Web3: You, me, and Web3: how Internet’s next avatar will transfer power from Big Tech to the people – The Economic Times

lipped from: https://economictimes.indiatimes.com/prime/technology-and-startups/you-me-and-web3-how-internets-next-avatar-will-transfer-power-from-big-tech-to-the-people/primearticleshow/88655864.cms

SynopsisCalendar 2022 will be the year of Web3, which promises to be decentralised. With the power shifting from Big Tech to users and applications running on blockchain, it promises more privacy and security on the Internet besides changing the way value is generated in the digital world. But Web3 will take time to achieve that lofty goal.

The run-up to 2022 has turned out to be a busy one for a few tech geeks and investors. No, they weren’t predicting the number of new unicorns that will be created in the new year or discussing new ideas to invest in. Instead, they were sparring online over what’s seen as the third iteration of the Internet — Web3.

Twitter founder Jack Dorsey was quite blunt in his comment about the ostensibly more democratised version of Web2, which is dominated by tech giants such as Apple, Amazon, Facebook (renamed as Meta), and Google.

“You don’t own Web3. The VCs and their LPs do. It will never escape their incentives. It’s ultimately a centralised entity with a different label. Know what you’re getting into,” he said in a tweet on December 21.

After his comment, Marc Andreessen, co-founder of California-based venture capital firm Andreessen Horowitz, blocked Dorsey. Soon, Tesla chief Elon Musk joined the heated debate with a question. “Has anyone seen Web3?” he tweeted. Dorsey replied, saying, “It’s somewhere between a and z,” taking a dig at a16z or Andreessen Horowitz, which is among the biggest supporters of Web3.

This year, we will hear a lot more about Web3 — a decentralised Internet that runs on a public blockchain, which so far has been used for cryptocurrency transactions. Being positioned as the future of the Internet, venture capital firms are betting big on Web3. Several new applications are coming up (such as cryptocurrencies) that promise more privacy and security on the Internet besides changing the way value is generated in the digital world. Moreover, entrepreneurs in India who missed the boat on Web1, when tech giants such as Google and Amazon were built, are now looking at Web3 to create scalable businesses.

But Web3 comes with its own set of technological and regulatory challenges. For example, will ‘click and shop’ be as easy in Web3 as it is in Web2? Further, given that most governments are unwilling to give up control on currencies, what will be regulatory implications?

Read, write, and own the Web
Rajesh Dhuddu, vice-president and practice leader, blockchain & cybersecurity, Tech Mahindra, says, “Web3 is seen as the future of the Internet. It promises to transform the way value is generated in the digital world while ensuring privacy and security”.

Users will have ownership in platforms and applications. Dhuddu points out that going forward, we will see applications such as NFTs (non-fungible tokens), DeFi (decentralised finance) and DAOs (decentralised autonomous organisations) ushering in the era of Web3 adoption. All of these run on blockchain technology.

Chris Dixon, a general partner at Andreessen Horowitz, hopes that Dorsey will change his view. “We can eventually bring him around to Ethereum and other blockchains,” he said in a blog post. According to him, Web3 is the Internet owned by the builders and users which is orchestrated with tokens.

The major differentiating factor, according to Eshita Nandini, a crypto asset research analyst at Messari, is that while Web1 was read-only and Web2 is read-and-write, Web3 will be read, write, and own.

In the last 18-24 months, Andreessen Horowitz spent USD3 billion backing Web3 companies such as NFT marketplace OpenSea and blockchain-based gaming venture Dapper Labs. Sequoia Capital made 20 investments in Web3 startups in 2021, up from just two in 2020. The California-based venture capital firm invested in the crypto marketplace Beta Finance, crypto treasury management platform Coinshift, electronic trading solutions provider Clearpool, and Faze Technologies, a startup which has partnered with the International Cricket Council (ICC) to create digital collectibles for cricket using NFTs.

Early-stage venture capital firm Antler India is planning to invest around USD50 million in 25-30 startups in Web3 and blockchain space over the next few years. Elevation Capital, which has backed startups such as social-commerce platform Meesho and food-tech venture Swiggy, has added Web3 to its investment portfolio.

Web3.0- Believers vs. naysayers@2x

Ashish Singhal, founder and CEO of CoinSwitch, points out that India missed out on the earlier versions of Web which saw the rapid growth of Amazon, Google, Meta, and Twitter. With the emergence of Web3 amid a booming startups landscape, he says Indian entrepreneurs are now better placed to be part of the new wave.

“India has lost out on Internet 1.0 that saw the inception and rise of global tech companies such as Google, Amazon, and Microsoft. Today, anyone who is launching a business online has to pay 70% of revenue to global infrastructure providers. The blockchain industry is forming a new Internet altogether,” says Singhal, adding that the best global startups of tomorrow will run on Web3 blockchain infrastructure.

“Some of these startups will come from India,” he adds.

Will the control shift to users?
Unlike Web2 which is under the sway of Big Tech, the users will have all the control in Web3. In the next version of the Internet, services will run on the blockchain. If cloud platforms or on-premises IT infrastructure form the foundation for services in Web2, Web3 services will be built on blockchain. The key difference will be that while the cloud is controlled by tech giants, on-premise infrastructure is controlled by companies and hence will be centralised. In the case of blockchain, anyone can access it as data is distributed across networks, but no single entity owns the information.

The best examples of Web3 are NFTs which are bought using cryptocurrency. Early last year, cryptocurrency entrepreneur Vignesh Sundaresan bought Everydays: The First 5000 Days, the digital work of art created by Mike Winkelmann (known as Beeple) which is tied to blockchain, for USD69 million. Also, some of the recent NFT transactions such as the sale of the first-ever text message (SMS) sent which was sold for USD150,000 is also an example of Web3 transaction.

