⬆️ UPVOTED | BACK TO FIRST PRINCIPLES: UNPICKING WEB3
Whilst the majority of the cryptosphere spent the week eagerly counting down the hours to the imminent approval of the spot Bitcoin ETFs (the widespread assumption being that it’s now finally happening early this coming week), I decided to take a break from giving a damn (primarily because it’s been exhausting waiting for Gensler to withdraw from his shadow boxing match with his own bruised ego). And instead, I chose to spend the week gathering my thoughts, with a view to tackling the (occasionally controversial) topic of “Web3” — which is something I’ve been meaning to do for a while. Yes, Web3 (or lower-case “web3” if you’re a crypto bro): it’s a term that seems to defy succinct explanations — and it irritates the hell out of at least as many people as it resonates with. And so, I thought it was as good a place as any to start 2024 off — at the beginning of what I’m certain will be a landmark year for crypto…
First of all, it’s worth noting: all such labels (Web1, Web2, Web3, etc.) are merely that — labels. They do not denote formal version changes to software code or anything of the kind. Rather, such labels exist to help us express and understand complicated concepts more succinctly than would otherwise be possible.
But in the case of Web3 it’s slightly more complicated than that. So there’s a minor etymological detour we need to first take, before we get into the weeds of what Web3 really is. And that etymological detour concerns what Web3 is not.
It’s worth the initial pitstop, if only for the sake of clarity…
Because the term “Web3” is NOT the same thing as “Web 3.0”. Some people may mistakenly use the terms Web 3.0 and Web3 interchangeably (and who could blame them, since we already have Web 2.0 as part of our existing tech lexicon) — but in reality the two terms are not at all the same.
Ah yes… we have once again entered the realm of the computer geek — where nothing, especially technical nomenclature, is straightforward. And to confound things yet further, neither of these things (Web3 or Web 3.0) actually exist in an entirely tangible form factor quite yet — in other words they’re both basically emergent design philosophies. So there’s that…
You see, “Web 3.0” (which is always capitalised and always has a space in between the “Web” and the “3.0” because it’s the conservative, well dressed cousin of the two) is an entirely separate term, adopted by the World Wide Web Consortium (W3C), before Bitcoin was even the slightest of glints in Satoshi Nakamoto’s eye — as a kind of media-friendly placeholder for its longer-range vision of the “Semantic Web”.
Translated: Web 3.0 was a term adopted by the W3C because nobody outside of the developers’ conferences they were running understood the term “Semantic Web” (oh the irony)…
Indeed, the Wikipedia entry for “Web 3.0” highlights this ongoing clash between Boomer and Gen Z nomenclatures:
The Semantic Web, sometimes known as Web 3.0 (not to be confused with Web3), is an extension of the World Wide Web through standards set by the World Wide Web Consortium (W3C). The goal of the Semantic Web is to make Internet data machine-readable [i.e. to build “a web of content where the meaning can be processed by machines”].
So, what in the blazes is this new Web3 pretender to the throne? Is it just another crypto pipe-dream? Or perhaps just a marketing buzzword, propagated by VC firms like Andreessen Horowitz, trying to sell crypto tins of spam without any discernible product-market fit by introducing their imaginary friend (Web3) into the mix — as some prominent tech moguls (including Elon Musk and Jack Dorsey) have previously intimated?…
Well, “NO” is the simple answer. But let’s rewind to the beginning for some initial context…
The term “Web3” was coined in 2014 by Ethereum’s co-founder Gavin Wood — in an effort to encapsulate the proto-cryptosphere’s shared vision for what has since been referred to (in the same all-encompassing way) as the ‘Internet of Value’ (IoV). It was founded upon the realisation that this new decentralised, peer-to-peer (P2P) technological paradigm (which Wood called “Web3”) was supported (at least at the infrastructure level) by the invention of cryptocurrencies and permissionless smart contract platforms such as Ethereum.
“Web3 is really sort of an alternative vision of the web, where the services that we use are not hosted by a single service provider company, but rather they’re sort of purely algorithmic things that are, in some sense, hosted by everybody. So it’s like, it’s very peer to peer, right? ... The idea being that all participants sort of contribute a small slice of the ultimate service.”
Gavin Wood, co-founder, Ethereum
Of course, Web3’s use and meaning has expanded significantly since the early days of Ethereum, when Wood was riffing on the concept. And today, Web3 is used as an umbrella term (including by marketeers) to represent all kinds of on-chain activity and applications, both present and anticipated, including: decentralised finance (DeFi) protocols and decentralised applications (dApps); anything involving non-fungible tokens (NFTs); aspects of the metaverse involving the role of crypto and NFTs within extended reality (XR) scenarios; future and present blockchain gaming applications; the nascent world of decentralised social media (sometimes called DeSo and more recently SocialFi in mimicry of DeFi); decentralised autonomous organisations (DAOs); and decentralised compute and file storage protocols — which use crypto, blockchains and smart contracts to provide distributed compute and file storage services; as well as many other rapidly emerging domains too numerous to mention here, including most recently at the nexus of crypto and AI.
