Technology Web3: Is it Really the Next Generation of the Internet?

Technology

Web3: Is it Really the Next Generation of the Internet?

December 8, 2022

Unlike the two iterations of the web that came before it, Web3 uses blockchain networks, cryptocurrency, and NFTs to give power back to users and wrestle ownership away from the grasp of ‘Big Tech’ companies like Meta, Google, and Twitter.

Web3, also called Web 3.0, refers to technologies including blockchain, cryptocurrency, non-fungible tokens (NFTs), and smart contracts, which utilize internet protocols built on top of open source, decentralized and distributed systems, that reduce dependence on individual or centralized companies.

Dgtl Infra provides an in-depth overview of Web3, including examples of the transformative technologies it has already spawned, and how it represents an opportunity to create a better version of the internet. Additionally, we highlight the top Web3 companies and the infrastructure supporting their businesses.

What is Web3?

The term Web3 was coined by Ethereum co-founder Gavin Wood, shortly after the cryptocurrency’s launch in 2014.

Today, a big part of the web still relies on trusting a handful of private companies to act in everyone’s best interests. Web3 is the notion of an internet where there would be less reliance on trusted third parties.

Web3’s core guiding principles are:

Decentralization: large portions of the internet will not be controlled by single entities, ownership will be distributed amongst its users
Permissionless: everyone gets to participate in Web3 and no one will be de-platformed
Native Payments: cryptocurrency will be used for money exchange, bringing an end to our reliance on fiat currencies and banks
Trustless: participants can reach a consensus without relying on trusted third parties

Web3 technologies such as blockchain networks, cryptocurrency, non-fungible tokens (NFTs), and decentralized autonomous organizations (DAOs) are providing the necessary tools to create online spaces that users can truly own.

Web3 Market Size

According to DappRadar, there are over 11,600 decentralized applications (dapps) in existence today. These applications range from popular online video games such as Axie Infinity and NFT marketplaces like OpenSea, to decentralized finance (DeFi) platforms such as Uniswap and Curve.

Over the past decade, blockchain has established itself as the foundation for the cryptocurrency and NFT ecosystem and it is now transforming applications in other industries such as real estate, gaming, carbon markets, and art.

Per Grand View Research, the Web3 blockchain market size stands at $1.73 billion in 2022 and is expected to grow at a 44.9% compound annual growth rate (CAGR) to reach $33.5 billion of revenue in 2030.

Web3 Catalysts and Concerns

The biggest developments in Web3 include 3D interactive technologies such as augmented reality (AR) & virtual reality (VR), artificial intelligence (AI), the Flux Protocol, the Semantic Web, low-code application building software, and cloud computing.

Critics of Web3 point to the underlying technologies not delivering what they promise. For example, the ownership of many popular Web3 companies is not distributed amongst its users, but concentrated in the hands of early adopters and venture capitalists. A recent public spat between ex-Twitter CEO, Jack Dorsey and well-known Silicon Valley venture capitalist, Marc Andreessen, highlighted just that.

Additionally, there are prominent figures who hold considerable sway and influence over what is supposed to be a leaderless community. An often cited example of this is the amount of power Vitalik Buterin continues to have over Ethereum, even though he is no longer involved in its development.

What are Examples of Web3?

Examples of Web3 are blockchain networks, cryptocurrency, non-fungible tokens (NFTs), smart contracts, and web browsers.

Blockchain Networks

Blockchain is the backbone of Web3. The digital ledger makes it possible for websites and applications to live across many different servers that are independently owned and operated.

Blockchain is a digital ledger that keeps a record of all transactions on every node in the network and provides a system for arriving at a consensus without the presence of a central governing authority.

The data on these shared digital ledgers are grouped together into ‘blocks’ and stitched together sequentially in a ‘chain’, hence the word blockchain.

Launched in 2019, Helium is an example of blockchain technology enabling wireless communications. Specifically, Helium is a decentralized global network of wireless hotspots which powers Internet of Things (IoT) devices.

