In the Beginning, There Was Web1
Web2 and Web3 refer to successive phases of the internet that sprang from Web1, the original version of the internet. So, to properly understand the differences between Web2 vs Web 3, let’s first look at what came before.
Computer scientist and internet pioneer Tim Berners-Lee will get the credit for coining the term “World Wide Web.” In the 1990s, Berners-Lee successfully created the fundamental technologies that would drive the early internet. They are things that we take for granted today, such as HyperText Markup Language (HTML), the uniform resource locator (URL), Hypertext Transfer Protocol (HTTP), and the web browser.
With the help of user-friendly internet service providers (ISPs), such as America Online (AOL), and web browsers like Netscape Navigator, the Web1 era of the mid-1990s kicked off. Ordinary people could now surf the internet.
The Web2 Era
Surfing the Web1 internet meant wading through many poorly designed, static web pages. Web2, on the other hand, offered interactivity.
Some key innovations that drove the growth of Web2 were social networks and mobile-powered devices connecting to the internet. Besides interactivity, Web2’s expansion included social connectivity and more user-generated content. So, users could create their own blog content instead of walled gardens such as America Online (AOL) force-feeding Time Warner content to its readers.
Furthermore, it was Web2 era innovations that disrupted traditional ways of doing business. Web2 empowered ventures such as Google, Apple, Amazon, Facebook, Airbnb, Twitter, and Uber. Some of the world’s largest companies today result from Web2 innovations.
The Dark Side of Web2
On the negative side of Web2, however, some of these big-tech firms grew into monopolistic giants that harvested their user’s data without consent. When economist Milton Friedman quipped, “there’s no such thing as a free lunch,” he wasn’t kidding. Big tech behemoths weren’t offering all these free Web2 platforms out of the kindness of their hearts. The hidden cost to users was ceding control of their personal data.
Users initially considered themselves to be the customer when using such Web2 inventions. In actuality, they had become the product. More specifically, their data was the product. Search histories, email topics, likes and dislikes, political and religious affiliations, sexual orientation, relationship status, health information, purchase histories of all sorts were harvested, quantified, packaged up, and sold to marketing and advertising firms. Whistleblowers like Edward Snowden would also insist that it wasn’t just private business snooping on big tech’s bountiful data harvests. But that’s a story for a different time.
Web2 and Data Harvesting
During the Web2 phase, personal data roamed the internet like free-range chickens clucking and scratching to be poached. Not surprisingly, big-tech companies were more than happy to harvest as much of it as they could. In particular, Facebook (now Meta) came under fire for data privacy breaches culminating in a $5 billion fine in 2019 from the Federal Trade Commission.
Although Web2 brought us some excellent free services, many began to worry that new walled gardens were succeeding where the AOL / Time Warner merger of Web1 had failed. It’s no secret that big tech companies want more control over their user’s data and content. But big tech’s oppressive maneuvers for greater control may prove to be a motivating factor for Web3 builders looking for ways to break their stranglehold.
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Web 3.0 Definition
The Web3 phase of the internet promises to be an exciting one that will hopefully result in a power shift away from big tech to individual users.
So, if Web2 represents a frontend revolution giving a face-lift to the static webpage, then Web3 represents a backend revolution. Its decentralized networks will challenge the supremacy of behemoths such as Facebook (now Meta) and Twitter, whose servers hoard information. Decentralization could break up the power of Web2’s massive databases and create a more level playing field for users.
To sum up, while there may not be a standardized definition of Web3, below are some of its features.
Welcome to the Decentralized Web
The defining features of Web3 are decentralization, trustless, permissionless, and connectivity. Let’s dig a little deeper into each one.
Web2 vs Web3 – Decentralization
Decentralization is a core tenet of Web3, and it promises improvements on many fronts. First off, there is no central authority controlling content and imposing indiscriminate censorship. The more decentralized a platform is, the more censorship-resistant it becomes.
Web2 vs Web3 – Trustless and Permissionless
Web3 is trustless and permissionless, which means participants can interact without permission from a trusted intermediary or governing body. Applications in Web3 run on decentralized peer-to-peer networks. That’s why they’re called decentralized applications, or dApps, rather than “apps.”