So, as you can already see, the term Web3 begins to expand and morph to defy succinct explanations, like a ball of string — it’s all over the place, saying “look at me, I’m over here now!”; encompassing everything from cryptocurrencies, to NFTs, to trading platforms, to the metaverse… which is perhaps why some people have likened it to a marketing buzzword — i.e. based on pure hype and speculation rather than anything more concrete.
But I would beg to differ with that characterisation. In reality, it’s actually much simpler than that. Only you need to tackle the definition from the other end, from the ground up — i.e. based on first principles. Because ALL of this can ultimately be boiled down to a few simple factors.
1. The Digitisation of Value
We’ve been moving into the digital world at high speed since the advent of the World Wide Web in the 1990s. Few if any would deny that this has had a profound influence over many aspects of our lives. That said, only since the launch of Bitcoin in 2009 - and with the subsequent invention of smart contracts (digital contracts stored on a blockchain that are executed automatically when predetermined conditions are met) - do we have the necessary tools at our disposal to effectively and securely digitise value. That’s the single primary phrase I’ve condensed it down to in terms of trying to explain what’s going on here: ultimately, this whole crypto and Web3 revolution is about the digitisation of value (in the same way that the first wave of innovation was about the digitisation of information).
Of course, there are other aspects to unpack when it comes to explaining Web3. You might argue, for example, that the digitisation of value is nothing inherently new. We already make everyday electronic payments via our credit and debit cards after all — and our bank accounts are basically zeros and ones in a database, nothing more.
2. A New Trustless Form of Digital Ownership
Which brings me on to the second defining characteristic of Web3: it infers a new form of digital ownership. MicroStrategy’s Michael Saylor refers to this characteristic simply as “digital property” when he is explaining the benefits of Bitcoin as a bearer asset or instrument. And in case you missed the circular: any units of value you have deposited in a bank, you don’t actually own.
By way of contextualising this point in simpler terms: in 2012, there was a story about the actor Bruce Willis discovering that he was unable to leave his iTunes music collection to anyone in his Will. He allegedly got very upset and considered taking legal action against Apple. Because, having spent thousands of dollars collecting digital music, he discovered that he didn’t actually own any of it — Apple did. And the same is true of all your ebooks on your Kindle — you don’t own any of them, Amazon does.
So, as we move into an increasingly digital world, this highly restricted form of digital ownership is the antithesis of what we want, unless we want to create a world of digital serfdom. Technology should remove barriers, not impose them — so this new digital form of rentier capitalism is abhorrent. And nothing has fundamentally changed since 2012. In fact, in many respects, it’s even worse.
The ubiquity of music streaming platforms, for example, means that not only do you not physically own the music that you listen to but the artists you listen to don’t get properly paid for your patronage. Of course, as a consumer, it has its upsides, but this is basically the Web 2.0 status quo: it’s the world of surveillance capitalism run amok — where we came for the free lunches only to realise that we are the lunch; digital citizens (netizens) in a world where we don’t really own anything, and where (unlike Klaus Schwab’s spurious mantra) we will become increasingly unhappy as a result.
3. Our Future Digital Sovereignty
Which brings me to the last point I’d like to make, which is also at the heart of what Web3 is really all about in the broader social context: in the same way that Bitcoin was ultimately designed to take the (a) issuance and (b) control of money away from the central bankers, Web3 is about wresting control over our digital sovereignty back from the centralised Web 2.0 gatekeepers — the Silicon Valley chokepoint operators, a handful of whom have risen during the last couple of decades to become more powerful than the majority of nation states… simply by commoditising our data and attention.
This is perhaps the single defining characteristic of the ‘Web3 vision’ that distinguishes it from crypto — the underlying asset class. Because, via the decentralised architectures enabled by cryptocurrencies, tokenisation, smart contracts and smart contract platforms, we can now develop new, decentralised ways of engaging with social media without the centralised Web 2.0 chokepoints; and in doing so retain self-sovereignty over much more of our personal data — for example over our social graph, or over the content we post.
