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The modern internet has made tycoons of those clever enough to leverage the data unwittingly generated by its users. In fact, it’s created a whole new class of tech tycoon – the sort of all-powerful magnates that buy newspapers, control what we can and can’t say on social networks, and much else besides.
The recent avalanche of recent Web3 protocols promises to change that. These decentralised applications (dApps) effectively aim to overhaul long-standing Web2 business models by handing control back to the users that make their platforms tick.
Built using distributed ledger technology (DLT), Web3 protocols have, in a short space of time, highlighted their transformative potential by pioneering new modes of community management, innovative creator-centric business models, and even a parallel financial system that processes billions of dollars in volume each day. While it’s still possible to become extremely wealthy from leveraging Web3, the difference is that its architecture is open, transparent and user-owned.
Web2 Models: Doomed to Extinction? Web2 is the name given to the existing iteration of the internet – the one Web3 seeks to supplant. At one time, Web2 was viewed with the same sense of wonder and appreciation as many now view Web3, with users extolling its seemingly unlimited interconnectivity and information-sharing potential. Over time though, the internet’s evolution has attracted criticism due to the gross power imbalance between corporations/governments and end users.
While the earliest phase of the internet (Web1) saw it function largely as a publishing platform, a clumsy extension of businesses’ physical storefronts, Web2 introduced many of the features that power today’s internet: search engines and SEO; blogging; file sharing; digital advertising; video streaming and podcasting; social media.
Countless enterprises have slotted traditional business models into the Web2 framework, building audiences using centralised databases, communicating with customers via blogs, emails and social media, and conducting targeted advertising campaigns using data behemoths like Google (NASDAQ:GOOGL) and Facebook (NASDAQ:FB). Amazon (NASDAQ:AMZN) is perhaps the best example of a Web2 success story: last year, the retail giant reported annual revenue of $469 billion. As well as building its global e-commerce business, the company has become a leader in the cloud infrastructure service market via Amazon Web Services (AWS), as well as the video streaming market thanks to Amazon Prime.
In the Web2 paradigm, users pay for goods and services using the legacy financial system, directly linking their bank account/credit card to individual company databases or using third-party services such as PayPal (NASDAQ:PYPL). The vast majority of web users also use insecure browsers and search engines that continually harvest their data in order to build consumer profiles and serve advertising content.
Gatekeepers and intermediaries have been the primary beneficiaries of Web2, as users have had to operate according to the terms of each platform. Gavin Wood, co-founder of blockchain platform Ethereum, summed up the intrinsic flaws of Web2 in a 2018 essay that popularised the term Web3: “With so much of the world’s data channelled through so few cables, the inconvenient truth is that unless we put in place open software protocols, our increasingly digital society will continue to be at risk from malicious “authorities” both within society and (as in the case [of] Russian tampering of our elections) from outside.”
How Web3 Fixes the Internet Economy According to Wood, the Goliaths at the summit of the Web2 pyramid “make money from our fealty, feeding us our information, and cutting us off when inconvenient.” While Web3 will not make these Goliaths obsolete overnight, the move toward permissionless and open technologies empowers the internet’s 5 billion users to exercise their self-sovereignty every step of the way.
There are many practical examples that demonstrate the utility of blockchain-based technologies in this regard. Consider decentralised finance (defi) as one example: these permissionless financial products enable users to save, trade, lend and borrow without visiting a bank account or surrendering their identity, which if left on a centralised database could make them the target of identity theft/fraud.
The emergence of NFTs and peer-to-peer marketplaces, meanwhile, allows artists and creators to connect directly with fans. Naturally, replacing intermediaries with smart contracts – which automate transactions based on fixed terms – enables such artists to earn more from their work into the bargain. Smart contracts can also allow creators to earn future royalty payments when their work, commodified as a digital token, is sold on the secondary market.
If defi represented the first wave of Web3 protocols, gamefi (gamified finance) and NFTs certainly represent the next phase. In many respects, gamefi absorbs defi by integrating features such as staking and trading within a video game environment. Thus, players can connect via Web3 wallets and earn tokens for completing missions, winning PvE and PvP battles, providing liquidity to the ecosystem, and climbing a leaderboard. In some interactive gaming environments, it’s also possible for players to ‘mine’, buy and sell tokenised land parcels, tracts of virtual space upon which businesses can be built.
In many respects, play-to-earn participants act as co-owners and builders of a new kind of system, rather than mindless consumers kept in the dark about the practices of the platform itself. In this value-based economy, governance often comes under the purview of gamers themselves via a decentralised autonomous organisation (DAO). Ostensibly, DAOs act as community-centric administrators of a protocol; to become part of a DAO and influence the project’s direction, users merely need to hold the relevant governance token which allows them to submit proposals and vote on key decisions.
From privacy-preserving data networks and community-organised gaming guilds to NFT bazaars and blockchain-powered messaging apps, the deluge of decentralised use-cases represents a viable exit ramp from Web2 and an egalitarian vision of the internet for future generations.
Lucid Metaverse Dreams Web3 sets the scene for a fairer and more transparent internet, although that’s not to say there aren’t opportunities for entrepreneurs to generate income. According to Crunchbase, around $17.9 billion was invested in Web3 startups in 2021 – and almost 50 crypto companies raised over $100m apiece.
Much of the talk of late has centred on the potential opportunities in the metaverse, vast, often interconnected 3D environments where users come together to socialise, game, transact, build, and even host/attend events such as conferences and concerts.
Web2 bellwethers like Facebook are actively exploring the metaverse, with Mark Zuckerberg describing the interactive realm as “an embodied internet that you’re inside of rather than just looking at.” However, Web3 technologists have expressed wariness regarding Facebook’s plans to create an all-encompassing metaverse. Yat Siu, executive chairman of metaverse startup Animoca Brands, called Facebook the biggest threat to the growth of an open metaverse as the model was “in contradiction to the way that they’ve constructed their business.”
Web3-native metaverses like Alien Worlds are a different proposition to the kind proposed by Zuckerberg and his ilk. Built primarily on the WAX blockchain, but also connected to Ethereum and BNB Chain, Alien Worlds is spread over six planets and is home to over seven million players, who power a thriving in-game economy with native Trilium (TLM) tokens (which can be cashed out to fiat). Inhabitants of Alien Worlds can earn cryptocurrency tokens from mining, battling other players, completing missions or, in the case of landowners, hosting events on planetary land to attract other participants; they can also submit proposals and elect council candidates via Planet DAOs. The first metaverse release to onboard 100,000, 1 million and 5 million users, Alien Worlds is a true play-to-earn trailblazer.
Clearly gamers with an entrepreneurial streak can leverage Alien Worlds and other metaverse titles to earn a good income. But there are opportunities, too, for non-players. Consider AW Butler as just one example: this airdrop service is designed to help projects run promotional campaigns that reward players for mining on their land. Rewards in the form of token drops to specific Alien Worlds gamers can increase marketing visibility for metaverse projects while inspiring brand loyalty. It’s just one example of a service that can flourish within the burgeoning metaverse economy.
Whatever way you look at it, the gamified and financialised metaverse is destined to be the next key battlefront of the internet economy. But Web2’s major players aren’t likely to go down without a fight. While some will cling to tired models, others – like Facebook – are pivoting and at least contemplating a new direction. If the vision of a more just and equitable internet is to be achieved, the blockchain technologists and innovators will need to stay on their game.
Image credit: Rarestone Capital
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