Web3 and the future of the Internet: opportunities and challenges for the financial world (Part I)
The internet has developed rapidly since its creation in the 1960s. From the purely static Web 1.0 to the dynamic Web 2.0 to the emerging decentralized Web3. But what exactly does Web3 mean and what role does this next stage in the evolution of the Internet play? For the financial sector, this could have far-reaching consequences and at the same time offer immense opportunities.
The evolution of the Internet: Web 1.0, Web 2.0 and Web3
Web3 describes a decentralized version of the Internet that differs fundamentally from the centralized platforms of Web 2.0. The “Next Generation Internet” is far more than a purely technical advancement. It addresses existing problems of today’s information age such as data breaches, behavioral targeting and censorship as part of so-called “surveillance capitalism”. This term was coined by economist Shoshana Zuboff in her book “The Age of Surveillance Capitalism” in which she describes how technology companies, for example, collect and use personal data to predict and influence behavior, leading to an unprecedented concentration of power and social impact [2]. Web 3 is therefore to be understood as a concept for a new generation of the Internet based on common principles of its users and innovative technical components. The web applications are primarily based on open protocols and blockchain technologies with the aim of decentralizing existing structures of the platform economy and giving users a new kind of sovereignty over their own data, digital assets and identities. Figure 2 provides an initial overview of the most important differences in the concept.
Web 1.0 (1990-2000): The original Internet was “read-only”, i.e. purely passive. Users could only consume information without being able to interact or collaborate. Websites were static and content was mainly provided by companies or institutions.
Web 2.0 (2000-today): With the introduction of social media, blogs and platform economies, the internet became a “read-write” environment. Users were able to create, share and interact with each other. Facebook, Twitter, YouTube and the platform economy with marketplaces such as Amazon and Airbnb emerged during this period.
Web3 (future): The upcoming Web3 goes one step further: the user is in a “read-write-own” environment. This means that users not only interact and create content, but also have control and ownership over their data, identities and digital assets. Web3 is decentralized and trustless, meaning that transactions and interactions can take place without central authorities such as banks or big tech.
The technology behind Web3: blockchain as the basis
A central feature of Web3 is the underlying blockchain technology. Blockchain enables decentralized, unchangeable storage of transactions in a network that is not controlled by central institutions (https://cc-bei.news/das-blockwiki-die-blockchain-erklaert/). In contrast to traditional centralized systems such as banks or social networks, where data is stored in central servers, the blockchain is a distributed ledger that is updated simultaneously on all participating computers [4].
Smart contracts play a key role here. These contracts are based on program code that is automatically executed when certain conditions are met. This allows complex processes to be automated, such as the processing of payments, without the need for an intermediary [4].
Blockchain has some decisive advantages [4]:
- Decentralization: No central control authority, data and processes are distributed across many network nodes.
- Transparency: All transactions are publicly visible and cannot be manipulated.
- Security: Cryptographic processes protect transactions from manipulation and forgery.
- Immutability: Once confirmed, transactions cannot be reversed, which creates trust in the system.
Blockchain technology forms the foundation of Web3 by combining decentralization, security and transparency. In the next part, we will look at other essential prerequisites for a digital future without central control and consider the token economy and decentralized applications (dapps), among other things.
Sources:
[1] https://burstiq.com/web3-the-future-is-here-and-now/
[2] Shoshana Zuboff: The Age of Surveillance Capitalism (2019)
[3] https://elevatex.de/de/blog/web3-de/unterschied-zwischen-web1-web2-und-web3/
