The development of the internet may seem to be one continuous stream of innovation, improvement, and growth, but technologists break down this history into phases known as Web1 and Web2. Today, Web3 is on the horizon, though potentially still years away from actualization. Web3 will unlock new potential use cases and opportunities for enterprises, from logistics companies to financial service organizations, and consumers alike.
In this article, we’ll review key topics related to Web3 to equip you with an understanding of the next generation of the World Wide Web.
What is Web3?
Web3 is described as the next iteration of the World Wide Web characterized by decentralized applications built on a blockchain architecture. Users will have more control over their data, without a central authority controlling the network. This contrasts with the current model in which data, content, and digital assets are owned by a small collection of tech enterprises, such as the Big Tech companies.
Further, the data and content owned by Big Tech is centralized in clouds and privately owned infrastructure. A decentralized web would involve apps and data that have no singular owner and no singular computer, server, or datacenter in control. Instead, ownership of the data is distributed across nodes of peer-to-peer networks in which no computer or entity has control of the other. Read more about decentralized automated organizations (DAO) and decentralized apps (dApps) below.
The term Web3 was coined in 2014 by the Polkadot and Ethereum co-founder, Gavin Wood, and the term took hold in 2021 after cryptocurrencies received investments from several high-profile technologists.
It is important to note that transitions from one era of the internet to the next are not uniform or conclusive. Web3 applications and websites will operate alongside Web2 applications and centralization in the internet will persist. Think of Web3 more as a concept and innovative operating model than a wholesale technology revolution. It may be that a full implementation of Web3 concepts never comes to pass and instead organizations take advantage of a hybridization of both paradigms. Web3 is still in a very speculative phase and the manner in which this technology is adopted and utilized remains to be seen.
What is Web 1 and 2?
To understand where the Internet is headed, it helps to review where it has come from.
Web1 (Web 1.0) is the initial iteration of the internet, occurring between roughly 1989 - 2004. It consisted of static webpages that could be read by a user, GIF buttons and graphics, and HTML forms sent through email. Essentially, it was an era of the internet in which online content could be consumed, but there was no opportunity for interaction – a read-only web. This was the height of early search engines like Yahoo, AOL.com, Netscape, and Ask Jeeves.
Web2 ushered in an era of monetization and consolidation beginning around 2002 until the current day. The key differences between the first two eras are that Web2 introduced multimedia content and a new ability to interact with content. During this time, we saw the rise of social media platforms like MySpace and Facebook as well as many of Big Tech companies and social networks, such as Amazon, Alphabet (Google), Apple, Meta (Facebook), and Microsoft. People could upload videos. People could make transactions. People could use online banking applications. Web2 is the current internet we know and use today – no longer a simple means of conveying information but the foundation of modern commerce.
As the internet progresses from Web1 to Web2 and now on to Web3, the complexity of activities on the internet rises. With that complexity comes security risks and opportunities for scammers and fraudsters to disseminate malware. Web2 saw a dramatic rise in cybersecurity threats, and the same will be true for Web3. As the conversation about Web3’s potential value continues, we must also consider how we can secure complex digital agreements in this changing landscape.
How Will Web3 Work?
It is important to note at the outset that Web3 is still speculative. Technologists, futurists, and proponents can make their best predictions, but how exactly these trends will manifest in the next era of the Internet remains to be seen.
However, using a distributed ledger blockchain model, Web3 content can remain decentralized from the platforms we use today. For example, in Web2, the new meme you create and post to a social media site may be posted on your profile, but the data is owned by the platform. Using blockchain and non-fungible token technology allows the user to retain ownership of the meme while still posting and sharing on the web.
This may seem an inconsequential example, but scaled out the ability to own data will have significant impact in how Web3 will operate. Users will be able to reassert levels of data privacy that align with their individual sensibilities and better separate revenue generated by their content from the policies of the platform.
In Web2, social media sites are monetized in the attention economy. Because revenue is generated by advertisements, they are incentivized to collect as much data on an individual as possible so as to both present content that will keep them on the site longer and better market products to them. Web3 will put pressure on this model as individuals begin to retain their data.
Hear from OneSpan CEO in this Fortune interview about how OneSpan intends to address security challenges in Web3.
When Will Web3 Be Released?
Web3 is not a proprietary product or platform that is being brought to market by a specific entity, so it cannot be said to have been released, even long after its demise! Also, because it is a concept rather than a specific technology, it does not lend itself to definitive start or end dates. It is probably more accurate to reference timing in the context of functioning Web3 ecosystems and a decentralized web.
The plumbing required to make Web3 ecosystems functional — the decentralized protocols and storage systems — is still in search of sufficient scalability and energy efficiencies to live up to its promise. In any case, we could still be some years away from mainstream adoption, which will require massive adjustments on a social level, in both behavioral and regulatory terms.
What Are the Potential Benefits of Web3 for Enterprises?
