Is web 3 nothing but a marketing ploy, or is it the future of the internet? Is it controlled by vcs, or could it one day enrich every single one of us and what the heck is web3 anyway, in this video i’m going to answer all of that and more it’s my attempt to break down that great web 3 debate. So don’t go anywhere: before you venture any further down the rabbit hole. Allow me to clarify something you may be laboring under the delusion that the man you know as guy from the coin bureau is some sort of oracle able to impart financial advice. He’S not he’s nothing more than an entertainer, an educator.
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Whoa felt felt like something weird happened: there didn’t it: oh well, probably nothing okay! So what is this web3 stuff anyway? Well, like any good movie, you can’t watch the third installment without knowing what happened in the previous two. So, let’s rewind web one was the first internet. Its early development was spurred on by the likes of researchers, like tim berners-lee in the 1990s now web.
One is also called the static web that comprises three fundamental technologies. These are html or hypertext markup language. Basically, the formatting language of the web url or the unique resource locator, which is the unique web address that we all use to find web pages and http or hypertext transfer protocol. This allows for the retrieval of all that information across the web, however, because it was the static web, it was not user friendly at all. There were no algorithms that could dynamically serve pages, and the web pages themselves were also really basic.
The functions that served the most purpose were things like email or perhaps the real-time retrieval of news and the like, but it was a one-way information highway. The content on these web pages was developed by the companies hosting the websites and users could not interact with these web pages. Applications were unheard of, it was a read-only internet. Then around 2005 came the concept of web 2.
Interactive and rich websites started to proliferate interactive web platforms. That would allow the user to generate their own content and be a much larger part of these websites as a whole. If web one was a read-only web, then web 2 can be thought of as a read-write, where the users on these platforms were fundamental to the content as well. This is sometimes also called the social web and it was driven by innovations in technology such as mobile phone apps. Companies that have been able to flourish in the web 2 environment include the likes of facebook, now meta, google, youtube, twitter, uber, etc, etc.
These are companies that have been able to generate trillions of dollars of value for their shareholders by effectively leveraging user data from billions of people around the world. They’Ve transformed the way we live our lives from the way we order food to the way we hail rides from the way we keep in touch to the way we pay online but and here’s the crucial point. Web2 is owned by these companies. They control the platforms and they are the gatekeepers of this information. It is inherently centralized with these companies creating walled gardens of value that we can’t participate in, and this is where web 3 comes in.
Web 3 is the next generation of the internet, which people envision will be more decentralized and permissionless. One that’s built on decentralized protocols where users don’t only help with content creation, but also in the governance of the web itself. They also have the ability to own a part of the network, so you can think of it. As a read write own internet. There are already a number of technologies that could serve as the backbone for a web3 world, most point to blockchains, like ethereums, for example, but there are other distributed technologies like ipfs, which can also be used to decentralize these networks.
There are already thousands of dapps or decentralized applications that are being built in the web3 environment, dapps that often include native tokens as a way to add value to the application to those who hold the tokens. These native crypto assets allow those who participate in the network itself to share in the value that’s generated from it. It’S because of all this that the internet’s original creator tim berners-lee has called web3 the quote semantic web now here is a really helpful chart by fabric ventures. That brings all of it together. The value created, charted against time link to in the description.
If you want to come back to it later now, in order to best understand why web3 has so much potential, we have to first appreciate just how centralized web 2 actually is. Currently the web functions on what is called the client server model? More specifically, when you want to visit a website open a mobile, app or watch a video you’ll be requesting information from one centralized source. This is a server and these are usually controlled by the company whose service you’re using or website you’re visiting. This server also contains all of the data that’s required to make the website or service run data that is often comprised of our own data.
In fact, even the process of you finding that server is controlled by a centralized server. These are dns or domain name service servers that act as the backbone for domain routing on the internet. Essentially, when you type a domain into your browser, the request is sent to a dns server. That will then tell your computer exactly where this information can be found. These dns servers are usually controlled by another centralized group of companies, including the likes of google, cloudflare, etc.
What this means is that the internet is inherently centralized. Everything that you do online can effectively be limited by those who control those services. Now there are a number of problems with this. Firstly, there’s the point about a centralized point of failure. Centralized servers can go down sometimes for extended periods of time and in those times, people can’t access that data.
