Since the phrase “Web3” first appeared in 2014 to refer to novel protocols that enable decentralized consensus, it has expanded to encompass a vast ecosystem of open-source applications, public blockchains, and even architectural philosophies. The query “What is Web3?” evokes a flood of responses that are as diverse as the persons voicing them, as is the case with other big obscure concepts. In this blog article, we examine nine concepts that define Web3 and provide several examples to help readers comprehend them in action.
- Web3 gives artists and producers an opportunity to own the platform itself in addition to the content they make on it.
In 2021, it seemed like everyone was announcing an NFT, with DappRadar reporting a $23B total trade volume. Many digital artists found their first legitimate source of full-time support for their work through NFTs. NFTs are a general-purpose token format, thus, you may create your own code to mint an NFT or use an NFT marketplace. Your token can be purchased on one service, sold on a secondary market, or utilized for other games and applications—unlike the social networks of Web2. In other words, NFTs are transferable and programmable representations of value since they inherit the characteristics of Ethereum.
Some of the initial NFT marketplaces quickly understood that their role is not just to serve as a marketplace but also to improve the alignment between platform creators, users, and users themselves. In order to reward its early artists and collectors and to encourage the community to participate in the curation of its art, SuperRare released a $RARE governance token and established the SuperRare DAO in 2021. The company stated, “We envision Spaces as the future of community-driven art curation — a vibrant ecosystem of curators, artist collectives, galleries, and community members, onboarding artists and collaborating on auctions, under the shared brand and technology of SRA.”
Tokens are currently being used by other Ethereum applications to reward network efforts and facilitate decision-making. Even Web2 social networks like Reddit are experimenting with the usage of “community points,” which are tokens that enable frequent participants to a subreddit to “own” a piece of the social network. By encouraging liquidity providers to offer to fund the trading pairs of almost every asset on Ethereum, DeFi protocols like Uniswap have already established a positive-sum dynamic.
The largest danger to the network effects of Web2 social networks may come from the advantages of people having a common stake in the numerous services they use online. As Scott Belsky puts it, “Would that become a competitive edge against the big guys if every stakeholder in these firms was highly compelled to help establish, improve, market, and patronize the brands?”
- A new patron model for the internet is called Web3.
The phrase “creator economy,” which is becoming more and more nebulous, refers to digital venues designed to support creators’ new forms of monetization. Platforms like OnlyFans, Twitch, and others guarantee users the flexibility to make money from their followers directly rather than relying on an attention-based, ad-driven monetization model. However, unlike Web3 social media website development networks, creators are not the owners of the content they share and can be arbitrarily removed from the network.
Platforms like Substack, Ghost, and Lede have increased the attraction of making money directly from readers for authors and journalists during the past year. However, none of them give authors the opportunity to establish an ownership-based connection with their audience. Mirror, a Web3 blogging network, redefines the writer and patron model with “crowdfunds” and allows users to sell their work as an NFT. The crowdfund function allows users to contribute ETH to fund a concept in exchange for a token that serves as proof of support and may also be used to enter a DAO or enjoy future benefits from publishing. The token serves a purpose, but it also has the potential to indicate your early support for a writer or idea. It also increases in value as more people contribute to the crowdfund.
“Subscription is undoubtedly a feasible financial model for many sorts of media, but it does not necessarily suit all forms of content or experimental work, which collectors and patrons are excellent for,” said Kyle Chayka, a New Yorker staff writer who sponsored Dirt. Xyz through Mirror. NFTs and the kinds of tokens Mirror support, like $ESSAY or Emily Segal’s $NOVEL, can promote the ties between collectors and patrons. Instead of relying solely on subscribers and monthly payments, I would like to see blogs, series, and think tanks sponsored by tokens and NFTs, with benefits for both producers and supporters.
A collection of Ethereum addresses or ENS names that can be used for mailing lists, entry passes, and payment systems allows artists to engage their fans regardless of the platform they are using. These tokens, which can be fungible or non-fungible, are part of the patron-artist relationship and give artists a direct line to their earliest supporters.
- Setting up cooperative ownership and governance structures is simple with Web3.
If you participated in any DAOs in 2021, there are a number of reasons you might have joined a Telegram or Discord group with a lot of online strangers: You can participate in a residency program for artists and developers, vote on a DeFi governance proposal, choose which project to fund, attend an Erykah Badu concert, purchase the sole copy of the Wu-Tang Clan’s 2015 album Once Upon a Time in Shaolin, or even band together to purchase a copy of the US Constitution.
A DAO is a group led by the community that uses Ethereum smart contracts to create the guiding principles and carry out the chosen actions. In Ethereum, some of the biggest and first DAOs are in charge of the expanding funds of decentralized financial protocols. The top 20 DAOs presently own digital assets worth close to $10.5 billion.
DAOs are not only used with DeFi. DAOs are used by media companies like Bankless and public funding groups like Gitcoin to organize, rule, and manage their finances. In Web3, there are currently more than 1.3 million DAO token owners. DAOs, according to an NYTimes journalist, are “chat rooms with bank accounts.” The ability of leaderless online communities of like-minded individuals to instantly come together, pool resources, and make decisions is an indisputable appeal of Web3, nevertheless.
- Web3 is still not completely decentralized.
Anyone who has spent more time in the Web3 wallet development ecosystem is aware of the design compromises developers had to make in order to maintain the most decentralized architectures, user-friendly apps, and scalable infrastructure. The idea of Web1 was that everyone on the internet would be a publisher and consumer of infrastructure as well as a publisher and consumer of content, as Signal’s founder Moxie Marlinspike recently stated in his own examination of Web3. Each of us would have a personal web server for our website and a personal mail server for our email. That is not what the public wants, though, and I can’t stress this enough. No one wants to manage their own servers.
The fact that a large portion of Ethereum’s applications relies on reliable API sources for their data shouldn’t have come as a huge surprise to him. Or that there are currently 5,433 full Ethereum nodes running, with 40% of them being based in the United States. One of the first design choices made by MetaMask was to connect to Infura to provide Ethereum data rather than requiring each user to run a self-hosted Ethereum node. This allowed developers to concentrate more on creating applications rather than maintaining the network infrastructure. “This allowed users to get started straight away and without constantly exhausting their laptop batteries,” explains Dan Finlay, the founder of MetaMask. It changed the game for adoption and sort of proved what Moxie claimed in this passage: “People don’t really want to operate their own server (definitely not one that is meant to use up an entire laptop’s capacity).”
This is not to suggest that Ethereum and the Web3 community are not still considering ways to undermine trust at every level, such as the installation of light clients for Eth2 or the use of decentralized data centers like W3BCloud. The default blockchain connection for MetaMask is Infura, but users have always been free to select their own. With Snaps, users will also have more options outside of the traditional wallet-server relationship. A snap “could allow a user run light clients, choose alternative runtimes like zk-STARK chains or new friendly languages, or maybe it just lets users connect to their favorite centralized service,” according to Dan Finlay.
The success of some newer, more centralized crypto networks suggests that users may not be as concerned with decentralization as the several teams in the Ethereum community would have you believe. However, there is no reason to surely believe that Web3 infrastructure will continue to function as it does today in the future, especially as more people become aware of its benefits.