There is never a shortage of buzzwords in the world of cryptocurrency and the greater tech-space. Every new emerging start-up wants to use them, they build their whole god-damn advertising campaigns around them.
In the earlier days it was ‘Blockchain’, every business wanted to somehow use the term in their business, regardless of whether or not it had any relevance to their business. In fact, companies saw their share price double just by integrating the term into their name.
An example of this was back in 2017 when the Farmingdale, New York-based beverage maker Long Island Iced Tea changed their name to “Long Blockchain Corp.” and subsequently saw their share price jump by 200%.
Well, the world has moved on, ‘blockchain is so 2017!’. The latest term to be thrown around is WEB3. Now, you maybe wondering what happened to WEB2, did we miss something?
Not really, you are using WEB2, we have been for years. Early internet adopters experienced WEB1, which was the simple set-up of static websites. Basic HTML pages, advertising their wares and services, listing directories of other websites and rambling blogs on alien abductions and time travel. I have referred to WEB1 in the past as Layer-1 internet.
Then came WEB2. Second-layer platforms like Google, eBay, Facebook and YouTube began to create autonomous gateways to other parts of the internet. Websites began interacting with each other, utilising functions and commands from a whole host of other platforms. Suddenly the internet was more than a just a place to advertise your business, it was the central hub of your business.
Welcome to WEB3
WEB3 goes one step further. WEB3 decentralizes the internet using blockchain technologies, effectively placing the control of data back into the hands of the users.
The vision for this new, blockchain-based web includes cryptocurrencies, NFTs, DAOs, decentralized finance, and much more. It offers a read/write/own version of the web, in which users have a financial stake in and more control over the web communities they belong to.
In a nutshell, here are the main features of WEB3:
- Distributed and robust
- Native built-in payments
These features all combined together give the user full custody of their data and privacy. It removes the fat-cat middle-men from scraping profits from online interactions. Ultimately, it offers a fairer and freer internet where the free market can thrive.
WEB3 applications typically run on blockchains, decentralized networks of many peer-to-peer nodes/servers. These applications are often referred to as dapps (decentralized apps). For anyone in the cryptocurrency space, the term dapps will surely be very familiar to you.
WEB3 is a bank in your pocket
Traditional finance relies on custodians to store and handle your wealth. These custodians effectively own your wealth, but a promise has been made to return the funds when requested, although they are not by law required to do so.
These custodians are also required by law to reveal the balance and transactions of your wealth to the state. The state has the power to freeze and remove your funds from the custodian at any time, should they choose to do so.
WEB3 removes this issue by giving everyone the ability to store and transact their wealth personally. No government or legal body can stop you from investing your wealth into a new and exciting project; if you want to send $500k to a business partner in Libya, go ahead; if you want to short the market with your life’s savings (not recommended), go ahead; if you want to create a new economy of your own and allow anyone with a smartphone to transact with it, no problem!
WEB3 allows startups to raise money in minutes, without the hundreds of hurdles and dead-ends the traditional financial system has to throw at you.
When we think of current WEB3 based systems that already exist beyond cryptocurrency itself, think Decentralized Exchanges (DEX), think DeFi platforms like Aave, PancakeSwap and Compound where users can provide liquidity to exchanges in return for a cut of transaction fees.
Finance is being revolutionised and there isn’t a great deal the legacy financial system can do about it, other than look on in horror and try and smile sweetly. Which they are, banning it was never going to work, they know this – which is why they are pretending to embrace it, while regulating it. However, their regulation requires one thing to remain constant, without this constant their regulation holds no power. This constant is that state economies remain the dominant transaction currency.
Policing WEB3 finance can only be done via on-ramps and off-ramps to-and-fro from the state fiat system. Policing within decentralized finance is futile if the funds remain inside this brave new world of finance.
Decentralized Autonomous Organizations
Traditionally setting up and organization, delegating stake to each share-holder and managing the daily structure and decision making within an organization would require solicitors and accountants, as well as continual reporting to your government. All of this combined creates friction, inefficiency and loss of profits.
WEB3 fixes this with decentralized autonomous organization (DAO). Anyone can create a new organization, allocate shareholders and their stake in the business within minutes at almost zero costs.
Stakeholders can sell their shares in the business to anyone, anywhere. These DAOs are not subject to human corruption, unless the DAO code itself had corruption built in, but code is law in WEB3 and if one is to participate without verifying the code first, then the fault is with them. DAOs give voting rights to all share holders of the DAO based on their stake in the organization, only when the coded consenus limit has been met can proposals move forward.
Alongside cryptocurrency and DeFi, DAOs are the final nail in the coffin for traditional systems. While DAOs have been around for sometime, only now are we beginning to see them utilized as they were designed.
If you’re interested in DAOs and how they work, please reach out to me on Element about the DecentMinds project I’m working on, I’ll even send you over some shares in the DecentMinds DAO.
Before you can appreciate the significance of decentralized domains, you really need to understand how the Dynamic Name Service (DNS) works for web domains. I’ll try and keep this as simple as possible.
The Internet is a giant network of computers connected to each other through a global network of cables.
To identify them, each computer is assigned an IP address. This is a series of numbers that identify a particular computer on the internet. A typical IP address looks like this:
Not exactly memorable is it?
So to make these interconnected computers locations more memorable, domains were created. Domain Name Systems (DNS) were born.