They can’t interact with the applications. If you have to do some critical work and you need access to a website, that’s down, there’s not really much that you can do then, given that these centralized servers contain all that user data and contain the code which interacts with user clients. Those servers are incredibly lucrative to hack data theft is big business in cyber crime circles. So when you store your personal data with a company like amazon, you have to trust that they keep that data safe. It’S a trusted system.
On top of this, there are also the risks that the data being sent to your devices could be compromised if you’ve ever heard of the software supply chain hacks. This is how it’s done. Hackers gain access to the server of a provider upstream of the software supply chain and insert malicious code. That’S then passed down along the chain, because the other participants trust that the software is safe. Then, when it comes to the issue around the permissioned nature of web2, it’s a really hot button issue.
When you’re using services like facebook, instagram, twitter, paypal, uber, etc, etc, you’re only allowed to be using them because they let you they can restrict your use or boot. You off the platform at a moment’s notice: d. Platforming has been going on for years now, and there is very little that can be done by the user. These companies are technically legally allowed to do it because you’ve agreed to their terms and conditions on sign up. It’S within these walled gardens of information where echo chambers form, but these walled gardens of information are incredibly lucrative for those who control them.
When you control the code, the users and the data, you control the value plenty of fortune, 500 companies have developed their entire business models around monetizing. Our data. This value is not shared unless you’re a shareholder. Of course. This centralization of control and value is the reason why people are dying for an alternative.
What web3 promises is a decentralized alternative, where we are all users, owners and developers. This line from fabric ventures, perhaps best sums it up quote. Web 3 enables a future where distributed users and machines are able to interact with data value and other counterparties via a substrate of peer-to-peer networks without the need for third parties. The result, a composable human-centric and privacy, preserving computing fabric for the next wave of the web. Now the main difference between web3 and web 2 is the fact that there are no centralized databases where you store the application state.
In the case of blockchains, it’s stored on a decentralized ledger where distributed nodes all agree on the state of the network. I don’t have the time to get deep down into the weeds of the infrastructure behind web3, but i highly encourage you to read this blog post over here. It goes into the nitty gritty of web3 applications and it’s linked to below, but the main point to take away from web3 architecture is that the back end infrastructure is inherently decentralized across nodes nodes that have the singular purpose of maintaining the network. If one of these nodes goes down, the network still runs. If one of these nodes is hacked, it doesn’t affect the state or security of the broader network.
Moreover, a distributed network like a blockchain is cryptographically secure. There is no way someone else can surreptitiously alter the code of a smart contract unless they have the keys. Any updates to the smart contract are time stamped and immutably stored on the blockchain forever. The cryptographically, secure nature of a decentralized blockchain means that you don’t have to trust anyone with your data. You don’t have to trust that they keep their servers safe and that their apps won’t have malicious components.
The code is fully open, source and auditable for everyone to see, then another really important characteristic of web3 and decentralized blockchains is that they are permissionless. All you need to connect to adap is a web3 wallet. No kyc required nobody to pull your access because they don’t like what you’re saying or doing the code is blind to the individual behind that wallet. Moreover, there’s nothing stopping you from building something better, as it’s all open source. You can just fork that code and start building something else or in the case of ethereum smart contracts.
It’S all composable, which means you can easily build on top of a dap. There’S no need for third-party developer api access here, but perhaps what gets people so passionate about web3 is that you can shape the direction of these applications and you can share in the success of them. This is generally through the use of governance, tokens that allow protocol users the ability to make decisions which impact on the protocol. Moreover, because users own the governance token, they can share in the success of the growth of that ecosystem growth that they had a hand in shaping through their governance. Decisions by aligning these incentives economically web 3 allows a system to flourish where participants can work together towards a common goal, network growth and token appreciation.
Now, if you want to get more of an overview of the potential of web 3 and how it’s likely to power the next internet, then i encourage you to read this post by chris dixon, one of the first investors in the web 3 space. That’S going to be in the description as well now as much as web 3 sounds like a panacea. There are some limitations that it will have to overcome if it can legitimately challenge web 2.
Perhaps the most important of these is scalability more specifically because it’s built on a decentralized network, it’s nowhere near as fast as serving data and running computations, as it is on a central server. If we’re talking about networks like ethereum miners will first have to propagate a block in order to update the state of a ledger.
