I have spent the last six months researching and playing with “Web3”. You may have heard of Web3, NFTs, DeFi (Decentralized Finance), and of course, Crypto. Here is the snapshot of my current understanding:
Make sure to check out the glossary near the end where I explain each term in case you are not familiar with it yet.
What this Web3 even is?
The Internet has its informal history. One version (disputed, of course) goes something like this:
- Web1 – Static pages, created by companies, and experts, or self-hosted communities ran by nerds – WordPress, Forums, Chatrooms.
- Web2 – Social features created by corporations. Users create and share content easily, but the platforms are closed – Facebook, Twitter, Instagram.
- Web3 – Users loosely connected in a network that they all own, with blockchain as the underlying technology.
In the eyes of Web3 enthusiasts, Web2 biggest problem is that it’s putting too much power in the hands of these big companies. They are benefiting from network effects to the degree that it’s hard to really hard to escape their grasp. Some cannot quit Facebook (because of that one homeschooling group), while others have trouble creating a competitor because users are already somewhere else.
Blockchain is the layer behind the servers that is supposed to make this possible. Web3 is the spirit of building decentralized products interacting with each other without being mediated by one of the current tech giants. The accrued network effects (for example, connections between users) are shared, so everybody benefits. Data belongs to everybody but is secured by cryptographic permissions, which theoretically prevents misuse by big corporations. Privacy is “solved” by pseudonymity – everybody has access to the data you share, but you can have multiple personas to keep your identities separate.
Web3 enthusiasts think this will usher in a new age of creativity, comparable to the Internet’s early days where everyone could have created anything they dreamt of, provided they had technical chops. The energy feels similar, and many “tech luminaries” of the early days are now very vocal and excited about web3, mainly because the technology is supposed to combine the best aspects of the previous stacks – interactive, collaborative nature of web2 with the openness of web1.
An obvious criticism (that I, too, have made) is that it’s entirely possible to use existing Web1 technologies and protocols (Email, XMPP, RSS) to provide collaborative features without even using Blockchain. Read more in “Oldschool Internet and the Blockchain”.
I am not entirely convinced that Blockchain is the best technology to solve all these problems, but I also think this is immaterial. What matters is the critical mass of engineers, creators, and users with the shared goal of making the Internet a little bit more open and a little bit more collaborative.
A few web3 examples
- My go-to example is the Ethereum Name Service – a decentralized protocol for buying a domain name like artpi.eth, that serves as my web3 username, is tradeable as NFT, and cannot be controlled by any one institution. Here is a Twitter thread in which I explain the specifics.
- Signin with Ethereum is an open protocol for federated login, like those “Login with Google” or “Login with Facebook” buttons.
- Most of the successful services will get reimplemented in web3: for example, Mirror is a web3 version of Medium, there are multiple notion clones being built, and so on.
In the end, I don’t think web3 will be a tectonic shift some perceive it to be. Instead, the set of blockchain protocols will add to the web ecosystem, enabling new solutions while previous layers will continue to function.
WP DAO Login
WordPress is the best web1 has to offer, and it shares the core principles of web3 – openness, interoperability, composability, and Open Source. It is a natural fit in my mind, so as part of my exploration, I wrote a small WordPress plugin to connect any WordPress site to web3. Some features include:
- Existing users can log in with their Ethereum Wallets
- New users can create accounts based on their token/NFT balances
- You can designate members-only areas for token/NFT holders
- Works with existing WordPress user roles and other plugins. You can create a private forum, private store, DAO blog, etc.
Demystifying some other crypto terms
We are a few hundred words into this essay, and I haven’t mentioned coins yet, because there is so much more to web3 than speculation. The monetary aspect is interesting, but it gets disproportionate attention and introduces a lot of noise.
Here is my brief explanation of all the associated terms.
- Crypto usually refers to Bitcoin, Ethereum and other cryptocurrencies. They have many other applications, but usually the term “Crypto” refers to speculative use. Coinbase is considered very trustworthy.
- Smart Contract is a feature of Ethereum (and other coins) that lets you execute instructions. Imagine you have written “give 10% to this charity once you get it” on a 100$ bill and had a way of ensuring that anybody who takes it has to comply. Smart Contracts are what enables DeFi, NFTs, Web3 and other elaborate applications.
- DeFi, aka Decentralized Finance is a sector re-implementing existing financial solutions (loans, savings accounts, ownership certificates) on top of Smart Contracts, with much higher returns and risk (“savings account” with 8% return is considered quite avarage). BlockFi is considered trustworthy, and this thread explores some more exciting (and risky) possibilities.
- NFTs are public certificates of ownership. When you hear about NFT art, it relates to existing digital art (image, music, animation) with a mechanism to own, after paying for it (which makes artists very interested about the possibility of finally being paid decent money). As a certificate of of ownership, it can also secure your membership to a specific club, or signal status – that is why people combine the art and status signalling by setting NFTs as their profile picture on Twitter. Think of it as wearing Rolex on your wrist. You can sell/buy NFTs on OpenSea.
- DAOs are foundations/non-profits/LLCs incorporated using Smart Contracts. Instead of writing up who is a member, each member is issued a token, or a governance token which permits them to vote/make decisions. This system allows in theory for fully anonymous / pseudonymous participation, because all the organizations knows about you is your wallet address.
- Metaverse is a term only slightly related to blockchain and I will cover it in another issue. In essence, I think Facebook will try to appropriate entire web3 space just as it did with open protocols of the early web2 days.
Where to learn more
Here are some resources that I found particularly useful:
- Chris Dixon / Naval Ravikant episode of the Tim Ferriss Show (2h30m) explains NFTs, web3 and their potential.
- Decentralized Tech goes deep into philosophical/societal aspects of DAOs and ways in which they can help humans organize.
- My first impressions of web3 shares some criticisms of the current implementation of NFTs and where they fall short in bringing the decentralized future about.
- I collected my ongoing learnings in this Twitter thread