Web 3.0: This version is new, more open, and decentralises the internet

Experts working on the ‘third version of the internet’ — Web 3.0 or Web3 — say the new version will be built on concepts of decentralisation, openness, and greater user utility and will be here sooner than many people think. 

In the first phase of its evolution, the internet was driven by users consuming information. In the current (second) phase, users also became contributors with the advent of social media.

In Web 2.0, which is the world of social media and mobile apps, people’s data is owned by organisations such as Facebook, Google, and Amazon.

In contrast, the Web3 world is envisioned as a decentralised internet which is permissionless and democratic. For example, Twitter will not be able to censor posts and Facebook will not be able to maintain a database of billions of users that can be potentially used to influence elections.

Arjun Kalsy, vice president for growth at blockchain start-up Polygon, likens Web3 to a power station. 

“The way we get power in our houses now is that if the power station breaks down, everything stops. With solar cells, people are able to produce their own power. Let's say you are my neighbour and I am producing extra electricity, would you like to buy electricity from me? Since everybody else is also producing electricity, there is competition in the market. Now I can find someone selling it cheaper, leading to others who are selling electricity to optimise their price,” said Kalsy.

This raises the question of who maintains the power infrastructure. “You can levy a small tax every time power is traded. A very small percentage of that power will be set aside, as a tax of sorts. And that tax will be used to maintain the infrastructure. This will operate at scale if there are numerous transactions…This kind of decentralised system will ensure that all bodies act in the best interest of the system as a whole,” said Kalsy.  

Those working on Web3 say it will reduce the power of, and revenues, made by big technology firms. 

There are two lines of thought around this. “In Web3, instead of data residing in these centralised databases, it is going to reside on the blockchain technology which is not controlled by one organisation. And with that, my data becomes my choice, (and) which advertiser I want to give it to, and if the advertiser is paying Facebook, I should get a piece of that,” said Kapil Rathi, CEO and co-founder of digital currency exchange CrossTower.

Others believe this is not going to be the case. “Big technology firms have been monetising people for data, where revenue models depend on productising people. Web3 adoption will force these companies to rethink their core business models and become more community-owned and driven,” said Kalsy. 

The big tech firms are already experimenting with different aspects of this new technology, and are likely to ride the wave rather than vanish into oblivion. 

The other issue is that of regulation. 

The think tank, Competitive Enterprise Institute, has said in an article titled ‘Web3 Requires New Regulatory Thinking’ that, so far, wary governments have reacted in two ways. Those of a more authoritarian bent seek to capture the new technology while eliminating private competition. For instance, China began researching digital money in 2014. It plans to force its exclusive use at the cost of privacy, freedom, and political dissent.

Western democracies, said the article, seek to force Web3  innovations into compliance with familiar legal structures.  

India is also looking at regulating cryptocurrencies under Sebi, according to news reports. Letting go of a centralised way to regulate will take time, say most people working on the technology.  

The regulatory uncertainty surrounding crypto in India has meant that venture capital investors have largely stayed away from betting on crypto start-ups.

Although crypto exchanges such as CoinSwitch Kuber and CoinDCX have attracted unicorn funding rounds on the back of a rush of new users, there has been hardly any early stage funding.

However, this situation is bound to change over the next one year, according to Nischal Shetty, CEO and founder of crypto trading platform WazirX. He told Business Standard last month that in 2017, India had around five 5 million crypto users and now the figure stood at around 20 million.

“Even if 5-10 per cent of the total user base adopts an app, that means a good 1-2 million users. This is another reason that you will see more start-ups working in the Web3 space getting funded,” said Shetty.

A slew of Indian start-ups like Biconomy, Polygon, EPNS, Persistence, and Vauld are working to put together the technological building blocks to make Web3’s mass adoption a reality.  

Bridging the worlds of Web2 and Web3, Indian short video platform Chingari recently shifted from a Web2 model of incentives for content creators to a Web3 model. The start-up raised over $19 million in October that will help it build its token called ‘$GARI’ on the Solana blockchain.

By one estimate, Web3 can help India contribute an additional $1.1 trillion of economic growth to its GDP over the next 11 years. It’s believed that digital assets like Bitcoin, Ether, Solana, Algorand, and stablecoins are the fuel of the future financial ecosystem.

Like most nascent ideas, Web3 has its share of sceptics. National Public Radio in the US recently quoted James Grimmelmann, a Cornell University professor who studies law and technology, as saying that blockchains are interesting and solve some difficult problems in new ways.

But he added a big ‘but’. “They're probably going to end up in the toolkit that the next internet is built out of, but that doesn't mean the internet is going to be built around them,” said Grimmelmann.