Web3 - the future or just another "hype" in a series

Digital transformation is both a significant business opportunity and one of the major social changes of our time. The internet (Web) is arguably the most important driver of digital transformation, evolving through various iterations since its inception, adapting and shaping itself into the infrastructure we know today.

The internet we use today is commonly referred to as Web2. Compared to its predecessor, Web1, Web2 has become widely accepted due to interactive applications, user-generated content, and free access. Web2 business models typically rely on leveraging network effects to achieve market dominance and monetize user data through advertising and marketing.

The original Web1 simply connected computers and users worldwide and is often called the "read-only" internet. Web2, often referred to as the "read-write" internet, expanded content and connections to include social media, real-time news, online shopping, and more complex web applications. Today, we find ourselves in an era where we all create and share content on social media platforms, but most of this data is owned and controlled by the platform-owning companies.

Web3, often referred to as the "read-write-own" internet, represents the next big step in the evolution of online interactions. It bridges the gap between the physical and virtual worlds by introducing new ownership and transaction models.

Though still a somewhat abstract concept, Web3 is envisioned as a decentralized version of the internet built on blockchain technology, which underlies many major cryptocurrencies and tokens. From the perspective of Web3, which follows Web1 and Web2, today's online platforms are seen as too centralized, controlled by a handful of large internet companies like Microsoft, Amazon, Apple, and Meta (formerly Facebook), which gather vast amounts of user data and content created and shared on the internet.

If we go back to the 1980s and look at the first personal computer, we can confidently say that the relationship between it and today's most advanced smartphones is akin to that of a grandparent and grandchild. Just as in a family connection, these two devices, with an age difference of more than 40 years, fundamentally share very similar characteristics and functions. Both can create databases, edit data, access email, chat, and more. Even the grandparent had the ability to provide services based on location, albeit using an IP address, while today, we have all of this in the palms of our hands.

As technology has evolved and helped the grandparents have much more advanced grandchildren, the entire family has evolved with them. One of the main themes and questions of the future is the kind of power that the anticipated Web3 will bring and whether it will bring radical changes in the exchange of value on a level similar to the transformation the first personal computer brought to the information exchange domain.

What society has been accustomed to for years and on which trust is based is that all finances are controlled by centralized bodies. From defining monetary policy and lenders providing money and making it available to legislation that provides a certain level of security in which society believes. This framework is sufficient today for secure value exchange and the functioning of the business world and society as a whole.

Web3 brings new assumptions and new rules that society needs to become familiar with. We are all already accustomed to terms like blockchain, cryptocurrencies, and NFTs, but we are still far from their complete acceptance and application on a global economic scale. Certainly, not every business today needs a website or application, but some form of communication is necessary, given that value is exchanged on a daily basis. With the advent of the new version of the internet, individuals or entities will be able to influence the way value is exchanged, and technology will enable us to be creative in creating exchange methods.

Today, the US dollar can be used in most countries around the world. If you travel through Europe and take out a $20 bill from your wallet to make a purchase, everyone will accept that $20 bill as worth $20 without exception. This confirms the belief in the value of a piece of paper that is universally accepted and allows for value exchange. However, the entire belief is fundamentally based on trust in the state and governments that, in various ways, guarantee the value to be real.

Other methods of value exchange are also prevalent, such as in the world of gaming, where it's possible to use currencies that are only valuable within specific games or platforms to buy skins, extra lives, or in-game items. However, these transactions can also be carried out with traditional money.

Additionally, loyalty concepts are becoming increasingly common, whereby, frequently using a certain service, companies offer loyalty points or rewards that can be traded for discounts on other services according to the rules set by these companies.

Imagine that a band manager needs to secure a guitarist, keyboardist, and backup singers for an upcoming gig and pays exclusively in coins he created, which are widely accepted in the music world and for exchanging value among musicians. Transactions of this type would have no issues if these coins could also be used to buy coffee at Starbucks and ice cream at McDonald's. However, it's likely that Starbucks and McDonald's would consider and decide whether this coin is relevant for value exchange, and musicians could use it after the concert.

Web3, in essence, tells us that we can expect new environments for creating value, new money to spend in that environment, and new ways to settle. In this way, individuals can create their own coins and tokens representing defined value, and commercialization itself would lead to the creation of endless financial derivatives that can be traded.

The impact of Web3 and new ways of exchanging value will have a significant effect on economic development and, therefore, society as a whole. From a marketing and advertising perspective, the consequences of technological advancement may be the most rapidly evident.

If we analyze how new services have influenced how society consumes media compared to ten years ago, we will see that with the emergence of streaming services, people are increasingly not watching linear television. Consequently, targeted marketing and advertisements that have advanced to the point of "hitting the user directly in the head" are slowly losing their relevance as people simply stop watching them using services that have developed with technology. Internet marketing is also changing, all as a result of people being saturated with not wanting their data to be tracked to that extent, and all of this happens at the "peak" of understanding user behaviour habits and needs.

Decentralization is one of the main narratives around the hype for Web3, stemming from the idea that giants like Facebook, Google, and Netflix have centralized platforms with exponentially growing value. Each of these platforms, especially for social networks owned by Meta, uses all the data generated through the use of applications. This model generates immense value created by the users themselves. Decentralization, in this sense, would imply that content creators themselves are the owners, which has not been the practice so far.

Although decentralization is the fundamental "advantage" of Web3, which is announced as a new era of the internet, it is worth noting that most things today are actually centralized, and society has no problem with that per se.

For example, the NBA is the central entity for professional basketball, and most basketball fans would not see the need for decentralization of basketball. The NBA has its entirely centralized NFT platform, and the biggest basketball fans who own one of those NFTs would have all the benefits in a centralized environment created specifically for them.

Of course, it is possible that Web3 will bring new models that are fully decentralized from the beginning, especially in the fields of media and entertainment. However, not every business model requires complete decentralization. To start with, it might be more practical to break down business models with the advent of Web3 and identify which segment could be decentralized and for which it is more beneficial to remain centralized.

All these changes force businesses to try new things, follow development trends, and adapt their strategies, as failure to do so will inevitably result in negative outcomes.

Today is characterized by endless possibilities promoting models of "watch and earn," "listen and earn," but also many other models based on crypto blockchain technology, which society does not yet fully understand the functioning of. But this does not prevent technology from laying the foundation for the era to come, and it is not the first time that global society has lagged behind in terms of technology; on the contrary, every new wave has had this trend of development and acceptance.

Web3 will bring enormous opportunities and comparative advantages to businesses if they catch the wave of this technology in time, starting with the banking industry, through healthcare, the automotive industry, logistics, insurance, gaming, media, production, and more. This wave will not come as a tsunami but will gradually change the world in line with reactions, influencing societal behaviour. There are countless scenarios of how all these changes will be accepted, and we are all curious to see and participate in that outcome. Does this mean that there will be more and more blockchain, NFT, and crypto projects? There will definitely be many, and many if not most, will fail, just as many projects did in the grandparent's time.

Hype is often used, usually successfully, as a way to make quick money, but in this case, Web3 is certain. On the other hand, we should not ignore the challenges faced by the underlying infrastructure on which the new Web3 is envisioned to be built, as well as numerous limitations in blockchain technology in terms of scalability, accessibility, and user experience, so we should not expect to truly reach "there" in less than a decade.