Helium pays people in tokens to run their wireless hotspots for others to use. Presently, Helium has a network of nearly 1 million hotspots around the world.

Cryptocurrency

Cryptocurrency is a form of virtual currency that is designed to be used over the internet as a new asset class. Since it is based on blockchain technology and secured by cryptography, it works safely as a medium of exchange, store of value, and as a means to power applications.

Bitcoin is the world’s most popular cryptocurrency and, as of December 2022, the market value of all Bitcoins in circulation was ~$321 billion. Bitcoin is generated through a process called mining.

“Mining” is the term used to refer to a process where networks of specialized computers perform and solve extremely complex mathematical problems to generate new digital “coins” and verify new transactions. The first computer that solves the equation is awarded the newly created cryptocurrency asset.

Cryptocurrency can be bought on exchanges such as Coinbase or transferred directly to a digital wallet by its holder.

Ether is the second largest cryptocurrency (after Bitcoin), with a market capitalization of ~$143 billion as of December 2022, and is used in the Ethereum platform. Ethereum is a decentralized, open source software platform powered by blockchain technology.

Non-Fungible Tokens (NFTs)

Non-Fungible Tokens (NFTs) are unique digital assets that cannot be replaced with something else. Whereas ‘fungible’ assets like Bitcoin or a dollar bill can be traded for another asset.

These tokens are held on the blockchain and can be used to represent ownership of unique items such as art, music, memorabilia, in-game collectibles, and videos.

The information that identifies an NFT is recorded in smart contracts, making it uniquely identifiable and its record of ownership immutable. NFTs can be bought at online marketplaces such as OpenSea and have quickly reached high valuations, especially after Beeple (Mike Winkelmann) sold an NFT artwork at Christie’s for $69 million.

And it’s not just artists, even large consumer-facing corporations are entering the NFT space. For example, Starbucks recently unveiled Starbucks Odyssey, a program powered by Web3 technology offering its Starbucks Rewards members the chance to earn and purchase digital collectible assets that will unlock access to new benefits and immersive coffee experiences.

Smart Contracts

Smart contracts are self-executing software programs stored on the blockchain for controlling the transfer of digital assets between parties after certain conditions are met.

These contracts are written using simple “if… then…” logic and the actions are executed when certain pre-determined conditions are met. Broadly, these actions could include releasing funds to the appropriate parties, registering vehicles, pushing notifications, or issuing tickets.

As an example, a music artist could record the ownership of a song on a blockchain by embedding it in a smart contract. Whenever the song is used for commercial purposes, royalties would be credited to the artist.

Web Browsers

Web3 browsers are built on blockchain technology and enable users to interact with decentralized applications and integrate cryptocurrencies.

These web browsers allow users to surf the decentralized web with better privacy and complete anonymity.

The world’s first Web3 browser, Opera, includes features like a built-in cryptocurrency wallet and enables easy access to decentralized applications.

What is the Difference Between Web2 and Web3?

Before discussing how Web3 compares to Web2, it is important to understand the evolution of the web.

The late 1990s witnessed the first version of the internet, known as Web 1.0. It included many links and homepages, but there was zero interactivity with websites or between users.

Web 2.0 came along in 2004, which not only allowed people to consume content but also create their own work and publish. Blogs, forums, and eventually social media platforms became the mainstays of Web 2.0. The internet evolved from a read-only entity to read-write.

Web 3.0 (or Web3) can be described as the read-write-own version of the internet. This means that users must participate in the operation and governance of the platforms themselves, acting as shareholders and not just as customers.

The Evolution of the Web

Overall, Web1 was about bringing people onto the internet via web browsers and services such as AOL and Yahoo. Next, Web2 was an era of consolidation of all the content shared by people into businesses. And now, Web3 is about taking control back from the ‘Big Tech’ companies like Meta, Google, and Twitter through decentralization.

