be picking up.
Is this really the future?
The future is always uncertain, but the tech industry is generally on the leading edge and the buzz around crypto is unmistakable, whether it’s a bubble or not.
Benedict Evans, a London-based tech investor, wrote this month that the crypto world is characterized by both “irrational, religious hype” and “straw-man attacks.” And he said it has helped to shift the center of gravity in tech away from, say, smartphones or social media.
“Crypto is so big and potentially important, and yet so vague and so early, that we can’t even agree what to call it,” he said, without using the term web3.
There are other hot tech sectors — including gaming, autonomous cars and virtual reality, Evans said — but there’s likely little that could cool off web3 hype in the immediate future without a regulatory intervention from Washington or elsewhere. Other countries, including China, have cracked down on Bitcoin mining, for example.
Still, a few more actual products would help the cause of web3 proponents.
What’s Washington going to do?
So far: mostly debate. The Biden administration is weighing cryptocurrency regulations, and in December, Congress held hearings on possible regulation of cryptocurrencies — and by extension, all the potential tokens of web3.
“What do you say to the folks that say this doesn’t seem like a new financial system per se but an expansion of the old one?” asked Rep. Alexandria Ocasio-Cortez, D-N.Y.
One of last week’s witnesses, Brian Brooks, was a former Trump administration official who’s now CEO of blockchain tech company Bitfury. And other former government officials are being snapped up by none other than Andreessen Horowitz as part of a lobbying blitz to rewrite regulations around cryptocurrency.
Andreessen Horowitz is also predicting voters may favor pro-crypto candidates. “Web3 has emerged as a major political force,” it said last month, based on one survey it paid for.