How this works isn’t as complicated as you might think. When you enter a domain into your browser, such as peopleempowermentproject.com the first thing your browser does is connect to a DNS.
The DNS holds a directory of all domain names and which IP address they should be directed too.
So in the case of our website:
- The user enters peopleempowermentproject.com
- Browser sends a request to DNS asking where peopleempowermentproject.com points too.
- DNS searches its directory, finds the forwarding IP address, which in this case is 220.127.116.11 and returns it to the users browser.
- The browser now heads over to the IP address and the website is displayed.
That is basically it. The problem with this is it relies once again on third-parties. You can never truly own a domain name through this system of allocation, you can only rent them. When you buy a domain, you are simply renting the directory entry on the DNS for a year or two.
‘Internet Corporation for Assigned Names and Numbers (ICANN)’ is the central authority that takes care of this entire architecture and overall system.
The three causes of concern for the traditional domain system are:
- Censorship: ICANN has the authority to take down any domain name it feels inappropriate. While this can be really handy to curb the spread of misinformation, there is a definite downside of giving this power to a single authority. They can succumb to pressure and lead to the spread of propaganda.
- Permanent Ownership: You are not the real owner of your domain name. You are merely renting it out for a limited period. Therefore, the ownership of your domain remains a cause of concern.
- Fraud/Single Point of Failure: Centralization always comes with a risk of a single point of failure. ICANN is no different. It also has a risk of being hacked or defrauded. In such a case, millions of users who are trusting this centralized authority will be impacted.
Well, guess what WEB3 has already resolved this issue. Companies like Unstoppable Domains have create a new system that stores Domain redirection data on NFTs. In order for this to work requires browsers to support them, but already most major browsers have already added support for NFT based domains.
So, how do NFT domains work?
It is quite simple really. In the same way our browsers ask DNS servers what IP address a domain name points, the browser will now check the Ethereum blockchain instead.
When you buy an NFT domain, it is yours for life. You can sell it if you wish, you can deliver whatever content you wish via the domain. If you own your private keys, you are the true custodian of your domain.
So for example when we request to go to peopleempowermentproject.dao, a browser that supports NFT domains will check the Ethereum blockchain to see where it should head too.
In the case of this domain, it will simply get redirected to our traditional domain using the legacy system, however, in the future we can also host our website on decentralized servers, accessed by a decentralized domain offering services paid for using decentralized currencies and paying our employees using same decentralized currencies, while maintaining our organisation structure using a DAO. This would be an entirely unstoppable business infrastructure.
Decentralised Irrefutable Ownership of Digital Goods
Or should I say, NFTs. Ownership of digital goods like we just talked about with domains, can be applied to everything in the digital space, and to a certain extend the physical world around us.
Non-fungible tokens(NFTs) are just strings of data held on the blockchain. These pieces of data can only be changed or transacted with, by the wallet holder (private key holder).
The biggest fad right now for NFTs has been digital art, mostly gimmicky rubbish of hash smoking monkeys and such-like. But while these fads will likely pass as quickly as they came, the concept of digital art being held on the blockchain via an NFT does hold some merit. Just as a traditional art fanatic will prefer to hold the original artwork from their preferred artist, often costing in excess of millions of dollars, while a perfectly indistinguishable replica of the same piece can be bought for under a hundred dollars; an digital art fanatic will pay he premium for original artwork released by the artist as an NFT.
Collectibles have always been part of popular culture, a man will pay insane amounts for an original vinyl release from their favourite artist of days gone by, while the same song can be downloaded for free online. Collectibles come with bragging status. It doesn’t matter if you think its ridiculous, people do it and they do it a lot.
But while digital artwork is a worthy use-case for NFTs, it can go much further than that. Subscriptions and memberships to products and services can be stored using NFTs. For example we could move our subscription packages over to NFTs. In doing so our customers would be able to sell their subscription to another user if they no longer want it. They can remain entirely anonymous, while still retaining the same privileges given using the existing centralized system.
But such a system would also benefit cross-platform benefits. So maybe the People Empowerment Project team up with another platform who offer help and advice on urban gardening (this is a hypothetical example). Subscribers would be able to sign in on the other platform using their PEP NFT. At the backend little work is required, no data sharing of personal information would be required between platforms. Its seamless and efficient.
But also, maybe 5 years from now we decide to give everyone who has ever subscribed to our services a free additional service, regardless of whether they are still subscribed – or, maybe we want to hold a conference where all PEP NFT holders are invited. All the hard-work of managing such things would be done, a simple signing using your wallet address holding the NFT would confirm your access.
These are just a couple of examples of how NFTs can be used, but let your imagination go wild, the possibilities are endless.
Meanwhile, Jack Dorsey is building WEB5?
Whereas Web3 incorporates blockchain technology and tokenization to decentralize the internet, Web5 is being envisioned as an identity-based system that only utilizes one blockchain, you guessed it, Bitcoin.
Basically, Dorsey is just trying to sell a new platform by superceeding WEB3 with WEB5, but actually there is nothing new. Dorsey’s WEB5 is still WEB3.
Web5 is essentially a decentralized web platform, or DWP, that allows developers to create decentralized web apps via DIDs and decentralized nodes, according to TBD’s prototype documents. Web5 will also have a monetary network centered around BTC, which mirrors Dorsey’s belief that the digital asset will one day become the internet’s native currency.
Great project, but by definition it’s still Web3 – sorry Jack