Web 3 has been a hot topic over the last five years, with its development signalling a paradigm shift in how the internet itself is constructed. Yet there is still a lot of uncertainty as to what Web 3 will actually look like, and will it actually ever truly exist in the decentralised form that it was originally envisaged.
Like most organisations in the tech space, your organisation has likely heard of Web3, but might not be too sure of exactly what it means or what it involves. That’s ok though, you’re not alone. According to a 2022 study in the Harvard Business Review, almost 70,000 of the more than 50,000 people surveyed said that they did not know what Web3 is.
Web2, as it’s known, was the successor to the early initiation of the internet in the 1990s and has been around since about the mid-2000s. The largest element of Web2 was the influence of massive companies that allowed users to create their own content, X, Facebook, Google, Wikipedia etc. These companies were, and still are, able to leverage and monetise the massive user activity on these platforms to make strategic decisions on the governance and structure of the Internet itself, which has led to huge issues in some jurisdictions, particularly the European Union when it comes to issues such as data privacy.
What Does Web3 Look Like?
The fundamental technologies that make up the Web3 environment already exist and are broadly in use, they include:
Blockchain: Most widely known for its cryptocurrency usage, blockchain technology is essentially an independent, decentralised digitally distributed ledger that exists on a computer network and records transactions. As each new piece of data is added to the network, a new block is created in the chain, and all data sets in the blockchain are then updated to reflect the change. One of the great strengths of blockchain is its immutability and its difficulty to disrupt.
Digital Tokens and Assets: Cryptocurrencies, Non-Fungible Tokens (NFT’s) and Central Bank Digital Currencies are all established terminologies and digital assets. Tokenised assets such as sports or concert tickets are also part of Web3 technology, their strength lying in their security in terms of transferring, due to blockchain technology, and that they can be independently controlled outside major platforms, particularly welcome in areas such as ticketing, which has long been prone to monopolisation.
Challenges of Web3
The challenge facing Web3 is that while many of its technologies are established, as a cohesive transformation to a new digital structure it faces the dual challenges of almost monolithic corporate ownership of massive marketplaces and the ease with which consumers use them, which makes disruption on a large scale difficult. That said, this year is seeing the expansion of many Web3-related technologies.
Increase in Decentralised Platforms and Smart Contracts
One of the most significant Web3 developments is Decentralised Finance (DeFi), a financial system that uses blockchain technology to eliminate the need for traditional banking or financial intermediaries, such as brokers, exchanges or even banks. DeFi operates on a peer-to-peer (P2P) network, facilitating trading, borrowing and lending directly and transparently, with the aim of reducing barriers to entry and the significant costs associated with traditional financial services. DeFi has particular significance for developing, or underdeveloped economies, where access to financial services is often limited.
The blockchain system that powers DeFi uses what are known as smart contracts rather than third-party intermediaries to validate financial transactions. Smart contracts themselves are self-executing programmes that eliminate cost through the use of digital wallets, which form an ecosystem of interoperable financial systems, where data and assets can be moved with ease across different decentralised finance applications, providing a smoother user experience. A majority of transactions and services are carried out using tokens and cryptocurrencies, which can act as collateral, facilitating lending or borrowing and also can be used for governance purposes within the DeFi ecosystem.
Stablecoins
A relatively new type of cryptocurrency, stablecoin is a cryptocurrency whose value is tied to a traditional currency, such as the euro or the dollar. The objective of this is to ensure that they maintain a stable value, which increases the attractiveness of DeFi transactions. Stablecoins can also be used in cross-border payments, with international payments giant PayPal recently launching their own Stablecoin.
Web 3 and AI
Artificial Intelligence is also powering the development of many Web£ assets, particularly Blockchain, which is at the core of the Web3 universe. Traditional blockchains are about security, decentralisation, transparency and immutability. Through AI-enabled machine learning, blockchains can predict, adapt and optimise as they evolve. AI is also being used to drive the evolution of Web3’s smart contracts. It enables them to analyse and gather data such as market analysis, and situational or strategic threats and respond not based on predetermined instructions, but actual real-time insights.
For expertise and information on the development resources and practices for your business, get in touch with us at IT Experts Europe.
Web3 Skills Your Organisation Needs
With Web3 applications and tools constantly evolving, it is unsurprising that the most in-demand skills for working in Web3 are Developer skills, with Java, code-writing, memory management and functional programming forming the core of the skills needed. Skills like blockchain development and consensus mechanisms, smart contract development, API rollout and Web3-specific app development are also in demand. Knowledge of cryptocurrency and its various ecosystems also has a massive part to play for any Web3 team. Web3 itself is characterised by rapid development and innovation, with development teams required to stay up to speed on the latest developments in DeFi, crypto, blockchain, tokens and much more. New standards, protocols and tools are always emerging, which often require swift adaptation.
A recent McKinsey report scaled the rollout of Web3 as just 2 out of 5 in terms of adaptation across all industries, but while the paradigm shift similar to Web2 brought may not be as obvious with Web3, it is undeniable that more and more Web3-specific tools are being developed and integrated into our systems. In considering what this change means, the words of serial tech entrepreneur and investor Naval Ravikant summarise it well; “Web 2: Users are the data, corporations own the platform, and the code is closed. Web 3: Users own their data, contributors own the platform, and the code is open.”