The next iteration of the internet requires some magical thinking. Web3 is a tech utopia. It envisages a world of decentralised collaboration that would end the supremacy of major companies by wiping out lucrative markets for data collection and digital advertising. Yet building that world would require exactly the sort of investment that only Big Tech can provide.
Hitting the refresh button on the internet looks tempting after years of disinformation and data hacks. First came the web — a scattered collection of open-source information. Then came Web 2.0, in which companies such as Google organised information and helped users to interact online while building walls around data. Tech giants amassed trillions of dollars of market value and now dominate the US stock market. Just five companies account for over a fifth of the S&P 500 index by market capitalisation.
Web3 provides the backlash to this concentration of power. It is imagined as a decentralised system built on the blockchain in which companies no longer act as gatekeepers. User information will freely move across the internet. Instead of platforms making decisions about content, users will self-moderate. Tokens will be generated as rewards and everything will be on public blockchains, making the web transparent and safe.
That is the theory anyway. Most of this does not yet exist. But the idea has gained momentum with the boom in newly fashionable non-fungible tokens (NFTs), digital ownership of online ephemera and decentralised finance projects running on public blockchains.
Venture capitalists already use Web3 as a point of focus for investment in cryptocurrency projects. New VC fund Paradigm One raised $2.5bn in November to focus on applications that operate on ethereum. Its token ether now has a market capitalisation of more than $500bn, up from $68bn a year ago. A planned upgrade from energy-intensive proof-of-work — solving a math problem — verification to proof-of-stake will raise ethereum’s profile further.
Yet the end of Big Tech’s hegemony seems unlikely. The ethereum blockchain has limits on transactions and much of the public remains wary of digital tokens.
Plus, these wealthy companies have no plans to hand over control either. Social media platform Twitter has announced a dedicated crypto team. Facebook’s name change to Meta and plans to become a “metaverse company” are linked to the idea of a future in which digital assets can be moved safely around the internet. These early investments hint that new walls are being built before Web3 becomes a reality.