Practical implementations of Web3 functionality remains one of the biggest challenges. Think about how easy it is to use Facebook, Uber, DoorDash, or PayPal. Web2 may suffer from the problems of centralization but it offers seamless functionality and an excellent user experience. Indeed, the Web3 ecosystem still lacks the usability to replace Web2.

What are the Top Web3 Companies?

Web3 is still in its infancy. There are a lot of questions surrounding the scalability and sustainability of Web3 products. But as technologies continue to evolve, companies make further improvements, and entrepreneurs devote more intellectual resources towards Web3 development, widespread acceptance may quickly gain traction.

Presently, the top Web3 companies by revenue are as follows:

Company	Revenue
Binance	$20 billion
Coinbase	$5.0 billion
Polygon Technology	$436 million
OpenSea	$140 million
ConsenSys	$52 million
CoinSwitch	$50 million
Web3 Foundation	$6.9 million
Alchemy	$3.0 million
Brave Software	$2.5 million

Source: Emergen Research.

Below are further details on notable Web3 companies:

Binance

Binance is the largest cryptocurrency exchange in the world in terms of daily trading volume. It was founded in 2017 by Changpeng Zhao, and offers a number of products such as a crypto wallet, Binance Coin, and an NFT marketplace.

OpenSea

OpenSea is the largest digital marketplace in the world for NFTs and crypto collectibles. The marketplace has more than 1 million active users and a daily trading volume of $6.0 million, as of November 2022.

Warner Music Group Partnership

In September 2022, OpenSea partnered with Warner Music Group, a music and entertainment company, to provide a platform for its artists to build and extend their fan communities in Web3. For example, select Warner Music artists will have their own dedicated drop page to host limited-edition projects, allowing for new opportunities for fans to engage with music and artists. Notable Warner Music recording artists include Ed Sheeran, Bruno Mars, Cardi B, and Dua Lipa.

Braintrust

Braintrust is a decentralized talent network connecting the world’s leading companies with vetted and skilled freelancers. The freelancing community controls the platform and also uses it to find work. Companies such as Nike, Porsche, and Goldman Sachs use Braintrust.

What is Web3 Infrastructure?

Web3 infrastructure comprises the tools, services, and resources which Web3 applications can be built and deployed on. This Web3 infrastructure includes blockchain node providers, cloud computing, and smart contract programming languages:

Blockchain Node Provider

Blockchain node providers create and maintain blockchain nodes for others to use. This shifts the responsibility of running nodes from the developer or company to the service provider. Node providers can lower maintenance costs and improve reliability. Examples of some of the popular node providers are Alchemy, Infura, and QuickNode.

Cloud Computing

For Web3 applications to fulfill their promise and work at a global scale, they need cloud computing capabilities, which provide the use of shared compute, storage, and networking resources that can be securely accessed to run applications and services from anywhere.

Google Cloud is creating Web3-optimized infrastructure so that companies can focus on innovation. Web3 leaders like Coinbase, NEAR, Nansen, Solana, Blockdaemon, Dapper Labs, and Sky Mavis use Google Cloud.

Google Cloud and Coinbase

In October 2022, Google Cloud partnered with Coinbase to accelerate Web3 adoption and innovation. Specifically, there are four key elements to this partnership:

Payment: Google Cloud will enable certain customers, starting with those in the Web3 ecosystem, to pay for its cloud services via select cryptocurrencies through Coinbase Commerce
Data Warehouse: Web3 developers will have access to Google Cloud’s blockchain data through BigQuery. This offering will be powered by Coinbase Cloud’s Node service
Institutional Crypto Services: Google will use Coinbase Prime for institutional crypto services, like secure custody and reporting, which serve institutional investors and corporate clients
Cloud Provider: Coinbase selected Google Cloud as a strategic cloud provider to build exchange and data services, such as processing blockchain data at-scale

READ MORE: Google Cloud’s Data Center Locations

Smart Contract Programming Languages

Smart contract programming languages allow users to write programs that implement smart contracts on the blockchain. Solidity, Rush, and JavaScript are some of the programming languages widely used by developers of smart contracts.