If you follow the world of cryptocurrencies even casually, you will know that it produces a constant supply of jargon.
If you follow the cryptocurrency world even casually, you will know that it produces a constant supply of jargon. There’s NFT, Dapp, DeFi, and Tokenomics to name a few. Get ready for a new one: Web3. The idea is that in addition to just sending money or speculating, crypto could be used to create a whole new website. If believers are right, it pays to get to know this crypto language, even if Bitcoin is never touched.
Of course, the software behind the internet is always changing. What makes Web3 different, and more than a little weird, is that it builds financial assets in the form of tokens into the inner workings of almost everything you do online. And its proponents say it could use it to replace businesses with decentralized internet-based organizations controlled by software protocols and the voices of token holders. “It’s the first real consumer penetration” for cryptocurrencies, says Jeff Dorman, chief investment officer at crypto fund Arca. “As time went on, all businesses became internet businesses. I think that’s going to happen here in digital assets.”
Skeptics, and there are many, say this trick falls short of demonstrating its use beyond niche apps, many of which are tools for cryptocurrency traders. It could also be an attempt to circumvent the regulations, at a time when politicians are about to set clearer rules for cryptocurrencies. In short, Web3 is an intoxicating mix of new creative projects, techno-utopia and financial engineering. Here is a beginner’s guide on what you need to know.
Why is it called Web3? What were webs 1 and 2 again?
The term Web 1.0 generally describes everything from the earliest connection of computer networks in the 1970s and 1980s to the first blossoming of browsers and websites in the 1990s. In the next phase, Web 2.0, companies used it to build applications from social media to search engines and wikis, which are largely based on user-generated content. It doesn’t rely on traditional companies or Web 2.0 business models like advertising. For example, users can pay for services directly with tokens.In an ideal world, we are assumed that Web3 services need to be operated, which must be owned and improved by user communities.
What’s this have to do with crypto?
Bitcoin, the original cryptocurrency, works with a public database called the blockchain, which records every transaction and is decentralized as this ledger is not kept by a single company, but by a huge network of computers, all of which are connected to the internet and theirs Operators are rewarded for their work, with the opportunity to earn more Bitcoin. But you can do more with a blockchain than record digital currency transfers. You can use it to enter into contracts and control how software and applications work.
Web3 applications are often based on a technology called Ethereum which, like Bitcoin, rewards users who help maintain their network. Its currency is called ether and has a total market value of $511 billion. The apps themselves can also be assigned tokens that can not only pay for the services, but also act as voting shares that regulate the development of the apps and even the fee structure. Often times, at least in the beginning, a large part of the incentive for this activity is the opportunity for the token to increase in value. join the community, but of course it can also be inflated with speculation.There is a lot of it in cryptocurrencies.
Why am I hearing more about this?
The speculative boom is a big part of it, but it’s also that people are starting to see technology in real life. When bitcoin and other cryptocurrencies rallied earlier this year, venture capitalists invested billions of dollars building and improving distributed applications, or dapps. Many Dapp teams also received coin distributions that gained in value and generated more interest. “We are at a turning point that will lead to an even faster pace of innovation and growth at Web3,” says Ali Yahya, General Crypto Partner at the venture capital company Andreessen Horowitz. (Bloomberg LP, owner of Bloomberg Businessweek, invested with Andreessen Horowitz.)
Over 8700 active Dapps are listed in the DappRadar tracker. This includes many trading platforms and games for cryptocurrencies. Sometimes the line between them is blurred: many games earn and trade non-fungible tokens or NFTs, which are virtual characters or collectibles that can fetch sky high prices.
Operating over a distributed network can be difficult, but the user experience just keeps getting better. “It’s just getting started, but it’s changed in the last six months,” says Jonathan Dotan, founding director of Starling Lab, a nonprofit research organization founded at Stanford and the University of Southern California’s Shoah Foundation and involved in the use works from cryptography and decentralized networks to help with the retention and review of documents, including sensitive historical records. One of the group’s projects is to upload more than 55,000 video testimonies from genocide survivors to Filecoin, a distributed network where more than 3,500 vendors from around the world store files on their computers in exchange for FIL. The Starling Lab can now pour three times more data per day on Filecoin than at the beginning of the year, says Dotan.
In October, Dish Network Corp. entered into a partnership with the startup Helium Inc. for wireless 5G connectivity. Access point providers are paid in the HNT token for offering coverage. “People are starting to realize that this is a whole new opportunity that is reminiscent of Airbnb or Uber,” says Helium CEO Amir Haleem. The city of San José is setting up 20 helium hotspots to earn HNT tokens to help secure internet access for some low-income residents.
Twitter Inc. engineers are working on Bluesky, a decentralized version of social media. The game company Ubisoft announced on December 7th that it would allow the players of a game to receive NFT collectibles as vehicles for their characters, faces a lot of competition from traditional web players. “The biggest battle here is with the big tech companies,” said Aaron Brown, a crypto investor who writes for Bloomberg Opinion. “The main financial incentive for these companies is to hijack Web3 with Web3-like versions of their applications.
Do I care if apps are decentralized?
“Centralization comes in handy,” says Brown. Web3 is probably “a place for specialized groups. People who develop new ideas”. The goal of many of these companies is to become a DAO or a decentralized autonomous organization; In fact, thousands of users control a project through chat groups and their tokens. “I think DAOs will be as ubiquitous today as corporations, associations, nonprofits, and all kinds of ‘official’ organizations,” said Maria Shen, partner at venture capital company Electric Capital.
What are the downsides?
Although Web3 is often described as an idealistic cooperative, decentralization can also act as a cover for mainstream companies with less responsibility. Regulators have raised concerns about some projects, particularly Decentralized Financial Applications (DeFi), that enable people to lend, borrow and trade Coins with each other, often without verifying the identity of the users or carrying out anti-money laundering controls. Many development teams claim not to be responsible for it because they have given control to their users. “What are those dirty little secrets that nobody talks about?” says Avivah Litan, a blockchain analyst at researcher Gartner Inc. “At the moment DeFi is run by centralized companies. But the difference is that you cannot stop the protocols. They can arrest people, regulators can put them in jail, “but you can’t stop the protocols.”
There are environmental concerns about the massive computing power some blockchains require, although newer systems can make this easier. And since much of the code was created in all-nighters, there are lots of software bugs and malicious hacking attacks. Many projects don’t even include contact numbers, although they can have online chat groups. If you accidentally misspell money and send money to the wrong account, it can be lost forever. You cannot solve the problem like calling a bank’s customer service department.
Many Web3 companies have few paying customers but can benefit from the appreciation of the underlying token, making them vulnerable to a wild market. Take Piknik and Co., which employs around 30 people and operates two data centers that support Filecoin. Tokens that have almost doubled in value this year but are down 82% since peaking in April. CEO Kevin Huynh says he has clients in pilot programs that will eventually pay him.He made a big bet on Web3. He trained as a surgeon before diving into Piknik, paid off his 401 (k) and raised small donations from around 70 family members and friends to get started. “I think it’s going places,” he says.
