Web3: The next generation of the web is here… apparently

What is it for and how does it work? The Reg investigates

Comment The growing scepticism around web3 can be summed up by the titles of a few recent blog posts. Web3 is B*llsh*t. Web3? I have my DAOts. Web3 is not decentralization.

Or how about: Web3 is not Decentralisation — it's a Ploy to put Crypto Bros in Charge. Or Keep the web free, say no to Web3.

For balance, let's look at what some of the advocates say: Is Web3… anything? And Web3 is a stupid idea.

What is this clearly controversial technology? Web 1 was simple HTML, later on with a bit of JavaScript for some interactivity. Web 2.0, as The Reg explained in 2008, turned websites into apps running in the browser. Web3 refers to the addition of the power of blockchain to the web, which, among other things, would enable smart contracts via distributed identities. The idea is that you enforce trust using cryptographically signed tokens, allowing world+dog to decentralise the web via federation.

It's confusing. We asked some experts in the area, such as London-based developer and web entrepreneur Stephen Diehl. He said: "Unlike previous iterations on web technology (AJAX in web2, JavaScript, etc), web3 offers nothing but an attempt to turn every site into a gambling portal to trade cryptocurrency. There is no technical benefit to end users other than to seduce them into trading more crypto coins."

Meanwhile, Blockchain technology watcher David Gerard told us: "web3 is a marketing buzzword with no technical meaning. It's a melange of cryptocurrencies, smart contracts with nigh-magical abilities, and NFTs just because they think they can sell some monkeys to morons."

Imagine NFTs being URL shorteners, but with proof of ownership... only they're longer and introduce new security risks.

So why all the hype? Because the idea of a decentralised online "ecosystem" based on the blockchain is being boosted by Silicon Valley VC Andreesen Horowitz among others – the company that helped get Coinbase off the ground. Co-founder Marc Andreessen sits on the Facebook Meta board too… which also tried to launch its own cryptocurrency, albeit rather unsuccessfully.

The core argument around cryptocurrencies is that, despite their extreme volatility, on average, their valuation continues to grow, and so people think that they can get rich. Pyramid schemes do work, for a while, as long as people keep buying into the scheme – pouring new money in, inflating the fund, and so tempting new investors. It looks like a good investment, which is very tempting. Some people invest a lot. For instance, a certain Andreessen Horowitz has put in $2.2bn.

Sometimes, snark contains some truth. Bitcoin is "a system designed to teach libertarians that financial regulation is actually a good thing," Robert Synott opined in 2014. And some libertarians, as John Spaulding observed recently, are like house cats: convinced of their fierce independence, while utterly dependent on a system they don't appreciate or understand. That's why some of us call Bitcoin Dunning-Krugerrands.

And if cryptocurrencies are no good as money, at least you can buy and sell NFTs with them. Which means you need places where you can trade in these fancy signed bookmarks, using imaginary internet species. Voilà: web3.

If you will forgive us for paraphrasing the great Douglas Adams, Web3 is "a myth, a fairy story. It's what parents tell their kids about at night if they want them to grow up to become economists." ®