Web2 vs Web3 – Greater Connectivity
With Web3, content is more connected than in the preceding eras. An increasing number of everyday devices in the “internet of things” (IoT) will be accessing multiple dApps that live on blockchains.
The Potential of Internet 3.0
Web3 will go well beyond Web2 offerings such as streaming video, online shopping, and social media. Its decentralized features should also help limit the unethical practice of data extraction without users’ consent or compensation.
Web3 could be as disruptive as Web2 was when it first hit the scene. Web2 disrupted the sectors of the economy that failed to adapt to the new web-centric business model. The hardest-hit being retail, entertainment, and advertising. Web3 will likely perform a similar disruptive function punishing outdated business models that fail to adapt.
Web2 vs Web3 – Paradigm Shifts
One of the most significant paradigm shifts in the Web3 era will be the gaming industry. With Web3, gamers can own their in-game assets in the form of NFTs. That means that they can buy and sell them for profit and transfer them to other games on other blockchains.
Some Web3 games such as Axie Infinity already offer other innovations like play-to-earn (P2E) models. P2E means that players get paid to play. Also, with the advent of Web3, company shares come in the form of crypto tokens. Notably, nearly anything can be tokenized on Web3, not just in-game items. Tokenization prospects include artwork, memes, or even tickets to a Gary Vaynerchuck conference.
Web3 and decentralization won’t come without challenges. Less centralization and big-tech control will unleash more individual freedoms. While this is excellent news for libertarians, issues such as hate speech, misinformation, and cybercrime will be harder to police.
But one of the strongest criticisms about Web3 isn’t fears about decentralization. Instead, the critique is that Web3 isn’t decentralized enough. At the heart of this Web2 vs Web3 debate is what’s called “decentralization theater.” This pejorative term insinuates that decentralized blockchains are, in actuality, decentralized in name only.
Web2 vs Web3 – Jack Dorsey Weighs In
One of the most vocal critics is Block Inc., CEO Jack Dorsey, the former Web2 king of Twitter. Dorsey recently griped that Web3 ownership is highly concentrated in the hands of venture capitalists (VCs), thus, making it impossible for Web3 to be genuinely decentralized.
It all started when he retweeted a meme featuring a greedy VC gulping down a fountain of Web3 profits, leaving only scant drops for the average retail investor. Dorsey later followed up with another tweet stating, “You don’t own Web3. The VCs and their LPs do.”
To Dorsey, this power dynamic invalidates Web3. If VCs own the Web3 protocols, then it can’t be Web3, according to his logic. But it’s not just Jack Dorsey. Others believe that Web3 is merely the hype VCs use to fill their bags with discounted valuations to later dump on the masses who aren’t part of the in-crowd.
Web2 vs Web3 – Bitcoin Maxis and Ethereans
On the other side of the Web2 vs Web3 debate is the “Ethereans.” These people use and build on Ethereum. Or, if they don’t build on Ethereum specifically, they use blockchains that do what Ethereum does. So-called Ethereans are behind such innovations as DeFi, NFTs, and the P2E gaming revolution that drives Web3.
So, Jack Dorsey and the Bitcoin maximalists have elevated the Web2 vs Web3 debate by arguing that these new innovative dApps on Web3 are inadequately decentralized. More importantly, they contend that compromises in decentralization only serve the VCs looking to fatten their wallets.
Web3 and the Problem with Bitcoin
On the other hand, the promise of Web3 is next to impossible to attain with Bitcoin. Bitcoin’s bullet-proof security and decentralization come with costs. The costs manifest themselves in a lack of innovative features, storage space, and transaction speed. Gamers on Web3, for example, aren’t going to wait ten minutes or more for confirmation.
Yes, Bitcoin has robust decentralization, but it came about under a different set of circumstances before the regulatory crackdown on ICOs that started in 2018. Nowadays, many of the funding alternatives available during Bitcoin’s inception have been knee-capped due to government regulations.
