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The concept of a new type of internet service constructed utilizing decentralized blockchains, the shared ledger systems used by cryptocurrencies like Bitcoin and Ethereum, is known as Web3.
Although the phrase has been in use for some time, it has just recently become popular. Web3 is the internet owned by the builders and users, controlled using coins.
Web3 advocates envision it assuming many different shapes, including decentralized social networks, “play-to-earn” video games that give players cryptocurrency tokens in exchange for their participation, and NFT marketplaces that let users purchase and sell bits of digital culture. The more utopian ones assert that web3 will revolutionize the internet as we currently know it, overthrowing current gatekeepers and bringing about a brand-new, middleman-free digital economy.
However, other opponents assert that web3 is only an attempt to reposition cryptocurrency in order to shed some of its social and political baggage and persuade people that blockchain technology is the obvious next step in computing. Others think it’s a dystopian depiction of a pay-to-play internet, where each activity and social connection is transformed into a commodity that can be bought and sold.
Why So Many People Talk about Web3
The typical concoction of marketing, excitement, and worry about missing the next great thing contributes to it in part.
However, the web3 growth also indicates how much money, talent, and energy are being invested in cryptocurrency start-ups in the wake of a protracted bull market. More than the preceding ten years combined, venture capital firms have invested more than $27 billion in crypto-related initiatives in just 2021, with a large portion of that money going to web3 projects. Some major tech firms have also begun experimenting with their own web3 projects, including Twitter and Reddit.
And the sector has turned into a magnet for tech talent, with many workers from major computer companies leaving secure, comfortable jobs to pursue their fortunes in web3.
How Web3 Can Improve the Internet
A blockchain-based internet, according to Web3 proponents, would be superior to the current internet in a number of respects.
They claim that, in comparison to today’s mega-platforms, web3 platforms might offer creators and users a means to monetise their activity and contributions.
For instance, Facebook today generates revenue by collecting user data and selling tailored adverts. Users of a web3 version of Facebook might be able to monetise their own data or even receive cryptocurrency “tips” from other users in exchange for sharing engaging content. Fans may purchase “stakes” in emerging musicians through a web3 Spotify, thereby becoming their patrons in exchange for a share of their streaming royalties. The drivers on the network might own a web3 Uber.
Facebook and Twitter, two internet giants, are effectively autocracies. They have the power to arbitrarily confiscate usernames, ban accounts, or alter the regulations at any time. Users of a social network built on the blockchain could be given the authority to decide how to address these situations.
Third, they claim that web3 would be less dependent on advertising-based economic models than web2, giving individuals more privacy by reducing the number of trackers, targeted adverts, and large organizations that collect people’s personal information.
Of course, this is a very idealized rendering of web3, created mostly by those with a financial interest in seeing it through. The truth can be very different.
What is an Example of a Current Web3 App?
Axie Infinity, a video game developed by the Vietnamese gaming firm Sky Mavis, is a popular example. It employs NFTs and cryptocurrencies based on Ethereum to pay players actual money for completing in-game tasks.
Players can “breed” characters in the game called Axies and use them to fight other players. They can also acquire digital cash known as Smooth Love Potion, or SLP, which can be traded on a cryptocurrency exchange, and amass virtual land in the form of NFTs. (The author Casey Newton referred to it as “Pokémon on the blockchain” in an essay from last year.)
Millions of individuals have played Axie Infinity, including several Filipinos who rely on the game as their primary source of income. However, because the game depends on crypto tokens, it is unstable, and players risk losing money if token values fall, like they did last year.
What do Regulators Have to Say about Web3?
Not much has happened thus far, but a recent congressional hearing did bring up the subject.
However, if regulators begin to pay attention seriously, the sector may encounter difficulties. The fact that crypto tokens, which are essential to many web3 apps, now exist in a regulatory gray area in the United States is one potential major issue.
Many tokens are unregistered securities, according to some regulators, notably Gary Gensler, the head of the Securities and Exchange Commission, who has argued that platforms that offer tokens should be held to the same standards as businesses that issue stocks and bonds.
Tokens should be recognized as a novel asset class, according to cryptocurrency businesses, exempt from the existing securities laws. However, it’s unclear if they will prevail in this debate. Additionally, many U.S. web3 startups might have to close down, adjust their offerings, or relocate if they are forced to consider their tokens as securities.
Disclaimer: The opinion expressed here is not investment advice – it is provided for informational purposes only. It does not necessarily reflect the opinion of EGG Finance. Every investment and all trading involves risk, so you should always perform your own research prior to making decisions. We do not recommend investing money you cannot afford to lose.