Two terms that are generating a lot of hype and excitement in the world of business technology right now are Web3 (sometimes called web 3.0) and metaverse—judging by some of the coverage, you would be forgiven for thinking that they refer to the same thing. Actually, although they are related in several important ways, they both describe different concepts. So, let’s take a look at the difference.
What are web3 and metaverse?
In simple terms, web3 is the decentralized internet – built on distributed technologies like blockchain and decentralized autonomous organizations (DAO) rather than centralized on servers owned by individuals or corporations.
The idea is that this will create a more democratized Internet. No single entity will control the flow of information or "pull the plug" and kill a network, simply because can as they own the hardware it’s running on. The servers, systems, and networks where applications are run from and where data is stored will, in theory, be owned by the users themselves, who will have voting rights over what rules and regulations are in place, and how they can be used. Why is it called web3? Because it’s thought that it will be the third major evolution of the internet, after the worldwide web (web1) and the user-generated web (web2, or social media).
The metaverse (or just "metaverse"), on the other hand, is really, at the moment, a shorthand for virtual worlds, where users can interact with each other and engage with apps and services in a far more immersive way. The term “metaverse” first appeared in Neal Stephenson’s sci-fi novel Snow Crash, where it described a virtual reality world. Since then, the concept has gone mainstream through books and movies like Ready Player One and The Matrix. Today technology is quickly catching up with science fiction. One survey carried out by Ericsson found that seven out of 10 respondents believe that by 2030 we will be able to enter virtual worlds that appear to be completely real. More generally, the term is used today to refer to any online spaces that strive to create immersive environments, so games like Fortnite, which have been used as a venue for virtual concerts, and Roblox, which offers businesses the chance to build branded worlds, are also considered to be metaverse experiences.
Why do some people think they are the same thing?
There are several reasons that they sometimes get spoken about as if they are the same thing. Firstly, and probably most obviously, is the fact that despite my statements above, no one is really entirely sure exactly what either of them is yet.
Both are very much "under construction" by many different people and organizations who all have different ideas about what they will look like when they're finished. For example, Meta (formerly Facebook) said it would spend at least $10 billion on developing the concept of a metaverse in 2021. But its vision of what the metaverse will be is very different to those who believe the metaverse should be decentralized and outside of the control of big corporations – like Meta.
Secondly, both the decentralized web (web3) and metaverse have been, at one time or another, referred to as "web 3.0" – an identifier used simply to state that they represent the third major iteration of the internet. Google search "web3" now, and most of the results will refer to the concept I described above in the first section of this article. However, some people have described web 3.0 as “the immersive web” – a new generation of the web which is primarily differentiated from what existed previously by its "immersiveness". The metaverse, in other words!
And thirdly, and perhaps most significantly, another reason that they are often conflated with each other is that they cross over in some very important ways. The technology that’s used to build web3 – which includes blockchain, and blockchain-based cryptocurrencies like Bitcoin and Ethereum, and NFTs – unique digital “objects” that are stored on a blockchain – all have huge implications for the way we will make use of the virtual worlds of the metaverse for work, play, socializing and learning.
How will they come together?
Perhaps most obviously, cryptocurrencies could form the foundations of economic and monetary systems in the metaverse. If the metaverse is a digital equivalent of the real world, then it’s pretty likely that people are going to want to shop, earn money and establish businesses there.
Cryptocurrencies offer a ready-made platform for doing this; they don’t need banks, clearinghouses, brokerages, or exchanges (in the traditional sense) to let people transact and invest currency tokens that they own. A wallet stored on your computer (or in the cloud) would be all you need to furnish your avatar with, in order for it to be able to go forth and prosper in these brave new worlds.
But what would you want to buy in the metaverse, and why would anyone want to buy digital items that aren’t even “real”? Well, there’s already a market for in-game items in video games that, in 2020, was said to be worth around $54 billion. Most of these are cosmetic items that players wear simply to decorate their avatars, or their in-game homes, or just like to have for bragging rights.
This is where NFTs – non-fungible tokens – come into the picture. Another key element of the web3 vision, NFTs, make it possible for unique items to exist in digital worlds. This is because, unlike most of the digital data that makes up the internet, social media, and virtual realities, it can't be infinitely replicated just by using "copy and paste" due to it being represented by a token on an encrypted blockchain.
This is why we’re already seeing companies like Nike creating NFT-backed shoes and clothing that only exists in the digital world. After all, people spend hundreds of dollars on expensive sneakers in the real world simply because they are limited edition, so why should they behave any differently in the virtual world?
Lastly, and perhaps most excitingly from the point of view of a technologist, web3 offers the possibility for the very foundations that digital worlds are built on to be built on decentralized platforms. Decentraland, for example, is an entire world built on the Ethereum blockchain. This means that users can use the Ether virtual currency to buy plots of land that intrinsically belong to them and not to a corporation that owns the servers where they are stored. This doesn't just mean they could profit as the land rises in value (just as with real estate), but it means they can set rules about what can or can't happen there. In decentralized virtual worlds, governance can be carried out via smart contracts – rules baked into the blockchain and designed to execute autonomously – and users can vote and exercise democratic rights to influence how the universe works. Don’t like the laws of physics stopping you from leaping across continents? Perhaps you don't think the T&Cs adequately protect users against cyberbullying or hate speech? Just start a campaign and get people to vote for the changes you want. It’s a far cry from the digital dictatorships, where corporations make the laws, and we can either like it or leave.
So, there we have it – that's the basic overview of both why web3 and metaverse are fundamentally different concepts but also closely related in many ways. More importantly, they both have the potential to help the other become more than they already are, and that’s why there’s so much excitement about the ways they can interact.