It’S one thing to talk about an idealistic internet where everyone owns a piece, but if a user has to wait for a long time to get that data, then the point is moot. Why use a decentralized social media platform that runs a snail’s pace when i can just load up my instagram on my phone and get my dopamine hit right away, then, of course you have limitations when it comes to user experience, while web3 applications have become a lot Easier to use of late, they are still very far from being usable by the general population. You need to have the knowledge of how to set up an ethereum wallet, how to interact with web3 wallets, approve transactions and store passwords and private keys. This, of course, opens up risks when it comes to potential losses or other human errors, there’s also the cost component in order to use web3 applications, you have to pay a fee in order to compute smart contracts. This is the gas fee when it comes to ethereum.
For example, now, while this fee is much lower on other layer, one networks and side chains, it’s still a fee that users will incur. So let me ask you this question: how many of your no coiner mates would be interested in paying a fee for accessing a dap and using it when they can essentially fire up their favorite web 2 apps and use them for free? It’S a hard sell. Then there’s the question around the time it takes to update web3 applications because the development has to be agreed by the participants. In principle, it means that upgrades are approved much more slowly than they are with a centralized service.
As i’m sure you’re aware, those companies and applications that are able to adapt more quickly are the ones that tend to sustain themselves in the long run. Now, while the open source nature of web3 applications is great for transparency, it’s also a double-edged sword. It’S not only white hat hackers and pen testers that study the smart contract code. It’S also black hat hackers and other miscreants. If there are any vulnerabilities, they would be more than happy to exploit them for a payday, moreover, because these protocols have crypto value attached to them an exploit of a smart contract that drains a liquidity pool, for example, can be quite catastrophic, especially for those users who Tied up more than they could afford to lose, and because these are inherently decentralized, the ultimate buck stops with the user bailouts and compensation for losses are less likely in a decentralized web.
So there are some outstanding limitations of web3, but it’s not only that. There are also some strong criticisms being leveled at it. The web 3 debate was supercharged a few weeks ago when jack dorsey, the former ceo of twitter, and an ardent bitcoinmaxi tweeted. This quote, you don’t own web3, the vcs and their lps. Do it will never escape their incentives?
It’S ultimately a centralized entity with a different label know what you’re getting into that. Tweet received a lot of attention, positive and negative, a lot of people in the ethereum and defy communities bashed him for it, because they viewed it as another maxi taking shots at eth. Some also pointed out that twitter’s centralization and censorship is exactly why they’re so bullish on web3. To begin with, there were also a lot of vcs founders and other crypto personalities who took issue with jack’s statement. It even led to the likes of mark andreasen, the founder of andreas and horowitz, blocking him handbags at dawn, as we say here in britain to be fair to jack, though he’s not the only one to take issue with web 3.
Elon musk also tweeted has anyone seen web3. I can’t find it now. He also said in a recent interview that web 3 is quote more marketing than reality. I’Ll leave a link to that interview. If you’re interested it’s fascinating now i will say that i don’t agree with jack’s point here, but there are grains of truth.
Vcs, do control a lot of the early stage tokens in some of these web 3 projects, some of the most popular applications like uniswap, dydx, one-inch, compound finance. They all have vc backing now. This could be problematic when it comes to governance votes, especially if those vcs use those tokens to vote in a way that benefits them over the other users. This has, in fact happened in the past. Centralized control of governance.
Tokens is an issue either way whether it’s a vc or some other individual. It means that they have undue influence, which is generally against the tenets of the broader community. Then, aside from these concerns about vcs, there’s the broader question of how decentralized the tech of web3 applications really is. I recently read this post by moxie marlinspike, the founder of the signal messaging app. It basically takes a look at how centralized node operators on the ethereum network are used by clients to interact with the ethereum blockchain.
He also showed how open seas api is essential to the presentation of nfts in many third-party wallets. There is, of course, a lot more to it than this, so i encourage you to read it when you have a moment linked to in the description, but the point is that web3 still relies on a lot of the centralized web infrastructure to function when you type The uni-swap exchange url into your browser it has to connect with a dns server. In order to find out where uni swap labs front end is hosted. The front end is hosted on a centralized server and web host. Yes, the underlying smart contracts themselves are decentralized, but without the front end most people would find it incredibly hard to use uniswap.
This is the case with nearly all web 3d apps. In fact, a few weeks ago, when we faced those aws outages, dydx’s front end actually went down just as other centralized web apps went down. Hence no one could trade because they couldn’t access the dap. It’S also not just the technology. Sometimes developers can take unilateral action in the face of some serious outside pressure.
