The idea behind Web3 is that technologies like blockchain, cryptocurrencies, non-fungible tokens (NFTs), and decentralized autonomous organizations (DAOs) give us the tools we need to create online spaces that we truly own, and even to implement digital democracies.
Why Web3? Well, to cover the history of the web briefly – Web1 was the original iteration of the world wide web, which was mostly a read-only affair made up of static websites. Web2 (or web 2.0 as it was more commonly called) refers to the user-generated web that came about with the arrival of social media sites like MySpace and, eventually, Facebook, which brings us to Web3 – the decentralized web!
The idea is not without its critics, however, as there are concerns that, in reality, it may simply mean a transfer of power from one group of technocrats to another. Others have highlighted the large amount of electricity that often needs to be consumed in order to run technologies such as blockchain that make decentralization possible. These are certainly challenges that need to be addressed before the concept will achieve the societal buy-in that will be needed for it to live up to its potential. In 2023, we may see progress towards this or further rejection of the whole thing as a bad idea. So here's a look at some of the trends that will influence the future of Web3 in 2023.
The decentralized metaverse
The metaverse is a hot trend just about everywhere right now, with everyone from Facebook to Microsoft pulling together their ideas for the “next level” of the internet. Proponents of the Web3 future, however, have their own ideas, and it doesn’t involve platforms controlled by the Silicon Valley giants.
Decentraland and The Sandbox are probably the two most visible examples of decentralized metaverse platforms. The data that makes up these digital worlds is stored on a blockchain – the Ethereum blockchain, in fact. This means (in theory) that only those with permission can make edits or add and delete elements. The server where the data that makes up the world are hosted has no individual owner who can censor activity that doesn't fit their political views or pull the plug if they decide they want to get rid of it entirely. This obviously isn’t true for the likes of Facebook, where the corporation that owns the servers will always have the final say!
Decentralized virtual environments are a core part of the vision for where Web3 will take us in the next decade, and in 2023 we can expect the pioneers to continue to lay the groundwork that could eventually make it a reality.
Non-fungible tokens are unique tokens that exist on a blockchain. Unlike cryptocurrencies, for example, where there may be millions of identical tokens existing on the chain, an NFT can be used to represent something unique.
Most people have probably heard of NFTs as pieces of computer artwork that frequently sold for thousands or millions of dollars (or did do, before the market for them somewhat collapsed this year, at least!)
Enabling sales of digital art is only one use case for them, however, and those who believe in the future of a decentralized web3 say that their true value will lie in tokenizing items, data, and even ideas in the digital and physical domains.
NFTs in the decentralized internet might be the keys we use to unlock and interact with the digital products and services we buy. They might also represent contracts that we enter into with other parties to acquire goods and services (known as smart contracts) or the keys to our virtual metaverse houses.
In 2023, the emphasis will be on NFTs that “do something” – sometimes known as “utility NFTs” rather than NFTs that simply represent virtual works of art or similar. Hopefully, this will lead to a change in perception of this potentially highly transformative technology and a better understanding of where they fit into the nascent Web3 ecosystem.
Decentralized social networks
One of the goals of the Web3 movement is to create a decentralized social network. If this does become a reality in 2023, it may even turn out to be thanks to none other than Elon Musk.
The Tesla CEO has spoken about wanting to create such a social network, where users would pay a tiny amount of cryptocurrency every time they posted a message, in order to deter trolling and spambots. These ideas came to light thanks to legal proceedings around Musk’s on-and-off plans to buy Twitter.
Web3 proponents say that a core advantage of a decentralized social network would be that it would be resistant to censorship. Currently, corporations such as Meta (owners of Facebook, WhatsApp, and Instagram) and Twitter have the final say over what can and can’t be said. Of course, if this means that Web3 users will ultimately have the ability to say whatever they want, without censorship, then a point will come where wider society (including governments and lawmakers) will have questions to answer about whether or not this is a good thing.
Even the most enthusiastic Web3 advocates have to face up to the fact that the technology has issues when it comes to green credentials. At its peak, the Bitcoin blockchain network alone was estimated to be using about as much energy as Argentina (130 terawatts per hour), and a single bitcoin transaction was generating 772 kilograms of CO2 emissions. Clearly, this is not sustainable, and this immense energy usage was cited by Tesla CEO Elon Musk as a reason that his company was moving away from involvement with the technology.
Since then, there have been concerted efforts to reduce the amount of energy used while retaining the usefulness of blockchain and associated Web3 technologies. Perhaps most notably, the Ethereum network recently completed its switchover from proof-of-work to proof-of-stake algorithm – leading to a reported 98% reduction in the overall amount of energy used on the network.
As well as reducing the amount of energy directly used by Web3 initiatives, in 2023, we can also expect increasing efforts to be put into using the technology to achieve green aims. The World Economic Forum has highlighted the potential the technology holds to enable organizations to coordinate and build collaborative technology designed to accelerate climate change mitigation. One avenue that is currently being explored is known as “regenerative finance” (ReFi), which seeks to promote financial incentives for projects that restore or preserve “resources essential for planetary wellbeing.”
Growing government intervention and regulation in the Web3 space
As the transformative impact of this technology becomes more apparent, the likelihood (and some would say necessity) of governments stepping in to oversee and regulate the impact on economies, society, and the environment grows. In the U.S., states like Wyoming have used their powers to develop and pass their own legislation to position themselves as “Web3-friendly” zones. The idea is that, in exchange for accepting regulation and oversight, businesses involved in Web3 activity will receive favorable treatment and special tax considerations. Also this year, Colorado became the first state to officially accept cryptocurrency as payment for taxes and state fees.
Outside of the U.S., Dubai has shown that it is keen to become a Web3 and cryptocurrency-friendly society. The emirate has created economic programs designed to attract companies involved in Web3 work to set up operations in its territory and is also promoting itself as a natural home for innovation in the fields of artificial intelligence, cloud computing, and metaverse – all technologies which are closely related to new developments in Web3. 2023 is likely to see other countries moving to position themselves as Web3-friendly – often through the use of central bank digital currencies – such as India’s forthcoming e-rupee and China’s Digital Yuan.