Web 3.0 A Visual Look | Deep Dive
Review Date: May 14, 2021 |
World Wide Web
The World Wide Web has experienced transformative changes since its advent in 1989. Sir Tim Berners-Lee, then a computer scientist at CERN (Organisation européenne pour la recherche nucléaire), first proposed a global hypertext system to manage information at CERN1. The project included three technologies that serve as the backbone of today’s web (hypertext markup language, uniform resource identifier, and hypertext transfer protocol) and ultimately became the first iteration of the World Wide Web (“Web 1.0”) and was released to the public in 1991.
Web 1.0
Web 1.0, which Nupur Choudhury of the Sikkim Manipal Institute of Technology estimated to span from 1996 to 20042, is characterized by the majority of users consuming content created by a minority of users. Web pages were static and information on pages was available for consumption by users at all times. The ability to edit information was limited to the creator(s) of the pages, which suggested Web 1.0 to be a “read-only” environment2, where content consumers could absorb information without the ability to edit information or interact with other users.
Web 2.0
Web 2.0, coined by Darcy DiNucci in 1999, refers to an environment that encourages end-user-created content, the interaction between all users, and interoperability. She suggests the “Web will fragment into countless permutations with different looks, behaviors, uses and hardware hosts…understood not as screenfuls of text and graphics but as a transport mechanism, the ether through which interactivity happens3.” It is important to note Web 2.0 does not specify any technical specifications or deviations relative to Web 1.0, but rather, a different design and use case for the World Wide Web. Separately, Tim O’Reilly defines Web 2.0 as the network as the platform, spanning all connected devices; Web 2.0 applications are those that make the most of the intrinsic advantages of that platform: delivering software as a continually-updated service that gets better the more people use it, consuming and remixing data from multiple sources, including individual users, while providing their own data and services in a form that allows remixing by others, creating network effects through an “architecture of participation,” and going beyond the page metaphor of Web 1.0 to deliver rich user experiences4.
While DiNucci’s description appears abstract relative to O’Reilly’s more pragmatic, both characterizations are generally recognized by readers. By allowing end-users to communicate with one another and edit content, Web 2.0 provides dynamic content that is malleable to user feedback. As such, it can be said that Web 2.0 is a “read-write” environment, compared to Web 1.0’s “read-only” environment. One key element of Web 2.0 is the trade-off between connectivity and control; users are sacrificing control of content in exchange for the ability to interact with other users. This abdication of control implicitly implies the surrender of privacy, which is a profound limitation of Web 2.0. The constantly-revised Terms of Service required by companies operating within Web 2.0 (Google, Facebook, Amazon, etc…) for access to its community provides the legal foundation for companies to collect and possibly monetize user data. This raises ethical concerns and conflicts of interest between users and community organizers. Choudhury estimates the span of Web 2.0 to be 2004 to 2016.
In May of 2001, Tim Berners-Lee, Ora Lassila, and James Hendler published an article in Scientific American detailing a new version of the World Wide Web. In the article, they describe the semantic web as “an environment where software agents roaming from page to page can readily carry out sophisticated tasks for users” and “as decentralized as possible7.” In essence, they view the Semantic Web as the framework by which concepts from different sub-communities can be integrated. While the Semantic Web has not (yet) come into fruition, Berners-Lee views it as a component of Web 3.0, suggesting it is when you’ve got an overlay of scalable vector graphics – everything rippling and folding and looking misty – on Web 2.0 and access to a semantic Web integrated across a huge space of data, you’ll have access to an unbelievable data resource8.
This suggests Web 3.0 to be a reversion to the original purpose of the World Wide Web (as per Berners-Lee), a platform to share information where users could participate without paying a fee or asking for permission; in other words, a decentralized network9.
This decentralization would require the transformation of the Web into a database6. Nova Spivack, founder of Radar Networks, described Web 3.0 as a “World Wide Database” and stated that society is “going from a Web of connected documents to a Web of connected data.”
Web 3.0 would also provide an upgrade to the back-end infrastructure of the web and requires data to be shared, not owned (as in Web 2.0). Services utilizing the data would show different applications of the same data. Moreover, as Berners-Lee stated, software agents carrying out tasks for users would imply machines possessing the artificial intelligence to mine human emotions and behavior. In other words, machines would need to provide context (as defined by humans) to data and classify data as relevant or irrelevant. If this technology becomes obtainable, it would designate Web 3.0 as a “read-write-execute” environment, as opposed to the “read-write” environment of Web 2.0.
