Web 3.0 Decoded: The Internet Transformation
Web 3 is the newest buzzword, taking over the technology & venture capital world & if you are wondering what it means, trust me you are not alone. The combined market capitalization of the top Web 3 crypto networks is $27.5 billion. According to the Dove metrics, 438 Web 3 companies have raised over $4.5 billion in funding so far. As per the National Research Group, 81% of consumers who are aware of Web 3 think that it will improve their happiness & wellbeing.
There is a plethora of such statistics roaming around on the internet. However, to start watching any good movie, you can't directly watch the third release, without knowing what happened in the previous two, so let's rewind a bit!
The 1990s: One-way information highway
Web 1.0 was the first internet. As it was the static web - it was not user-friendly at all. There were no algorithms that could dynamically serve pages with web pages being really basic in nature. The functions that served the most purpose were email or perhaps the real-time retrieval of news & similar stuff like that. The content on these web pages was developed by the companies hosting the websites & users were not able to interact with these web pages & it was a read-only internet.
2004 – 2016: Walled gardens of Value
Web 2.0 can be thought of as a read-write internet where the users on these platforms were fundamental to the content, justifying the name - Social Web. Driven by innovations in technology, companies have been able to flourish in the Web 2.0 environment. But the harsh reality is that Web 2.0 is owned by these companies (Meta., Google, YouTube, Twitter, etc.), they control the platforms & they are the gatekeepers of this information which is inherently centralized in nature. To remove these gatekeepers or middlemen, we kind of needed a revolution. Hence, Web 3!
Web 3.0 – by the People, of the People, for the People
Web 3 is the next generation of the internet which is envisioned to be more decentralized & permissionless in nature. One that's built on decentralized protocols where users don't only help with content creation but also in the governance of the web itself. They also have the ability to own a part of the network so you can think of it as a read-write-own internet. There are already a number of technologies that could serve as the backbone for a Web 3 world, for example, blockchain, IPFS, etc. All of this gives even more reason to the internet's original creator Tim Berners-Lee to call Web 3 a Semantic Web.
Every time you buy something on Flipkart, the website’s algorithm will look at the other items that people who have purchased your product, went on ‘buy’ & then recommends it to you. So, the website is learning from other users what your preferred choices might be & then using it to recommend what you may like. In essence, the website itself is learning & becoming more intelligent as each day passes by. That, in a nutshell, is the very philosophy behind Web 3. based on this philosophy, there are many advanced use cases that have solved some major issues in the world.
Let’s explore some!
InterPlanetary File System is a protocol & peer-to-peer network for storing & sharing data in a distributed manner. It uses Content-addressing instead of location-addressing, to uniquely identify each file in a global namespace connecting all the computing devices.
Just imagine if sites like YouTube or Wikipedia go down, how would we watch those cute dog videos, how would we learn about new concepts? To solve this dependency on one single entity, IPFS comes out as a saviour. If we want to access anything on the internet right now, we type it, & location-based addressing algorithms start functioning in the background. If the location isn’t accessible, or the server is down, we will not get access.
However, there is a high chance that somebody has already downloaded that information, but we cannot access it. In order to access that file, IPFS moves from location-based to content-based addressing which uses a unique hash for every file. This is more secure as it will work on the hashes of files & will remove deduplication.
Gartner expects that by 2026, 25% of people will spend at least one hour a day in the Metaverse for work, shopping, education, social media, &/or entertainment. Metaverse is a device-independent ecosystem & is not owned by a single company. It is a stand-alone virtual economy made possible by nonfungible tokens (NFTs) and digital currencies.
Metaverse represents a combinatorial innovation, as it requires multiple technologies & trends to function. Technologies like augmented reality (AR), adaptable work arrangements, and head-mounted displays (HMDs) also contribute to an AR cloud, the Internet of Things (IoT), 5G, artificial intelligence (AI), & spatial technologies.
Today there are many individual use cases & products, all creating their own versions of a Metaverse. Business opportunities across multiple industries including:
- Medical, military, higher education, etc.
- Virtual events
- Retail - Immersive shopping experience.
- Virtually Augmented workspaces.
- 3D avatars – social media
There is a lot of excitement around Metaverse, much of it driven by technology companies as Metaverse is here to enhance & augment the digital & physical realities of people.
A decentralized autonomous organization, or DAO, is a blockchain-based form of organization or company that is governed by a native crypto token. Anyone who purchases & holds these tokens gains the ability to vote on important matters directly related to the DAO.
