Understanding Web3

One of the buzz words you may hear a lot these days is Web2 or Web 3.0. This refers to the next version of the Internet and how people are expecting fundamental way it works to completely transform.

Web 1.0 was not called Web 1.0, it was just called the Internet. At its earliest stage, the vast majority of content was companies or organizations repurposing printed materials to be distributed electronically in the form of websites. The was also known as brochureware phase. Next interactivity in the form of calculators and personalization made websites more useful as companies figured out that they could move their customer service online by providing tools directly to consumers.

Web 2.0 began the rise of social media. We experienced the rise of large centralized companies, with hopes of transforming the Internet, and becoming apart of our daily lives. Facebook (now Meta), Twitter, Google, Amazon, Uber and others empowered the individual to connect with peers, search for information, shop and travel assisted by centralized databases and apps.

Web 3.0 is the rise of the Blockchain.  Many people see the future of the Internet as decentralized applications based on blockchain technology. Today, we think of the blockchain as crypto currency and NFTs. However this is just the beginning. The blockchain is a way to secure transaction between untrusting parties. That means the system has to transparent and allow all participants in the transaction know that all parts of that transaction have been fulfilled before completing the transaction.

A simple example today is someone transferring 1 Bitcoin (BTC) from a crypto exchange to a crypto wallet. The blockchain verifies the the exchange wallet address has at least 1 BTC and then transfers 1 BTC to the new wallet while at the same time deducts 1 BTC from the exchange wallet.  Independent computers verify the transaction and record it to the blockchain so everyone knows the balance of each wallet (although they do not know who the wallet belongs to) and that 1 BTC can not be spent twice.

In the future who knows how the blockchain will be used to verify transactions. Here are some examples of what the future could hold:

  • When you buy a car, the title of the car will be transferred to a new owner, the lending bank will send money to the former owner and the government to pay taxes while receiving a lean on the car. Now the car can not be resold until the bank loan is paid in full. This entire transaction is recorded on the blockchain.
  • Voting for President of the United States can done with a governance token. Everyone eligible to vote is given one token and on election day, they deposit that token into the wallet of the candidate of their choice. Results are available immediately because of the blockchain.
  • Self-executing will system with a blockchain that will automatically distribute assets of an inheritance trust to beneficiaries upon confirmation of the trustee’s passing, eliminating the need for executors and court battles regarding the integrity of the will.
  • Digital ids can be created on the blockchain so instead of providing your mother’s maiden name, date of birth and favorite stuffed animal’s middle name, you would simply respond to challenge using your digital ID and the other party will know that it is really you.
  • The end of high credit card fees will happen when consumer adoption of blockchain-based payment systems are wide spread. No longer will merchants have to pay 3-4% of a transactions value simply to make it easier for their customer to buy goods and services. Credit card companies will have to compete with decentralized alternatives forces lees lower.

We found an interesting short article entitled “What Is Web3?” by Kent Thune on Seeking Alpha, the world’s largest investing community. It provides an good overview of Web3 and its potential impact for investors.




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