Edge cases of Web 3.0 are currently in market; Netflix and YouTube scan user to history to provide recommended content. However, this technology is not unalloyed; changes in preferences or an accidental click can affect future recommendations, thereby sullying algorithms providing recommendations indefinitely.
The development of this intelligence, reaching a critical mass for decentralization, and lobbying efforts against decentralization by those profiting from centralization (Google, Facebook, Amazon, etc…) remain the primary hurdles for Web 3.0
Pivoting to Web 3.0
It is clear why Berners-Lee’s vision for the World Wide Web did not come to fruition (yet). The altruism associated with a free and unencumbered web dissipated when companies operating in Web 2.0 realized the centralization of data can be monetized in the form of targeted advertising revenue. Additionally, these companies disabled fundamental freedoms such as the ability to link to content via a URL or the ability for search engines to index its contents10.
A decentralized web will allow users to rightfully own their data. This would provide users with data privacy, portability, and security10. Moreover, it would allow users to monetize their data if they choose to. On balance, decentralization would lead to a fairer World Wide Web. Lastly, data transfers would be more efficient without a third-party intermediary.
Fabric Ventures provides a visual evolution of the web in terms of equity market capitalization11 (figure 1). According to Fabric, the value of Web 2.0 is over five times that of Web 1.0 (as of December 2019). If one were to use the eight biggest technology companies in the world (Apple, Microsoft, Alphabet, Facebook, Amazon, Tencent, Tesla, and Alibaba) as a proxy for the value generated by Web 2.0, it would be approximately $10.2T as of May 7th, 2021.
This conservative valuation does not include prototypical Web 2.0 companies such as Netflix, Uber, Airbnb, and others. Relatedly, these Web 2.0 companies comprise eight of the ten largest companies globally by market capitalization, underscoring the importance of technology and data in society.
Using the top eight cryptocurrencies by market capitalization as a proxy for Web 3.0 (Bitcoin, Ethereum, Binance Coin, Dogecoin, Cardano, Tether, XRP, and Polkadot), the value generated would be approximately $1.9T as of May 9th, 2021. This suggests the value of Web 3.0 is ~19% of that of Web 2.0, corroborating the thesis that while the transition from 2.0 to 3.0 is underway, there remains much work to be done from a technical, legal, and utilization respect.
Decentralized Finance
To further analyze the opportunity of Web 3.0, one should examine the merits of a decentralized financial (“DeFi”) system. After all, Tim Berners-Lee posited it as a logical progression in the advance of society- “if the world works by the exchange of information and money, the web allows the exchange of information, and so the interchange of money is a natural next step12.”
In Web 3.0, messages between users can be sent without a third-party intermediary. In the same vein, financial transactions could be completed without a bank of financial institution. Borrowing the framework from Fabric, the market capitalization of the top ten banking institutions (JPMorgan, Bank of America, China Construction Bank, China Merchants Bank, China Construction Bank, Wells Fargo, Agricultural Bank of China, Morgan Stanley, Citi, and Bank of China) is approximately $2.4T as of May 7th, 2021. Similarly, the top ten DeFi projects by locked USD value (according to defipulse.com) are Compound, Aave, Maker, Curve Finance, Uniswap, SushiSwap, InstaDApp, Liquity, Polygon, and yearn.finance. These projects have an aggregate value of ~$75B, or approximately 3% of the top ten banking institutions today.
It is sensible that the transition from the current banking system to DeFi lags that of 2.0 to 3.0 given it is considered a subset of 3.0. However, this lag highlights the potential opportunity in first-mover advantages within the DeFi environment. While the same hurdles faced by Web 3.0 (critical mass adoption, legal and technical threats) also apply to DeFi, these challenges present users with the opportunity to research and tactically invest in top tier DeFi projects that will become the backbone of the new financial system.
References
- “World Wide Web and Its Journey from Web 1.0 to Web 4.0.” Nupur Choudhury. International Journal of Computer Science and Information Technologies, Vol. 5 (6) 2014, 8096-8100.
- DiNucci, Darcy (1999). “Fragmented Future” (PDF). Print. 53 (4): 32. Archived (PDF) from the original on 2011-11-10.
- “The Semantic Web.” Tim Berners-Lee, James Hendler, and Ora Lassila. Scientific American. May 2001.
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