So, Dorsey’s assessment that Web3 should be rejected outright, or at least scaled back to match Bitcoin’s limitations, because of how Web3 protocols obtain VC funding loses some merit when considering the limited funding alternatives that exist in today’s regulatory environment.
What it boils down to in the Web2 vs Web3 showdown is that “Bitcoiners” believe it to be the only genuinely decentralized blockchain around, and everything else is merely decentralized theater. What is Bitcoin? If you’re not sure, follow the link.
Web2 vs Web3 – VC Investors
However, some of their critiques of how VCs engage in crypto investing have merit. For one thing, short lock-up periods on token launches enable VCs to dump their pre-sale discounted tokens on “Johnny come lately” retail investors. But do such tactics come as a surprise? VCs got preferential investing terms long before crypto came along.
If anything, Web3 protocols offer far better opportunities for the average investor than anything that’s come before it. To argue otherwise is completely ignoring how company listings have always worked on the NASDAQ or NYSE.
For example, one of the forces driving the 2017 ICO bubble was that average investors could get in early such as institutions and VCs always have. Such was the case in 2010 with Bitcoin and 2015 with Ethereum and continues today.
VC Investors vs Airdrops
Uniswap minted the UNI token in September 2020 and airdropped 60% of it to the community. This action is a “far cry” from the kinds of critiques Dorsey and fellow Bitcoiners are leveling. Uniswap’s efforts kicked off the retroactive Airdrop movement. Since then, hundreds of other retroactive airdrops have sent billions of dollars to ordinary users who interacted with their protocol. The Uniswap airdrop demonstrated how to fairly distribute capital to retail investors by supplying 250,000 unique addresses with UNI tokens while also providing a liquidity event for the VCs.
Ethereum Name Service (ENS) also airdropped 50% of their total supply of tokens without using VC funding at all. Coinbase, in turn, airdropped 100 shares to employees with its direct listing of COIN. Since COIN opened at $250 per share, each employee got a $25,000 gift. Not bad and certainly not something we’re used to seeing with Web2 companies.
Web2 vs Web3 – How to Raise Capital
Not all Web3 investment arrangements have followed the same inclusive path as Uniswap. Some have fared better and others worse. The main thing is that such actions show the kind of culture that Web3 is nurturing. Web3 platforms that grant ownership opportunities to their communities will likely succeed where others won’t.
Even though crypto has yet to figure out best practices for raising capital and liquidity, Uniswap and others are leap-frogging what’s going on in the Web2 paradigm. They kicked off the airdrop party. Now we’ll see how it evolves.
Why the Resistance to Web3?
Strange that Web3 faces such stiff resistance from those like Jack Dorsey, who was at the forefront of the Web2 revolution. But maybe it’s because those who formerly disrupted entire industries don’t feel like getting disrupted themselves. Web2 incumbents are likely pushing back because Web3 is a threat to how they do business.
Beyond Web2 vs Web3
So, 2021 ended in a heated debate over Web2 vs Web3 with Jack Dorsey retweeting a meme. Will such detractors succeed in delegitimizing Web3 by demoralizing the average investor? Will charges of Web3 being an insider’s game lead to overall cynicism? Or, is this critique just another Bitcoin maximalist strategy ready to fall flat? These are questions that remain unanswered.
One thing is for sure, though. When new paradigms and technologies such as Web3 emerge, people typically call them revolutions. But throughout history, new things tend to be built on top of existing foundations. The old foundation doesn’t necessarily have to go away. Take email, for example. It’s very much a staple of the Web1 era, but it still plays a significant role in our lives.
The Future of Web3
In reality, both sides of the Web2 vs Web3 debate have a role to play in the future. So, rather than betting on which battleship will sink the other, maybe we should eagerly embrace the best aspects of Web3 that can remedy some of the issues with Web2. After all, Web3 is but another critical building block in the upcoming metaverse.
Web3 can make for a better internet, and all the pushback we’re seeing isn’t going to stop it. Trying to kill an idea whose time has come or trying to snuff the entrepreneurial spirit of a global movement where people can build billion-dollar businesses is unlikely to succeed.
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