They typically use smart contracts in place of traditional corporate structures to coordinate the efforts & resources of many towards common aims. DAOs are based on Ethereum smart contracts, which can be programmed to carry out certain tasks only when specific conditions are met. These smart contracts can be programmed to automatically execute typical company tasks, such as disbursing funds only after a certain percentage of investors agree to fund a project. Stakeholders can vote on adding new rules, changing the rules, or ousting a member, to name a few examples.
However, no one could change the rules without permission, and those in charge of the physical infrastructure, such as the owners of the servers or the buildings where the profits were stored, were prohibited from interfering in any manner, even stealing the assets. Crucially, DAOs - in theory - eliminate the need entirely for many of the “men-in-the-middle” & “men of power” that are needed to run an organization.
DeFi – Decentralized Finance
DeFi aims to create an open-source, permissionless, & transparent financial service ecosystem. One that is available to everyone & operates without any central authority. The users would maintain complete control over their assets & interact with this ecosystem through peer-to-peer (P2P) & decentralized applications (DApps).
DeFi is built on 3 foundational blocks: Cryptography, Blockchain, & Smart Contracts. It has five major pillars of potential use cases, i.e.,
- Stable Coins – Coins that are tied to the USD & are used to be in the crypto sphere without involving a government-owned bank
- Borrowing & Lending – Borrowing & lending are automated via smart contracts, eliminating the time-consuming bank processes.
- Decentralized Exchanges – Exchanging one set of coins with another set, particularly used for cross-border payments with almost negligible fees. These also run-on immutable codes & smart contracts.
- Insurance – Use of Oracles (Reliable data source) to bridge the gap between the real-world & crypto world, which is used by smart contracts to make sure the conditions of getting the insurance amount are met.
Some other potential use cases of DeFi are, Monetary Banking Services, Margin Trading & Yield Optimization.
The new financial services are deployed on top of blockchains which eliminates the single points of failure. This data is stored on the blockchain & is distributed across 1000s of nodes, making censorship or the potential shutdown of a service a complicated task.
Since the traditional financial system relies on the intermediaries making a profit, their services are typically absent from locations with low-income communities. However, with DeFi, the costs are significantly reduced, & low-income individuals can also benefit from a broader range of financial services.
Smart contracts allow us to design globally accessible & fully automated incentive systems that can directly reward individuals, organizations, & governments for contributing to sustainable practices – such as regenerative agriculture.
In recent years, 'Oracles' – that escort facts about the world into blockchains, are now production-ready. Oracles are broadcasting agricultural data sets directly onto blockchains, making green smart-contract developers eligible to build solutions around crop yields, soil quality, weather reports, & much more.
Green Smart contracts are enabling regenerative agriculture programs. These include efforts to incentivize people around the world to reduce their carbon footprints through more sustainable land use practices, usually a combination of planting trees & conservation. These contracts use satellite data to automatically dispense rewards, & payouts happen timely, fairly, & transparently.
Velocity Network Foundation: Internet of Careers
Being in the HR Tech industry for more than 13 years, how can we not talk about the Internet of Careers!
We have observed that there is a need for accurate data about employees in the labour market to create & deploy human capital effectively. Applicant & employee career credentials are currently verified manually, using traditional & weeks-long processes that are expensive & prone to manual errors. Governments, businesses, & education institutions process career-related credentials on siloed platforms that don’t talk to each other & thus lack interoperability.
To solve this, the largest HR software vendors & solution providers came together to deploy & run Velocity Network. An open, public, decentralized utility layer that makes it possible for people to claim immutable, verifiable records from their work or school to curate their career achievements, store them privately & choose with whom to share this information. It is comprised of 4 easy steps:
- Signed credentials are issued by respective authorities & stored on the individual’s device.
- Cryptographic proof of validity is stored on the immutable, high-performance blockchain.
- Individuals present their credentials to access career & education opportunities.
- The receiver can access the blockchain & validate the credentials presented.
Through this, VNF is turning career records into verifiable digital credentials owned & stored by the individual herself.
While there is some hype related to Web 3, we can say that it is here to stay. Yes, cryptocurrencies play a critical role as a store of value & a medium of exchange. However, the potential use cases of Web 3 are much broader & could encompass other facets of different industries.
There are oodles of use cases in the market starting from DAOs to the metaverse & DeFi, and Web 3 has a lot in store for the whole business world. While some of the Web 3 use cases have already started making an impact in terms of business & technology, some of them are still taking baby steps. We have curated a derivation analysis of the use cases we analyzed and here is the matrix we created.
It’s hard to imagine a world in which Web 3’s technology doesn’t lead to innovation & a massive influx of talent & capital into the Web 3 space! Undoubtedly, we'll find out in due time if Web 3 proves to be a marvel or just another myth of the internet!