Name: Elon Musk and Jack Dorsey are skeptical of ‘Web3.’ Here’s why
Uploaded: 2022-05-25T17:40:43.000Z
Duration: 9 min 10 s
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Over the last few decades, the Internet has evolved from a niche pastime to an essential part of our daily lives.

But despite the technology's massive progress, critics say it's become too centralized, with power concentrated in the hands of a few big tech companies.

Enter Web3, where a slew of new companies, like the ones at this crypto conference, are aiming to reshape the Internet.

Proponents of Web3 say it has the potential to disrupt the giants of the tech world by giving power to Internet users rather than platforms.

But Web3's also drawn some prominent detractors, who've dismissed it as simply another Silicon Valley fad that creates more problems than it solves.

So what is Web3 exactly, and why can't the tech world stop talking about it?

Web3 is a movement in tech that calls for the creation of a decentralized version of the Internet based on a few technologies, with blockchain being a key one.

Ethereum is currently the most popular platform on which Web3 services are built, but there are others, including Algorand and Polkadot.

In fact, the term Web3 is thought to have been first coined in 2014 by Gavin Wood, Polkadot's creator and a co-founder of Ethereum.

Web3 is really sort of an alternative vision of the web where the services that we use are not hosted by a single service provider.

To understand Web3 and where it's coming from, it's important to look a little at the history of the Internet.

During the 90s and early 2000s, websites were mostly static pages where you could consume pieces of information.

But it was much harder to produce content of your own.

This period has been described as "Web1."

With the advent of "Web2" in the early to mid-2000s, we were introduced to applications like Facebook, YouTube and Twitter.

These sites were more interactive, allowing users to post their own material and engage in online discussions about everything from politics to pets.

While Web2 ushered in a more user-friendly online experience, there were a few significant drawbacks.

Bertrand Perez, chief operating officer at the Web3 Foundation, ran me through some of the downsides.

Right now, you have big organizations who are controlling your data and providing you services that use your data.

When you're using a service, if the service is free, that means that you are you are the product.

Those organizations are having a lot of insight on you, on your life, etc.

And if you add that, together with artificial intelligence, you're able to basically know and kind of model person per person very precisely, and that's, to some extent, a level of freedom that you're giving away.

Because the more those institutions know you, the better they can sell you ads.

So how does Web3 promise to change all that?

Web3 is basically an evolution of the Internet, going to a place where the Internet would be less centralized.

The idea of Web3 is to decentralize the data, so not a single organization will have full control of your data.

So that will provide you more freedom, because you don't need to trust a single organization.

In Web2, your data and content are managed by centralized platforms.

Web3 aims to flip this model on its head.

Ownership of virtual items, from social media avatars to songs, would be placed in the hands of users through nonfungible tokens, while commerce would be driven by different projects' native tokens.

Solo Ceesay is the co-founder of Calaxy, a blockchain-based social media app.

When you think about the way in which content creators monetize themselves nowadays,

you're relying on platforms and their arbitrary standards to derive income streams, which is something that can be amazing when they're in your favor but honestly something that's unpredictable.

Web3 platforms could be supported by decentralized autonomous organizations, or DAOs, online communities with their own tokens that users can buy to get a seat at the table.

I think Web3 really has to do with ownership.

And the idea about community empowerment, and complete transparency.

Just as there are drawbacks with "Web2," crypto enthusiasts' vision for a third iteration of the net has some trade-offs of its own.

Web3 has attracted the ire of some notable critics, including Tesla CEO Elon Musk and Twitter co-founder Jack Dorsey.

In December 2021, Musk shared a tweet questioning whether Web3 was "more marketing buzzword than reality."

Dorsey, meanwhile, poked fun at how Web3 projects are often backed by venture capitalists, such as Andreessen Horowitz and Sequoia Capital.

That led to a public spat between Dorsey and Marc Andreessen, the prominent Silicon Valley investor.

Andreessen's VC firm has invested in some major crypto ventures, including Coinbase, OpenSea and Bored Ape creators Yuga Labs.

Web3's critics worry that a handful of rich tech investors are holding too much sway over its development, giving average users less of a say.

Blockchain start-ups raised a record 25 billion dollars in venture funding throughout 2021, helped in no small part by the buzz around Web3.

Andrei Brasoveanu, a partner at venture capital firm Accel, explains what's behind the boom.

As investors, we very much follow the talent.

And there are some incredibly smart people, many technical folks devoting all their time to explore this new area, so it's impossible for us not to take notice.

VCs are increasingly buying tokens of new blockchains at an early stage through private sales.

They're sort of like traditional equity investments, but with investors owning a portion of crypto rather than shares.

These tokens are later distributed more widely to members of the public.

Web3's skeptics say that puts users at a disadvantage.

Some of them are really pure speculation.

They're not building for the long term, they just want to, as we say, pump and dump.

I would say the key in that kind of investment is how much the VCs are taking on the governance of the project.

If the governance is 100% driven by the VCs, then you can say, yes, arguably they are taking the control.

But if they are smart enough to say, we are here to invest, and we want the project to grow, and we want to participate in the governance, but there's room for others who also participate into it.

I would say that's the good way to see VC investments in the Web3 world.

The term Web3 is sometimes used in connection with the metaverse, a hypothetical virtual world in which users can work, play or even party.

But just like the metaverse, Web3 still isn't that well defined.

Several brands, from Gucci to the NBA, are trying to figure out their own approaches  to Web3.

Results have been mixed so far, particularly in the video game industry.

Attempts from big studios like Ubisoft and Square Enix to launch their own NFT initiatives have been met with swift backlash from their communities, for example.

Embracing blockchain comes with its own perils.

I think just slapping blockchain on a piece of old content won't work.

It has to be an organic effort that's well thought out.

You have to have a strong community approach.

Web2 giants like Meta and Twitter have faced a reckoning over how they moderate online content.

With Web3, it's unclear how they'll be able to respond to toxic and harmful content when the whole point is to decentralize how platforms are run.

This is all really solved with like, public governance.

The idea of the community being able to have an influence on the way in which that there are content moderation or different sorts of standards that impact the user experience for anybody that lives within an ecosystem.

Just like with anything, you know, everything is good in moderation.

And so there might be things that make sense to be fully decentralized.

But there also are equally a lot of different things that may not make sense to be completely decentralized.

Web3 is still a hazy concept, and it comes with numerous issues that will need ironing out if the technology is to mature.

But some experts say the true promise of Web3 technologies is yet to be realized.

Like any new innovation, the power of NFT is much more than a selling a bunch of apes over the Internet.

Because, thanks to NFT, you can really have digital ownership, digital property, whether it's for real estate, whether it's for cars, or for lots of areas that currently you need a third party to warranty that you have the property of something.

Right now, we're at this juncture where there's an opportunity for this technology to be made impactful for mass audiences.

Right now, we're kind of still trying to figure it out, it still feels like early days.