Editor’s note: This explainer was ‘commissioned’ by subscriber Shivangi Goel. We often do big stories on the request of our subscribers. So drop us a note at talktous@splainer.in if you have a topic in mind.

Web 1.0 and 2.0: A brief history

Web 1.0: Once upon a time, back in the 1990s and early 2000s, the internet was a collection of static web pages. You logged on and maybe read or bought a bunch of stuff, but there weren’t many ways for you to create content. And there wasn’t much money to be made off it.

Web 2.0: is the world we all live in now. This is when the tech giants like Google, Facebook, Apple, Amazon, Twitter etc. came along. We entered the era of giant platforms—where millions of people came together to post, share, shop at the same place. This had three big consequences.

One: Web 2.0 turned all of us into creators of content. Be it on TikTok or Instagram or Twitter, millions of people make the content—which is, however, monetised by these platforms in the form of advertising revenue. 

Two: It allowed these companies to collect huge amounts of data on their users—and monetise them via advertising. So you get Google Maps, Google Search, Gmail for free. But you become the product—which Google then sells to companies. As Charles Silver writes in Forbes:

“Indeed, the internet has become a massive app store, dominated by centralized apps from Google, Facebook and Amazon, where everyone is trying to build an audience, collect data and monetize that data through targeted advertising. In my opinion, the centralization and exploitation of data, and the use of it without users’ meaningful consent, is built into Web 2.0’s business model.”

Three: It led to the centralisation of the internet in every sense of the word. Data is all collected in the cloud by a handful of companies. They make all the rules to decide who creates content, what kind of content is okay etc. And it has also concentrated great amounts of wealth in the hands of a few companies and their investors. 

Quote to note: As one policy expert points out, Web 2.0 has not just become a data privacy nightmare for users, it has also stifled innovation:

“Right now, companies that own networks have unilateral power over important questions like who gets network access, how revenue is divided, what features are supported, how user data is secured, and so on. That makes it harder for startups, creators, and other groups to grow their internet presence because they must worry about centralised platforms changing the rules and taking away their audiences or profits.”

So how is Web 3.0 different?

Back to the future: The father of the internet—Tim Berners-Lee—envisioned the internet as a path to human freedom. And Web 3.0 is in many ways a return to original principles—the key among them being ‘decentralisation’: “No permission is needed from a central authority to post anything on the web, there is no central controlling node, and so no single point of failure … and no ‘kill switch’!” 

Say hello to Web 3.0: Right now, everything you do on the internet requires an intermediary—a company which enables a transaction, allows you to share or search etc. This is also what allows these companies to collect data on you—and make money off it. Simply put, Web 3.0 aims to remove these middlemen:

“[I]nstead of users accessing the internet through services mediated by the likes of Google, Apple, or Facebook, it’s the individuals themselves who own and control pieces of the internet. Web3 does not require ‘permission,’ meaning that central authorities don’t dictate who uses what services, nor is there a need for ‘trust,’ referring to the idea that an intermediary does not need to facilitate virtual transactions between two or more parties.”

But how do we achieve all of this?

Enter, the blockchain: Information in Web3 is stored on massive blockchains—not on any company’s cloud servers: 

• Blockchain is the term used to describe a collective Excel sheet or khatabook—which stores every transaction ever made. This is called a ‘ledger’. 
• Except it isn’t stored in a centralised database but distributed across hundreds of thousands of computers across the world. 
• Each transaction is recorded in something called a ‘block’—which is then linked in a “chain” to previous cryptocurrency transactions. 

As one founder of a cryptocurrency describes it: “Imagine a book where you write down everything you spend money on each day. Each page is similar to a block, and the entire book, a group of pages, is a blockchain.”

Why is this extra secure? Because it is decentralised and distributed across computers owned by volunteers. No one person can fiddle with the books. Each person has their own copy of the ledger—which is updated every time there is a transaction. This keeps all records “identical and accurate.”

Point to note: This current method of verification is called mining—and the volunteers spread across the world are called miners. They use a complex system called ‘Proof of Work’ (explained here so we don’t have to) to verify each transaction, and earn crypto as their reward.

I still don’t get how this will work...

Yup, it all sounds very abstract. So let’s look at three specific examples of how this might work.

One: Today, you have to create a separate account on each platform you use. So each time, you hand over your information to that company. In Web3, you only have a single account—and you go seamlessly from shopping to email to social media using that login. What’s important is that the data tied to your account is stored on a public blockchain—and not owned by any company. You own your data. 

A big but: The naysayers say making all your data sit on one public blockchain is even more problematic: “The vision says the problem with the internet is too many centralized intermediaries. Instead of having lots of different applications and sites, we’ll put it all on blockchains, which puts it all in one place.”

Two: Imagine a social media network where each user owns a part of it, and gets to decide its rules. Actually, Reddit is already experimenting with a version of this, and here’s how it works:

“The idea would be that users would use tokens known as ‘community points,’ which they earn by posting on a certain subreddit. The user then accrues points based on how many upvotes or downvotes that post gets from other users… Those points can essentially function as voting shares, allowing users who have made valued contributions to have more of a say when it comes to making decisions that will affect the community.”

Because these ‘points’ exist on the blockchain, no one can take them from you. And full blown Web3 iterations would go even further. Users will be rewarded in crypto by other users for what they create or share on the platform—so they can profit from their own content, which is now being sold instead to advertisers.

The big but: The idea of the most popular users getting the most power to determine the rules sounds attractive in theory. But in practice—in a social media world that rewards inciting outrage and anger—we may find it empowers exactly the wrong kind of people. One such app called BitClout is already being described as “dystopian.” As one expert puts it:

“The Faustian bargain is that the same reasons that it's exciting that there’s nothing impeding people to build whatever community they want, I can’t stop someone from building something that's hellacious.”

Three: Decentralized autonomous organizations (DAOs) are a big Web3 thing. This is where a group of people come together, pool in their crypto and make collective decisions around investment—by buying “governance tokens.” Or more simply put, “a DAO is an internet community with a shared bank account.” The ConstitutionalDAO tried to buy one of the earliest copies of the US constitution. VitaDAO, OTOH, is a “decentralized collective” that is funding early-stage research into human longevity.

The big but: MIT researchers have long warned against allowing communities to make financial decisions—arguing that they make bad choices. And one of the earliest DAOs, called The DAO, was targeted by a hacker who siphoned off $60 million worth of crypto from The DAO’s wallet.

The bottomline: Web3 supporters are confident that it will deliver the long-promised revolution. It is far more likely that the big tech players will learn to incorporate its features into their existing business models. Facebook isn’t going anywhere, but it may learn to play a little nice.

Reading list

Slate has the best introduction to Web3. Forbes makes a strong case for it, while NPR talked to critics of Web3. Dealbook looks more closely at the mushrooming Web3 businesses. CNBC has a good overview of DAOs, but for more detail check out CoinTelegraph. Fortune offers a guide to Web3 investments at the global level. Economic Times has more on Indian venture funds betting big on Web3. For related reads: check out our explainers on the crypto bill and NFTs.