Web 1.0 vs. Web 2.0 vs. Web 3.0
The birth of the internet. The technology used in this stage of internet development is quite simple. We had internet browsers like Netscape and static pages filled with text. We couldn’t do anything with the static pages except read them from our personal desktop computers. Individuals didn’t create content, and most of the pages belonged to large companies.
This is what it looked like:
Then came a gradual shift to what we now call Web 2.0. Along with this shift came Facebook and other social networks that transformed the internet and how we use it. The type of content changed as well. No longer was the web purely text, but it became interactive—pictures, likes, shares, messages, chats, and so on. Infrastructure changed from desktop computers to mobile devices. Storage and computing power moved from physical drives to the cloud.
Individuals no longer just consumed content but actively created it.
With it came the negative, centralization. The Internet now belongs to a few select, enormous organizations. They control the platforms and algorithms that control what we see. This has generated a lot of wealth for the companies that own where the media content is created and distributed. Just take a look at Facebook’s market cap over the years.
Individual users might not care that control is centralized, but we have seen the adverse effects of the Facebook algorithm affecting how our society thinks. Political parties complained Facebook’s algorithm promoted polarization
Web 3.0 is promising to change that.
This brings us to Web 3.0. At its core, the content is interactive and part of a larger virtual economy. People don’t only read and interact with the content, but also own parts of it. Control is decentralized because of how it is built with the use of blockchain technology.
It is hard to imagine what the mature Web 3.0 will look like, but pieces of it are starting to come together slowly.
Simply put, it is a mix of virtual goods and services that generate real-world value that are traded on the blockchain.
This vision has been propelled by the recent rise of NFTs (Non-fungible tokens), which are digital files that people can buy and sell using cryptocurrencies. Before the technology matures, there will be absurdities like this one: Christie’s auctioned Gary Vaynerchuk’s NFT art for $1.2 million that don’t necessarily make any sense. As the tech matures and the novelty wears off, we will see a transition into a few key services.
Metaverse and Web3
Web3 crypto Metaverses are virtual markets/economies. The simplest example is a video game world like Fortnite as an example. It is a virtual world where people can trade virtual goods on the blockchain.
Okay, this may seem farfetched. Why would the majority of population care about some video game world where kids trade costumes and skins. Well, these worlds are moving away from video game aspect into more sophisticated Metaverse experiences.
Here is just one example,
Sotheby’s Virtual Gallery in Decentraland
I have to agree that it looks childish and more of a PR stunt at this point in time but it is an example of a huge organization trying to build something for the future reality. Here is what they had to say about it.
“We see spaces like Decentraland as the next frontier for digital art where artists, collectors and viewers alike can engage with one another from anywhere in the world and showcase art that is fundamentally scarce and unique, but accessible to anyone for viewing,” says Michael Bouhanna, head of sales at Sotheby’s.
Investing in Web3 building blocks – Ethereum
What gets me excited about Web3 is not necesserily the glamorous future products that are yet to be fully developed but the technology that it is built upon.
Specifically the cryptocurrencies and blockchain networks that will be used.
At this time, Ethereum (ETH) seems to be the most comprehensive network that is built to be the backbone for decentralized future beyond simple cash transactions, like Bitcoin.
What follows is the case for ETH to become the biggest asset that many of Web3 applications will be built with. Thus investing in ETH is like investing in cement before the upcoming real estate boom.
Like I stated before, ETH has the potential to be more than just crypto used for financial transactions. In fact, ETH came into the spotlight and significantly increased in price after the birth of DeFi (Decentralized Finance).
I won’t get into DeFi in too much detail but want to say that there are reasons why these companies build DeFi solutions on Ethereum. Biggest example being, MakerDAO | An Unbiased Global Financial System The way they work is they take Ether as collateral and output a stable coin called DAI.
Dai is a stablecoin cryptocurrency which aims to keep its value as close to one United States dollar as possible through an automated system of smart contracts on the Ethereum blockchain.
Developer Support & Tools
Ethereum has the most expansive tooling. From open source libraries to node provides, there are lot of people out there who contribute their time to maintain these open source projects and develop them further.
Continued Investment into ETH development
Ethereum development is hard. It requires new skillsets from developers and support of the development community. Again, this is where Ethereum leads the pack. Tools like ETH.Build – Educational Sandbox For Web3 or Tenderly | Ethereum Developer Platform and the whole library of tools over at Ethereum.org.
ETH has more diversified holders than other major currencies
Ethereum was created with much larger number of developers writing code thanks to better financial incentives. This led to a lot developers benefiting tremendously from rising ETH prices.
Foundations and Ethereum Foundation holds very little percentage of the ETH supply.
Web 3.0 Thesis risks
It shouldn’t come as a surprise that investing in Ethereum or any blockchain technology is extremely risky. Main reason is because the technology is relatively new and we don’t know the way its development will go.
On this site we discuss all types of investment vehicles from real estate to vanilla stock portfolios and whatever the asset, we always come back to understanding the intrinsic value of whatever you invest in.
Unfortunately, it is very difficult to do so with a cryptocurrency. The price is mainly driven by the supply and demand but also the multiple the market places on its future potential. As Decentralized Finance projects mature and take shape the picture will be clearer.
Investing in ETH vs. Trading
Another distinction I want to make is investing in ETH for its long term potential vs. Trading it at current prices. Many blogs and professional newsletters will talk about “How to read a price chart” or “Is ETH a buy at current prices”. I am deliberately staying away from these approaches and focusing on the long-term potential of this technology.
The question is, will ETH become a crucial technology in Web3 development. Compared to competitors, at current stages, Ethereum comes out ahead.