BYOMSPM

In this assignment I outline the fundamentals of Web3 along with some of its promises and limitations. I didn’t add any of my own critical thoughts to this assignment.

Grade I gave myself for this assignment: 86/100 (it really only hits the basics)

Basics of Web3

Web1: this was the “read-only web,” which was the main version of the internet available up until the 1990s and consisted of just HTML & URLs.

Web2 (Web 2.0): this is the “read/write web” that came to prominence in the early 2000s and continues to be used today. The “write” ability encompasses the addition of user-generated content, social media, and other instances of everyday users contributing to the content on the internet.

Web3: this is the potential future “read/write/own web” that is based primarily on blockchain. This captures the variety of new technology and businesses that are based on distributed ledgers that aim to decentralize decision-making and ownership. More on this in a minute.

Blockchain: This describes a system based on a distributed ledger that is maintained by a network of connected computers (nodes). The most famous example is Bitcoin, which uses a distributed ledger to track financial transactions. Blocks are added to the chain when a majority of nodes reach consensus on the validity of the information in the new block. Information in a blockchain is public, though individual’s information is usually only tied to their virtual identity. Blockchains can be permission-less (which most are) where anyone can verify, or permissioned, where only approved verifiers can mine.

Proof of work: This is a method of processing new blocks being added to a blockchain in which miners use large amounts of computing power to try to solve a complex math problem. The first miner to solve each block’s puzzle processes those transactions, adding that block immutably to the chain, and receiving a reward in exchange for their effort. This type of verification is touted as being excessively energy intensive.

Proof of stake. This is another method of processing new blocks in a blockchain which, in essence, requires “miners” to prove that they have the financial capacity that would have been required to have a chance at solving the puzzle in proof of work mining. One of these miners is then randomly selected to add the block to the chain. This is a much more energy-efficient alternative to proof of work.

NFT: This is a non-fungible token, which is essentially a digital deed of ownership and authenticity that proves ownership of a digital object. It’s noted in the HBR article that due to the high cost of adding transactions to a blockchain the average NFT transaction will not actually be recorded on a blockchain.

DAO: This is a decentralized autonomous organization, which is an organization that raises and spends money democratically.

Smart Contract: This is a type of automated contract that is executed on the blockchain. The conditions for the contract are encoded onto the chain, and if and when the conditions are met the contract executes.

Promises of Web3

A key side effect of Web2, which is largely still what dominates the internet today, is that it has seen a great centralization of power into a few dominant companies (think: Google, Youtube, etc.). Web3 promises to distribute some of the control and decision-making power back to the users of the internet by decentralizing it.

Another promise of Web3 is improved privacy. Those same companies that control most of the internet rely on leveraging extensive data that they capture on users and then sell both the data as well as highly targeted ad space based on that data. Alternatively, Web3 is offered as a solution to privacy because all information on the ledger is de-identified, tied only to an individual’s digital key.

Web3 also promises to be much more fault tolerant than Web2, as the fact that information is distributed across many computers makes it much less likely to be hacked or to fail.

Web3 also has the potential for its information to have a much higher accuracy than that in Web2. In Web3 it is theoretically harder to “post” incorrect or false information because it has to go through multiple nodes of the blockchain network to be approved and officially added.

Lastly, with Web3 transactions can theoretically be completed with more efficiency than transactions on the current internet that have to go through banks and other regulatory agencies. This is particularly true for financial and international transactions.

Limitations of Web3

Maintaining a blockchain distributed ledger is very expensive and difficult to scale. From what I’ve learned, all possible current blockchain solutions are too inefficient to work at a global scale.

Another limitation of Web3 technologies are that they are hard to upgrade because, as opposed to the largely centralized power of Web2, there is no central body to manage upgrades.

Along with difficulty managing the technology of blockchain, there is unclear accountability for issues within the system.

Lastly, an inherent weakness of Web3 is that there is often a dependency on private cryptographic keys, which individuals use to link themselves to their digital assets. The key is the only way to access some of those assets, and if someone loses the key there is no alternative way to access the assets.

Please let me know if there’s anything in here that I’ve misunderstood.

Thanks for reading.

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Works Cited

Stackpole, Thomas. “What Is Web3?” Harvard Business Review. 10 May 2022.

Rodeck, David. “What Is A Blockchain?” Forbes. 23 May 2023. https://www.forbes.com/advisor/investing/cryptocurrency/what-is-blockchain/.