Web 3 – also known as “Web3″ or “Web 3.0″ – is a term you may of heard thrown around a lot lately. It simply refers to the next iteration of the internet that promotes decentralized protocols and aims to reduce dependency on large tech companies like Youtube, Netflix and Amazon. But what is it, and why is it on everyone’s minds?

To understand Web 3, it makes sense to understand what came before. The first version of the Internet – known as Web 1 – arrived in the late 1990s and comprised a collection of links and homepages. Websites weren’t particularly interactive. You couldn’t do much apart from read things and publish basic content for others to read.

Brian Brooks, the CEO of Bitfury, put it smartly in a speech to the U.S. Congress in December 2021: “If people remember their original AOL account, it was an ability to look in a curated ‘walled garden’ at a set of content that was not interactive, but was presented to you on AOL, the way that Time Magazine used to show you the articles they wanted you to see inside of their magazine, just you could see it on a screen.”

Web 2 came next. Some people call this the “read/write” version of the internet, in reference to a computer code that lets you both open and edit files rather than just view them. This version of the Internet allowed people to not only consume content, but create their own and publish it on blogs like Tumblr, Internet forums and marketplaces like Craigslist. Later, the emergence of social media platforms including Facebook, Twitter and Instagram took content sharing to new heights.

After a while, the general public became cognizant about the way their personal data was being harvested by tech giants and used to create tailored advertisements and marketing campaigns. Facebook, in particular, has had the spotlight shone on it innumerable times for breaching data privacy laws and was hit with a $5 billion fine in 2019 – the largest penalty ever issued by the Federal Trade Commission (FTC.)

Although Web 2 has brought the world amazing free services, a lot of people have grown tired of the new “walled gardens” these huge tech companies have created and want to have more control over their data and content. This is where Web 3 comes in.

Web 3 can be understood as the “read/write/own” phase of the Internet. Rather than just using free tech platforms in exchange for our data, users can participate in the governance and operation of the protocols themselves. This means people can become participants and shareholders, not just customers or products.

In Web 3, these shares are called tokens or cryptocurrencies, and they represent ownership of decentralized networks known as blockchains. If you hold enough of these tokens, you have a say over the network. Holders of governance tokens can spend their assets to vote on the future of, say, a decentralized lending protocol.

Again, here’s Brooks: “The real message here is that what happens on the decentralized internet is decided by the investors versus what happens on the main internet is decided by Twitter, Facebook, Google and a small number of other companies.”

Web 3 makes the proliferation of cooperative governance structures for once-centralized products possible. Anything at all can be tokenized, whether it’s a meme, a piece of art, a person’s social media output or tickets to Gary Vee’s conferences.

A great example of the paradigm shift is in the gaming industry. Gamers grumble endlessly about the bugs that developers leave in their favorite video game, or how the latest patch has upset the balance of their favorite weapon. With Web 3, gamers can invest in the game itself and vote on how things should be run. Large Web 2 companies, like Meta and Ubisoft, are creating virtual worlds powered in part by Web 3. Non-fungible tokens (NFT) will also play a huge role in reshaping the gaming industry by allowing players to become the immutable owners of the items they accrue.

The main criticism of Web 3 technology is that it falls short of its ideals. Ownership over blockchain networks is not equally distributed but concentrated in the hands of early adopters and venture capitalists. A public spat recently erupted on Twitter between Block Inc. CEO Jack Dorsey’ and various venture capitalists over Web 3, bringing this debate to the forefront.

Read More: What Jack Dorsey’s Beef With ‘Web 3′ is Really About

At the heart of the critiques is the idea of “decentralization theater,” where blockchain projects are decentralized in name but not in substance. Private blockchains, VC-backed investments, or decentralized finance (DeFi) protocols where just a few people hold the keys to hundreds of millions of dollars are all examples of decentralization theater.

And despite the supposedly leaderless community of protocols, there are clear figureheads. Izabella Kaminska, the outgoing editor of the FT blog Alphaville, pointed to the huge amount of power that Vitalik Buterin, the co-founder of Ethereum, continues to have over the network, even though he’s no longer involved in its development:

“Vitalik is a funny and contradictory phenomenon in his own right. He operates as the spiritual leader of a de facto headless system, while holding incredible sway and influence over the headless system he created and oversees,” Kaminska told The Crypto Syllabus.

Things aren’t much better within decentralized finance protocols. They’re rife with voter absenteeism, often rely on centralized infrastructure and the barrier to entry in creating them is still high, given that creating blockchains seems to be arcane magic reserved for only the most highly specialized engineers.

But despite its problems, Web 3 has a lot of potential. Whether it’s too idealistic to put into practice will be something that everyday users will discover over the next decade.

Read More: Web 3 and the Metaverse Are Not the Same

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Robert Stevens is a freelance journalist whose work has appeared in The Guardian, the Associated Press, the New York Times and Decrypt.

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The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.