Web3 is the term commonly used to describe the next major evolutionary internet shift—a shift that is currently underway.
The first shift of the web was from "read-only" (where webmasters created content and then web servers served it) to "read-write," with social networks enabling user-created content that internet platforms owned. Web3 shifts ownership in a "read-write-own" format, allowing users to own the content they create. The foundation of Web3 is a series of applications and services built on top of blockchain networks.
Web3 is the term commonly used to describe the next major evolutionary internet shift—a shift that is currently underway. The first shift of the web was from "read-only" (where webmasters created content and then web servers served it) to "read-write," with social networks enabling user-created content that internet platforms owned. Web3 shifts ownership in a "read-write-own" format, allowing users to own the content they create. The foundation of Web3 is a series of applications and services built on top of blockchain networks.
Blockchain itself is a simple concept. It’s a shared, immutable (not modifiable) ledger (transaction record) that facilitates the processing of recorded transactions and the tracking of assets across a network. At its core, blockchain provides “trust” without the need for a centralized authority like a bank, government or private entity. The detailed, immutable transaction record provides that trust rather than reputation or authority.
Blockchain often gets directly associated with cryptocurrencies, which are one of many applications and services that can—and do—run on blockchain networks. This myopic direct association with cryptocurrencies brings baggage in the form of perceived “get rich quick” speculation and pyramid schemes—arguments that, valid or not, only apply to a small set of apps and services blockchain offers.
This “pyramid scheme” view comes primarily from the fact that blockchain is beholden to the “network effect,” where the value of the network increases as the number of users on the network increases. This incentivizes users to recruit new users. As adoption grows, the active pull will no longer be required, as the Web3 environment itself will draw users and the businesses that want to serve them.
Many well-known services suffer and benefit from this same effect. A social media network with 10 users holds no value yet. A social media network with 10 million users has value. That’s why you see so much person-to-person evangelism for social networks. Even traditional banking is beholden to the network effect. A bank with one customer has minimal lending, borrowing or investment power. A bank with 10,000 customers is an entirely different story.
The core value of Web3 is its decentralization, which is enabled by the cheap, readily available trust that blockchain technology delivers. Web 2.0 is dominated by a small group of corporate technology platforms. Google is a great example. If your primary search engine is Google, your view of the internet is a Google view. More specifically, your view is a Google-curated view, as its algorithms provide you with the content that it believes you want to see and, therefore, click on. If YouTube or TikTok are your flavors of choice, you’re creating and viewing user content that the platforms own and profit from under their own dictated terms.
The decentralization of Web3 is not focused on avoiding government controls and taxes, and it’s not about hiding financial transactions. The decentralization is about moving ownership and control from a select few chosen entities to the users engaging with, and creating on, the blockchain network.
In its current form, this core decentralized tenet of Web3 is at risk. While the theory and structure of blockchain systems enable a fully decentralized model, the implementation in practice is highly centralized. Much of this is due to the costs and complexity of running the infrastructure required for the ledger nodes that process blockchain’s immutable ledger.
These nodes are intended, and designed, to be decentralized. In practice, however, they are heavily centralized. This is due to the low cost of entry and the reduced complexity of running blockchain nodes in the cloud. The advantages of public cloud to node operators are similar to the advantages to any enterprise IT department: low cost of entry, reduced complexity and pay-as-you-grow scale.
These advantages drive many node operators to the public cloud, which is dominated by a few companies globally. In its current state, the “decentralized” blockchain is often recentralized on dominant providers like AWS. For example, according to Ethernodes (via Cointelegraph), one of the most popular blockchain networks, Ethereum, had an estimated 52% of the nodes processing its ledger running in AWS as of August 2022. There is nothing decentralized about that.
For Web3 to reach its lofty goals, this consolidation of nodes must be remediated. The nodes running the chains must be distributed more broadly. This is required to prevent a single decision, mistake, policy or failure of a given cloud provider from impacting the blockchain and its users. In the current state, a single decision by AWS could potentially end the robust ecosystem built on Ethereum by shutting down over 50% of the nodes processing its transactions. This is an extreme example used solely for illustration.
This leaves a gap in the market that we should see edge computing fill. As edge computing grows in maturity, it can provide the ideal platform for decentralization. Widely distributed edge compute facilities can be used to remove the upfront costs and complexity of running ledger nodes.
For this to grow effectively, we will need to see an ecosystem grow at the edge. This ecosystem will require specialized offerings for blockchain nodes and the services they require. It will also require more distributed and localized hosting for blockchain compute requirements. This hosting can be provided through a combination of large global colocation providers and smaller regional providers.
The promise of Web3 aligns perfectly with Tim Berners-Lee’s vision, which drove the creation of the protocols that delivered Web 1.0 and Web 2.0—a vision of decentralized, open protocols to allow information-sharing across the globe. In order to help Web3 drive toward that vision, we need to first decentralize the processing foundation of the web’s next generation.