The argument started when Elon Musk tweeted out a vague comment about something crypto-related: Web3 in this case.
Web3 is a somewhat hazy concept that puts a decentralized blockchain-based infrastructure underneath a new, more private internet devoid of the influence and control of Big Tech.
Read more: PYMNTS DeFi Series: What Is DeFi?
That’s the idea, at any rate.
On Dec. 21, the Dogecoin- and bitcoin-boosting CEO of Tesla and SpaceX tweeted, “Has anyone seen web3? I can’t find it.” Suggesting that Web3 is essentially vaporware, a point he made in a Dec. 19 tweet that called Web3 “more marketing buzzword than reality right now.”
Has anyone seen web3? I can’t find it.
— Elon Musk (@elonmusk) December 21, 2021
Jack Dorsey, Twitter founder and Square aka Block platform CEO, weighed in on the location of Web3, saying: “It’s somewhere between a and z” — a reference to a16z, the blockchain and crypto arm of top VC Andreessen Horowitz. Musk promptly replied with a reference to M31, another venture capital firm.
Dorsey — a bitcoin “maximalist” who Monday (Dec. 20) tweeted that bitcoin will replace the dollar — ran with that ball, tweeting: “You don’t own ‘web3.’ The VCs and their LPs do. It will never escape their incentives. It’s ultimately a centralized entity with a different label. Know what you’re getting into…”
It’s not a popular opinion in the crypto community. ShapeShift cryptocurrency exchange founder Erik Voorhees, replied: “Saying you don’t own web3 because VCs own some of it is like saying you don’t control your Bitcoin because VCs also control some.”
When another pointed out that Dorsey has taken a lot of VC money over the years, he responded, “And this is why I know exactly what I mean.”
Who Owns Web3?
The idea behind Web3, also known as Web 3.0, is that it will be the next evolution of the web.
That calls Web 1.0 the AOL-era internet, in which content was behind the “walled garden” of internet portals that curated what you saw.
Web 2.0 is the current internet, in which search engines create an interactive community in which corporate websites, user-generated content and social networks all compete for attention.
Web 3.0 is an open-source, censorship-free place where you own your identity and choose how to share your personal information, can store data without the need for trusted middlemen like Google — think of decentralized finance (DeFi)-powered cryptocurrency payments bypassing banks and Visa — and can create apps and communities freely.
Both cryptocurrency and the DeFi financial markets it powers are core to Web3 — indeed the term was coined in 2016 by Ethereum Co-founder and Polkadot blockchain project leader Gavin Wood.
See: The Most Ambitious of the ‘Ethereum Killers,’ Polkadot’s Launch Could Begin the Reinvention of DeFi
Suddenly, it’s an idea with a lot of interest behind it. The term “web3” generally maintained a single-digit or low double-digit score on Google Trends’ interest over time ratings that didn’t crack 20 until September. It started November at 40, and topped out at 100 in the first week of December before retreating to its current 70.
Instead of storing data in centralized corporate silos — ranging from photos on Google Cloud Storage or Apple’s iCloud — it would be stored one decentralized storage platforms. Websites would not be hosted on platforms like Amazon Web Services (AWS) that can boot them off.
While Dorsey also commented in the thread that he had nothing to do with Web3, saying a Wall Street Journal article that called him one of the “unlikely revolutionaries who want to reboot the internet” was just clickbait.
But he put his money behind it with Bluesky, a Twitter-funded open-source project he created in late 2019 to create a decentralized protocol able to host any social media platform, saying Twitter could eventually be among them.
The goal, he said, was a very Web3-like desire to build a more civil public conversation by using an “open recommendation algorithms which promote healthy conversation” rather than relying on private social media companies like his that could censor debate — which it ended up doing during the 2020 presidential campaign.
Yes, But …
This points to another of the big problems with Web3 that many of its freedom-from-censorship acolytes wax poetic about: There’s no control.
Which also points to one of Web3’s potential legal troubles shared by current cryptocurrency and DeFi projects — how do you impose regulatory control like anti-money laundering checks on a decentralized platform? (One answer: U.S. authorities have said DeFi isn’t really so decentralized there’s no one to go after for violations. In other words, there can be regulation but good luck trying to enforce it.)
Then there’s the core mechanic of Web3 and any blockchain project: They rely on user-hosted “nodes” that contain copies of the whole blockchain, updated constantly. While it’s doable, the set-up is somewhat complex and the effectively a separate computer — with plenty of memory — is needed.
As a result, plenty of nodes are hosted by third-party companies like Bison Trails, which rents server space and node management to people who want to run a node — often to make money via DeFi staking.
Companies like Bison Trails — which was just purchased by Coinbase and folded into Coinbase Cloud — are centralized points that Web3 will inevitably use heavily. It begs the question — will Web3 ultimately be controlled by Big Crypto?
Related: With $30B Staked, Coinbase Cloud Aspires to Be Blockchain’s AWS
And then there’s the self-sovereign identity argument about controlling your own private data: companies will still be able to convince users to give it up, either for rewards or access to a service or product they want. Those that want to truly control what they give up will have to work at it — something plenty of people claim to be willing to do.
But will they? And will enough of them do it to scale Web3?
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