Many of the benefits of Web3 for enterprises derive from the nature of blockchain, which is one of Web3’s core technologies.
The primary benefit of data decentralization for enterprises is that the intermediaries can be eliminated from transaction workflows, making them faster, cheaper to execute, and more secure. Blockchain networks, smart contracts, and decentralized applications eliminate the need for third-party service providers, which will help businesses reduce costs.
The core of the benefits accruing to blockchain stem from the transparent and tamper-proof ledgers in which blockchain transactions are recorded. Not only can these factors help buttress trust levels in enterprises, but they can also mitigate issues related to fraud and money-laundering.
Learn more about the challenges and opportunities in Web3 in this video interview:
Key Web3 Features, Applications, and Technologies
Web3 is projected to possess these defining characteristics:
- Ubiquity and Ownership: A blockchain eliminates the need for intermediaries, such as payment processors. Web3 technologies are accessible to anyone and everyone no matter where they are. In this way, they are ubiquitous, however at the same time, Web3 will give individuals greater control over their digital assets and data. In Web2, individuals are frequently required to give up ownership of their data and personal information in order to use an application or engage with communities online through complex Terms of Service agreements. Web3 aims to restore ownership of an individual’s data to the individual.
- Resistance to Censorship: Because data is housed on a blockchain instead of an institution, Web3 could recalibrate the power imbalance and incentives that exist between content creators and platforms. Should a platform impose rules on a podcast or content creator that could impact their income, growth, expression, or other success metric, the content creator will have the option to remove themselves from the platform, take their content with them, and plug into a new interface more aligned with their goals.
- Decentralized Autonomous Organizations (DAO): DAO describes an organization, startup, or company with a business model structured around rules coded into a blockchain. A DAO-company, for example, would have shareholders on the blockchain who would vote on aspects of the business, like price and payouts. A DAO possesses no central authority or governing structure and no individual can make changes to the rules on their own or even own the infrastructure that the organization is based on.
- Decentralized Application (dApp): A dApp is a decentralized application that functions similarly to a DAO. Unlike a typical application, which is owned by a business and whose data is stored in some combination of on-prem or cloud infrastructure, the dApp is operated on a peer-to-peer (P2P) blockchain network and not owned by any single entity. DApps are often open source meaning anyone can view and contribute to the code. Further, a dApp’s protocols are designed to respond to a majority consensus of its users rather than any single entity or administrator.
- Decentralized Identity: In Web2, users are required to create accounts on every platform they use. They have a Reddit account, a Facebook account, Twitter, Amazon, Kohls, Home Depot, PetCo, and on it goes. Social login (e.g. Facebook login, Google login) allows reusing the same account with multiple online services in a federated model, but concentrates identity information with a few Big Tech companies. In Web3, Self-Sovereign or Decentralized Identity will allow users to remain in control of their identity and share identity attributes (e.g. name, address, proof of age, educational certificates) in a privacy-preserving way with online services.
- Native Payments: Current transactions on the Web require a payment processor, like PayPal, to facilitate the transfer of funds. Web3 sites will have cryptocurrencies built into their functionality allowing the user to pay directly in the app without the need for a third party.
- Decentralized finance (DeFi): DeFi is a popular application of Web3 technology, where users can access financial services such as lending, borrowing, and trading without intermediaries. Other use cases for Web3 include decentralized social networks, identity verification, and digital marketplaces.
Key Web3 Limitations for Enterprises
There will undoubtedly be growing pains on the way to Web3, and most enterprises will not be immune to those pains.
First, Web3 is complex. The user experience is still difficult, particularly for individuals who are not hi-tech savvy. There may also be a lengthy period of adaptation during which many user devices will not be powerful enough to fully participate in Web3. During this period, enterprises will be challenged to provide website functionality that captures seasoned Web3 users as well as digital newcomers.
Second, for the time being, regulatory oversight is still a long way off. Smart contracts, for instance, are not yet legally enforceable. It could also be that Web3’s inherent decentralization may make it challenging to monitor and defend against attacks in the next version of the internet.
How Can You Prepare for Web3?
OneSpan CEO, Matt Moynahan, recently shared this advice:
“Authentication and verification techniques will need to evolve to become more sophisticated and stringent. This means confirming your identity before you join a Zoom meeting. This means organizations must develop accurate- and reliably-reproduced audit trail capabilities for all interactions. Capabilities that prevent one person from signing or giving consent for their co-worker. These processes may seem excessive but it’s what must happen to protect ourselves. And we don’t need to sacrifice the experience to do this. Verifying who we are doesn’t have to be disruptive, and it must be invisible.
“This is the only way we protect against a world that operates on billions of insecure links sent around the world every day. It’s the only way we secure our identities and enterprise revenue growth while effectively managing risk and maintaining compliance. The only way we infuse trust in the brands of tomorrow, is to bring integrity back to the internet, and make good on the promise of [Web3].”