Introduction to web2 and web3
Web2, the current iteration of the internet, is characterised by dynamic and interactive websites, user-generated content, and the widespread use of social media. It is based on centralized systems and client-server architecture. It is built over centralised infrastructure and is primarily focused on providing users with a more personalised experience using technologies such as AJAX, RSS, and APIs. Additionally, Web2 has seen the rise of e-commerce, online banking, and other services that have made it easier for people to conduct transactions and access information online. Web2 was a massive upgrade from the primitive version of the internet, web1, which was composed of static information providers without any or negligible user interaction. Although the advancements of web2 are commendable, Web2 has also brought about issues surrounding privacy, the spread of misinformation, and the concentration of power in the hands of a few large tech companies acting as gatekeepers to the spread of information.
Web3, also known as the decentralized web, aims to create a more open, transparent, and secure internet by using blockchain technology. It is based on decentralized systems and peer-to-peer architecture, where users have more control over their data and can interact with each other without intermediaries like in web2. It also allows for the creation of decentralized applications (dApps) that can run on a network of computers rather than a single server. This creates a more resilient and tamper-proof environment, as there is no central point of failure. Additionally, blockchain technology enables the creation of digital assets that can be easily transferred and tracked, making it possible to build new types of decentralized marketplaces, social networks, and other online services. These digital assets further help to solve the problem of data ownership thus giving users more control over their personal information. Web3 aims to create a more equitable and inclusive internet through decentralization and reducing reliance on centralized intermediaries.
How is web3 different from web2?
The web2 version of the internet is designed on an attract/extract basis. To gain traction, web2 platforms must attract participants like users, developers and other third parties. Once a particular saturation point is reached, the network quickly switches to try and extract value from users, which is for the most part in the monetization of user data. Chris Dixon, General Partner at Andreessen Horowitz, in his essay - Why Decentralization matters - notes that, “As platforms move up the adoption S-curve, their power over users and 3rd parties steadily grows”. An example of the S-Curve has been provided below.
In the web2 paradigm, the slow descent into the extraction of value often comes at the expense of the integrity of the user’s privacy, exposing users to security vulnerabilities. In the world of web3, to accrue value network participants naturally align themselves due to the design of the network being enforced in open source code i.e. blockchain networks, which have in-built incentive mechanisms through cryptocurrencies allocated for various actions, and methods of governance. The network can choose to opt out of the network by either selling off the cryptocurrencies, or forking the network. To truly understand the differences between web2 and web3, it is crucial to understand what are the structural differences between centralized and decentralized networks.This table is referenced from the article web2 vs. web3 written by the Ethereum Foundation.
|Centralized Systems||Decentralized Systems|
|Low network diameter (all participants are connected to a central authority); information propagates quickly, as propagation is handled by a central authority with lots of computational resources.||The furthest participants on the network may potentially be many edges away from each other. Information broadcast from one side of the network may take a long time to reach the other side.|
|Usually higher performance (higher throughput, fewer total computational resources expended) and easier to implement.||Usually lower performance (lower throughput, more total computational resources expended) and more complex to implement.|
|In the event of conflicting data, resolution is clear and easy: the ultimate source of truth is the central authority.||A protocol (often complex) is needed for dispute resolution, if peers make conflicting claims about the state of data which participants are meant to be synchronized on.|
|Single point of failure: malicious actors may be able to take down the network by targeting the central authority.||No single point of failure: network can still function even if a large proportion of participants are attacked/taken out.|
|Coordination among network participants is much easier, and is handled by a central authority. Central authority can compel network participants to adopt upgrades, protocol updates, etc., with very little friction.||Coordination is often difficult, as no single agent has the final say in network-level decisions, protocol upgrades, etc. In the worst case, network is prone to fracturing when there are disagreements about protocol changes.|
|Central authority can censor data, potentially cutting off parts of the network from interacting with the rest of the network.||Censorship is much harder, as information has many ways to propagate across the network.|
|Participation in the network is controlled by the central authority.||Anyone can participate in the network; there are no “gatekeepers.” Ideally, the cost of participation is very low.|
What are some benefits of web3?
Since web3 technology is relatively new and more advanced it has some notable features which are missing in the primitive stages of the internet. Some of those features are:
- Resilient to breakdowns and censorship - The open-source and decentralized nature of web3 makes the network resilient to failures as it removes the requirement for central entities to maintain the integrity of the network.
- Censorship resistant - Since web3 is permissionless, anyone can participate in the network without needing approvals of any sort from a third-party entity.
- Democratized access to finance- Web3 enables new ways of managing capital. One of the most prolific forms of capital management has emerged through DAOs. DAOs allow individuals to pool money and deploy capital in the form the collective seems fit.
- Better governance - Web3 enables new forms of decentralized governance, where stakeholders can vote and make decisions on the management and direction of a project or organization. This can lead to more transparent and accountable decision-making, and can potentially reduce the risk of fraud or mismanagement.
- Identity management - Web3 is enabling a new breed of pseudonymous individuals. Where individuals can preserve aspects of their identity, while still being able to participate in various networks and benefit from various network effects.
What are some limitations of web3?
Considering the nascent stage of web3, much of the technology and its applications are yet to be battle-tested, reviewed by regulatory bodies, and technologically improved. So while interacting with the world of web3, consider these potential pitfalls:
- Regulation - There are various aspects of web3 that are being debated by regulatory bodies globally. Lack of clarity with regulation may breed volatility within the space.
- Premature user experience - The current state of web3 technologies may not be user-friendly for mass adoption. Core technologies are being improved as the technology evolves. Wallets for example are a major space within Web3 that is being improved from a user experience and security perspective.
- Scalability - The decentralized nature of web3 means that any information executed on a blockchain needs to go through its respective approval process by various nodes, which in the case of web2 is processed by a centralized entity, thereby making web3 protocols slower by comparison.