August 30, 2022
Web3 is the next-generation internet technology that supporters believe will redefine everyday digital experiences. With the help of cryptography and distributed-ledger technology, Web3 promises to create a user-owned and user-controlled internet. Numerous Web3 projects have already emerged, opening new opportunities in fields such as entertainment, retailing, financial services, gaming, and esports.
Web3 will enable users to transact and engage with each other in entirely new ways, says Alex Manders, partner and global blockchain leader with technology research and advisory firm ISG. “Most importantly, it will enable the creators of data to retain ownership of the data and be incentivized to share it.”
Web3 promises an entirely new generation of online services, decentralized and leveraging the same types of technologies found in cryptocurrencies, such as Bitcoin. “Web3 is the underpinning for many services and functions that will, over the next three to seven years, become minimum success requirements for continued Internet function and growth,” says Mark Thiele, co-founder and CEO of Edgevana, a company that's developed a global marketplace for automating data center procurement processes. “Web3 will lead to safer and more personal web interactions.”
What Will Web3 Mean?
Web3 promises to spur innovation across nearly all industries and markets. It will change the way people and enterprises interact with each other, offering new income streams for major brands and individual creators alike, says Markus Levin, co-founder of XYO, which offers a decentralized crypto-location network that's designed to provide accurate location data from cars to smartphones.
Web3 is an enhancement to the current Web2, which frequently fails to adapt to Internet users' individual needs and preferences. “Web2 led to the rise of companies gatekeeping our data,” Levin says. Web3 will enable users to pivot to a more inclusive model. “It will allow users to take control of both their own data and monetize their content,” he says.
When viewed in a business-to-business context, Web3 promises to revolutionize supply chain and business process optimization. “It offers new ways for enterprise partners, vendors, and suppliers to transact via e-commerce and collaborate in virtual realities,” Manders says. “There's a large opportunity for enterprises to explore, and design new revenue streams and business models beyond the technology.”
Web3 is also designed to allow consumers to interact directly with enterprises, including through tokenization, NFTs, and digital twins of products showcased on consumer avatars. New e-commerce models will allow consumers to pay for goods and services with digital currencies either in person, online, or in an extended reality environment, Manders notes.
What Are Web3’s Benefits?
Web3 promises to give users greater control over how they use the Internet as well as the people and enterprises they interact with. “With power to the people comes the vision of democratized access to services, payment systems, and business transactions that will facilitate a global boom in new small businesses,” Thiele predicts.
Online social behavior will also likely change. “Currently it seems as if we're all sitting at a digital dining table, fighting for attention,” says Jan Daniel Semrau, founder and CEO of Ternary Capital Group (TGC), an investment firm specializing in the convergence of traditional and decentralized finance. “In Web3, we're going back to a ‘single player’ experience where personal needs are met through a much quieter and less ‘social’ online experience.”
Manders notes that Web3 will put personal data back into the hands of the originator, effectively preventing unauthorized parties from exploiting private facts and habits. Additionally, by decentralizing data assets, Web3 promises to reduce the threat of large, targeted data breaches.
What Are the Drawbacks to Web3?
Web3 applications and use cases are rapidly appearing (and disappearing), making it challenging to predict which technologies and business models will thrive on the next-generation Internet platform. “At times, it can be confusing to understand how or why an application or use case is being developed,” Manders says.
Capital investment in Web3 technologies and services is both fluid and erratic. Some investment areas are more active than others, depending on what's being designed and proven out, Manders says. Complicating the situation is that many distributed applications lack strong governance models, which can lead to security gaps. Usability is yet another concern. “Many of the things developed today are highly technical and lack a good customer/user experience design,” Manders notes.
When Will Web3 Arrive?
Web3 is still an emerging concept, indicating that there will likely be a subtle transition from Web2 to Web3. “Developers are working tirelessly to make this new iteration of the internet scalable and more user-friendly,” XYO’s Levin says. “Additionally, regulatory bodies around the globe are having a constructive dialogue about what kind of regulation will safeguard Web3 users without stifling innovation.”
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