Closer home, celebrities such as Amitabh Bachchan, Rajinikanth, Sunil Gavaskar, and Sunny Leone are joining the Web3 bandwagon via NFTs. According to BeyondLife.club, a marketplace for NFTs, in November 2021 Bachchan’s Madhushala poem recital was sold for USD7,56,000 and physical posters of Sholay and other movies autographed by the Bollywood star were sold for USD94,052. Gaming platforms such as Dream11 and Mobile Premier League are also planning to launch their own NFTs.

Users generate huge amounts of content or data when they search, shop, or upload videos and photos on Meta, Google, Instagram, Amazon, LinkedIn, etc. All this is stored in the servers of companies that users interact with. The companies become owners of this data and profit from it via advertising. Web3 wants to give owners the control.

Web1 started in the early 1990s with static or personal web pages. There was not much scope for interaction among users. Web2 started in the early 2000s with user-generated content and that’s what we use every day now. But Web2 is centralised and user-generated content (social media posts, searches, shopping, music, videos, etc.) is controlled by big companies which sell the data to advertisers. Like a search engine knows what people are searching for, an e-commerce site has the information about what people are buying, while social media platforms have access to what people are discussing and sharing. All three centralised platforms use this data for their own gains without the users benefitting.

Evolution of the web@2x

Shailesh Lakhani, managing director, Sequoia India, points out that big companies such as Facebook (Meta) and Google are essentially databases. “We give or they collect information about us and then they resell that information to others. Is it a fair trade? They are super dominant. Decentralisation is the way forward,” says Lakhani.

Though there are products and services which are better suited to what Web3 advocates with promises of being user-centric, the shift won’t be en masse but will rather depend on individual use cases.

Aan Chauhan, chief technology officer, Mindtree, says, “Web3 is expected to propel the use of digital identities, micropayments, semantic data, and information”. He points out that by using augmented reality (AR) and virtual reality (VR), Web3 also makes our experience a lot more immersive, much like in the physical world rather than the 2-D experience of the current internet world.

Web3 is more about protecting data and eliminating the concentration of that data with few large corporations. “This is the only way privacy can be promised. Web3 puts the power back in the hands of the user, making data hegemony and data exploitation of the central platforms a thing of the past,” adds Chauhan.

Despite all its benefits, Web3 will be more suited for certain kinds of uses rather than being a complete substitute for the Internet. Hence, an enterprise application like a billing system, customer relationship management, MS office applications, or a word processor need not be decentralised or backed by NFTs or run on the blockchain.

“India has lost out on Internet 1.0 that saw the inception and rise of global tech companies such as Google, Amazon, and Microsoft. Today, anyone who is launching a business online has to pay 70% of revenue to global infrastructure providers. The blockchain industry is forming a new Internet altogether.”

— Ashish Singhal, founder and CEO, CoinSwitchA web of challenges
Will Web3 be a panacea for all ills — from fake news to cybercrime to misusing user data, and so on for which Big Tech is often blamed today? Web3’s multiple promises of empowering users from seamless transactions to privacy, the tech stack is still in its early days. Despite being around for a decade now, bitcoins, among the most early use case of blockchain or Web3, are not allowed to carry out daily transactions like you do with currency notes in your wallet or any other fiat currency. The underlying stack will take a few years to stabilise to the point so that applications like Meta or LinkedIn can be developed. Besides, the technology is still very hard to use for the masses.

“Single-click sign-in and check out as in Web2 is not so simple on Web3 yet. So, lots of work has to be done to make it simple,” says Lakhani.

Even some investors are still evaluating the space. Speciale Invest, which has backed future tech ventures in areas such as robotics and rockets, is watching from the sidelines. “If an ecosystem is super early, we have to see how fast it’s going to move. For example, crypto has been around for a decade but has only got traction in the last year or so. Besides, there are regulatory challenges. I think Web3 has value and it will be created over the next two decades,” says Arjun Rao, partner at Speciale Invest.

What most experts and investors see is the benefits of the decentralised Web3. “In the current Internet, there’s a ‘tax’ everybody pays to large companies to distribute and sell products. A lot of value has been created, but it has got concentrated in few large companies,” adds Rao. He points to the app world wherein developers have to pass via iOS or Google Play store to get to users. “Theoretically, in Web3 creators can benefit from not having to negotiate with one central, large player,” Rao adds.

So in Web2, few corporate houses and large platforms can monetise content without the permission of users. Web3 will allow users to have more control over their content. Dhuddu of Tech Mahindra says, “Web3 makes users ‘owners’ of their information and no private information is stored on centralised servers”.

In terms of security and privacy, Dhuddu insists that existing digital and social platforms on Web2 rely on centralised architectures and hence user data can be compromised through a single point of failure. An intruder may hack into the system and gain access to sensitive information.

“With Web3 technologies, this will not be possible as they are set up on blockchain which ensures an enhanced level of security enabled through cryptography and zero knowledge proofs (one party proves to another that a statement is true),” he says.

Further, the proponents of Web3 argue that decentralised identities will ensure passwordless authentication and eliminate data and information thefts.

The bottom line
Sceptics including Dorsey are yet to be convinced. Rather than freeing up the Internet from Big Tech, Web3 could simply mean replacing one set of powerful companies with another, according to the Dorsey camp.

The Internet started with the promise of eliminating the middleman but ended up being controlled by Big Tech. Web3 promises to change some of this. But that remains to be seen.

(Graphics by Mohammad Arshad)

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