If you’ll recall, last year, uniswop removed a series of synthetic tokens that tracked the price of stocks. This was presumably done in order to avoid the risk of action by the sec against the offering of unregistered securities trading on the decks. While this may have been a wise move, the fact that the developers can do this points back to centralization or how about the fact that openc recently helped a user recover some bored apes that were fished from him. These were some super valuable apes. Over 2.
million dollars in total openc was able to freeze the buying and selling of assets on the marketplace to prevent the hacker getting away with it. Now, don’t get me wrong. This was the right action to take. Theft is theft, but also code is supposed to be law. The mere fact that openc, a decentralized application, could do this without community input shows how centralized it really is.
So the point is that web3 does have some centralized control of value and uses components of the centralized web. Despite this, though, i’m still bullish af. Allow me to explain why. Firstly, let’s start with those concerns that jack raised about vc money. Most reputable projects will also have some fairly strong, vesting schedules for these tokens to make sure that these early stage investors don’t just dump the tokens on the open market.
It serves neither the projects nor the vcs purposes to trash the reputation of one of their investments by dumping on retail and then even when these tokens are unlocked, and these vcs can vote on protocol governance, they tend to have the same long-term goals as the retail Investors who invest in the tokens and protocols they want long-term appreciation in the value of the tokens. If they push through controversial proposals that drive down adoption and value of the protocol, then this will damage their long-term interests. They tend to be long-term greedy in that they know. The gains over the long term fully outweigh the short-term gains of profitable. Yet controversial moves, yes, andreas and horowitz made gains on uni and dydx, but so did the early users and community members in these protocols.
Let’S also remember that these governance tokens were airdropped to users, myself included for free. Now, you also have to ask yourself why all of these projects have to turn to vcs and high net worth investors when they’re doing their seed rounds. Quite simply, you have securities laws to thank for that in order to protect retail investors. These projects are not allowed to raise funding from non-accredited investors. Basically people like me and you if they do, that they risk catching a serious lawsuit from the likes of the sec.
So why would a project risk that, when it can avoid all the hassle and fill its seed round from some well-established vc, so i don’t think that the concern around vc money in web 3 is a massive one. They just like us, are capital, allocators sure they have more favorable entry points, but they also want to maximise their x. Then, when it comes to the concerns around centralization. These are well known in the community and it’s not as if there aren’t projects that are actively looking to solve some of these problems. For example, in the case of data access from the blockchain moxie’s concern, there are projects like the graph, which is an indexing protocol for querying data from ethereum and ipfs.
This is already being used by a number of web 3dfi applications, and the project has been making great strides i’ll leave a link to the video i did on it about a year ago. In the description, i should also point out that vitalik himself came out with an extremely comprehensive rebuttal to moxie’s points in a reddit post. As he says, there is a quote missing: middle, essentially decentralized tech, that’s as easy to use as centralized components that ux limitation. I talked about earlier in order to help scale adoption. Web 3 dapps have used some centralized tech, which offers a simplistic ux.
However, as vitalik says, that missing middle is being worked on as feverishly as ever. I really encourage you to read. His entire post could perhaps be some light bedtime reading, so you can drift off into web 3 dreams. Now i want to finish up this video with a few of my final thoughts as a crypto guy. I’M fully of the belief that decentralized technologies will trump the centralized status quo, whether that be in the case of finance, with crypto or in the case of the internet, with web3, when a community comes together to build something that they all benefit from.
It’S destined to succeed, look at the example of cryptocurrency, for example, from a cypherpunk’s pipe dream 13 years ago to wall street’s wet dream this year, while web 2 has transformed the way we view the world. It’S also made us slaves to a system that enriches a chosen few web 3 really is our best chance to distribute those riches amongst the rest of us. It’S our best shot at building a more inclusive internet that respects all who use it. Yes, there are many challenges that need to be overcome and it won’t be smooth sailing right now. Web 3 is trying to scale and onboard users in an environment that was developed for web 2.
But there are solutions that are being built from the way that we interact with these dapps to the way data is sourced and the further that i explore the web3 ecosystem, the more convinced i become that this installment of the web will be the best one. Yet that’s it for my video today folks, i’m keen to get your feedback, though. So what do you think of web3? Do you agree or disagree with jack dorsey i’d love to know in the comments below? Oh yes, i also have to let you in on a little secret.
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