*These opinions are held by the individual contributor and do not accurately represent SingleStone's thoughts on the subject*
The internet we once knew is broken. Data breaches, censorship, and corporate control have eroded our trust in the online world. But what if there were a way to rebuild the internet from the ground up, to be more secure and equitable for all? Enter Web3, a new decentralized internet powered by blockchain technology. In this article, we will explore the motivations, uses, and implications of the Web3 ecosystem, and why it has the potential to transform the way we interact online.
Motivations
To understand the motivations behind the Web3 ecosystem, we must reflect upon a pivotal event in recent history: the Global Financial Crisis (GFC) of 2007-2008. This period brought about widespread economic turmoil, with banks collapsing and economies suffering severe setbacks. The devastating consequences of the GFC exposed the inherent flaws of traditional financial systems, leading to a loss of trust and confidence in centralized institutions. This backdrop of financial instability laid the groundwork for the emergence of decentralized technology.
In the wake of the GFC, something remarkable emerged. On October 31st, 2008, an anonymous party under the name of Satoshi Nakamoto published the Bitcoin whitepaper, detailing the revolutionary peer-to-peer digital payment system known today as Bitcoin. Bitcoin’s architecture is like no other. Where other digital payment systems use a central database to record the transfer of funds, Bitcoin substitutes a public blockchain ledger, which is maintained by no single authority, but thousands of decentralized network supporters.
The Bitcoin network was launched in early 2009, shortly after the world witnessed the repercussions of the Global Financial Crisis. Embedded within the digital payment system's first recorded data was a concise message left by the enigmatic Satoshi Nakamoto. The message, “The Times 03/Jan/2009 Chancellor on brink of second bailout for banks,” pointed to a grim news article and hinted at Nakamoto's discontent with the state of the current financial system. Though the identity of Bitcoin's anonymous founder remains unknown, this message suggests their intention of offering Bitcoin as a potential solution to a broken financial system.
Bitcoin is different from traditional payment solutions in several key aspects. First, Bitcoin encourages self-custody — granting users absolute control over their funds regardless of external circumstances. Second, Bitcoin’s network is decentralized, making it so that no single entity can enforce restrictions on others. Lastly, Bitcoin places trust in cryptography rather than central authorities.
Since its inception, Bitcoin has witnessed exponential growth. Today, the Bitcoin network is validated by 44,000 nodes across the planet, each contributing to the decentralized nature of the network. Furthermore, the network's combined computing power, measured at 400 Exa Hashes per second (EH/s), highlights the immense scale and security of the Bitcoin network. As Bitcoin continues to expand and gain mainstream recognition, its transformative potential becomes increasingly evident, challenging the traditional financial system and opening doors to new possibilities.
Expanding upon Bitcoin's trailblazing use of blockchain technology for decentralized digital payments, Ethereum then emerged in 2014. Led by Vitalik Buterin, Ethereum introduced the world's first decentralized general-purpose computation platform. This groundbreaking platform revolutionized the crypto industry, enabling decentralized applications of all kinds through a new programming paradigm called smart contracts.
Uses
Decentralized technology has created a societal shift in the way we interact over the internet. Instead of relying on single entities maintaining full control over widely used applications, we are now witnessing the rise of decentralized systems governed by transparent and immutable code and protocols. Many organizations from across the world develop decentralized infrastructure, applications, and digital assets. These solutions provide alternatives to traditional centralized systems, offering a decentralized approach for addressing similar challenges.
Some organizations deploy decentralized networks, helping to maintain the network and work to develop it over time. These networks offer a type of infrastructure as a service, and often come paired with a respective native token which is used to pay for network usage. Some networks are application- specific like Filecoin, but others are more general purpose like Ethereum, Polygon, and Solana. These networks are open and decentralized, meaning anyone can join to support the network, and receive compensation for their computational resources.
Since it is quite an effort to build a substantial enough network to maintain security, most decentralized applications will opt to make use of pre-existing general-purpose computation platforms like Ethereum. Many decentralized applications revolve around digital assets. Digital assets are anything that you can own on the internet. Some common examples include software licenses, event-tickets, videogame skins, digital currencies, and artwork. With decentralized applications, users are able to maintain absolute control over their digital assets, as opposed to being at the mercy of a centralized institution having complete governance over the asset.
Decentralized applications have emerged across various industries, combatting a number of different challenges. While Bitcoin pioneered the decentralized finance (DeFi) sector, thousands of DeFi applications have since been developed, offering features such as token exchanges, lending/borrowing platforms, insurance, and derivatives markets. Furthermore, decentralized applications have made notable impacts in industries such as gaming, digital art, and social media, expanding the reach of decentralization beyond the financial realm.
As blockchain technology continues to evolve and mature, its transformative power will extend far beyond what has been achieved thus far. The blockchain community, driven by innovation and collaboration, is constantly pushing the boundaries of what is possible. By embracing decentralization, the web3 community empowers individuals and organizations to participate in a more inclusive, resilient, and equitable digital ecosystem.
Implications
The internet has evolved drastically since its inception 40 years ago. During the early years (Web1), the internet consisted of documents created by a few people and made available to the public. Then once the internet popularized, more and more users would inevitably dabble in content creation. There was just one major issue downstream of the content creator influx; the average user was not able to set up the infrastructure to host their own content. That’s where Web2 came along, large corporations like Facebook, YouTube, Twitter, Instagram, LinkedIn, and AWS, offered a solution where an average user could make their web content publicly available. While this solution achieved widespread adoption and helped many users to create and promote their content, it did have its pitfalls.
Somewhere along the journey from Web1 to Web2, the user gave up their ownership of their content (somewhere deep in those terms & conditions). Such that those companies who host the content, are now the arbiters of most everything on the internet. Corporations which sell every bit of data you create to the highest bidder are now in control of it all. What will they do with that kind of power?
Web3 brings about some major changes to the digital world. Where applications and data were once controlled by large corporations, a new ecosystem of open applications and protocols will be forged to liberate the digital world from the shackles of centralization. A world created by the people for the people, empowering the user to use their content as they see fit.