It’s very early days, and it remains to be seen what Web3 has in store for us in the realm of decentralised social media. But the so-called creator economy is no small affair, so the incentives are there for everyone. Goldman Sachs predicts the creator economy in its current format could approach half-a-trillion dollars by 2027. Just imagine what it might be worth if the majority of the value wasn’t being hoovered up by the Web 2.0 leviathans…
VAN ECK PLEDGES 5% OF FUTURE SPOT BTC ETF PROFITS TO BITCOIN CORE DEVELOPERS
It may be good public relations, but you have to hand it to Van Eck for its understanding of etiquette and the ethos behind the open source software development space…
In brief:
Investment firm VanEck on Friday pledged 5% of its potential profits from its spot bitcoin ETF, if it gets approved, to Bitcoin core developers at Brink.
"Your tireless dedication to decentralization and innovation is the cornerstone of the Bitcoin ecosystem, and we're here to support it—more details to come," said VanEck in a post on X.
VanEck added that it has made an initial $10,000 donation to Brink to support its work.
"I think it's fantastic news," said Jonathan Bier, who serves on Brink's board. "Open source development work on Bitcoin is really important and it's fantastic that VanEck will generously give back to the core backbone of the ecosystem."
Link to full story: https://www.theblock.co/post/270644/vaneck-pledges-5-of-potential-spot-btc-etf-profits-to-bitcoin-core-developers-at-brink
ETHER ETF LIKELY COMING, AS SEC ‘IMPLICITLY’ NODDED ETH AS COMMODITY: ANALYST
I thought this was an interesting take. I had kind of assumed that any future spot Ethereum ETFs might have a long wait for approval, given the SEC’s propensity to drag its heels. But Bloomberg ETF analyst James Seyffart is arguing that the SEC is hamstrung by its prior approval of Ether futures ETFs in October 2023 — which makes perfect sense to be, given what we already know about how the spot Bitcoin ETF applications situation played out. So maybe we really should expect spot Ether ETFs in 2024 — which would be very bullish for Ethereum after its recent loss of momentum…
In brief:
The United States Securities and Exchange Commission implicitly accepted Ether as a commodity when it approved ETH futures exchange-traded funds (ETFs) last year — meaning a spot ETF variant is likely set for this year — according to Bloomberg ETF analyst James Seyffart.
Speaking during CryptoQuant’s private webinar on Jan. 4, Seyffart alluded to the approval of Ether futures ETFs in October 2023, noting that the SEC did not challenge the coin’s classification through the ETF registration process with the Commodity Futures Trading Commission (CFTC).
“The CFTC is blatantly calling Ethereum a commodity. They do not call them securities. [...] The SEC has approved Ethereum futures ETFs. So again, Gary Gensler will not explicitly say whether Ethereum is a security or a commodity, but in their action, by approving those Ethereum futures ETFs, they’re implicitly accepting those Ethereum futures as commodities futures.”
Link to full story: https://cointelegraph.com/news/spot-ethereum-etf-likely-debut-2024-sec-commodity-analyst
SOLANA TRANSACTION VOLUME HITS HIGHEST LEVEL IN MORE THAN A YEAR AS MEMECOIN ACTIVITY INCREASES
Solana continues to show signs of pulling away from other Layer-1 smart contract platforms as the place to do stuff on-chain…
In brief:
Solana daily transaction volume has reached more than $40 billion, according to The Block's Data Dashboard. That's the highest level since October, 2022.
The increase in economic throughput of tokens built using the SPL standard, meanwhile, is at levels not seen since late 2022.
The current value transacted on Solana has surged by 700% compared to the volumes recorded in early December, when the seven-day moving average of transaction volumes was approximately $5 billion.
According to Nansen Research Manager Sandra Leow, "Solana-based transactions have increased from around 20 to 30 million daily transactions to approximately over 50 million at present."
"We’re also seeing daily active wallets on Solana increase from approximately 120,000 in October 2023 to approximately 470,000 in January 2024 so far," Leow told The Block.
Link to full story: https://www.theblock.co/post/270183/solana-transaction-volume-hits-highest-level-in-more-than-a-year-as-memecoin-activity-increases
ETHEREUM TESTNETS UPGRADE SCHEDULE AND KEY DATES REVEALED
In brief:
The schedule for Ethereum’s Dencun upgrade on testnets is now final, with Goerli, Sepolia, and Holesky, three critical testnets, ready for implementation within the next month.
This development marks a significant milestone in Ethereum’s continuous evolution, spotlighting the meticulous planning and collaborative effort of its vibrant developer community.
The Goerli testnet, taking the lead, with a scheduled upgrade on January 17 at 06:32 UTC, at epoch 231680. Following closely, Sepolia will undergo its upgrade on January 30 at 22:51 UTC (epoch 132608), with Holesky set for February 7 at 11:34 UTC (epoch 29696).
Link to full story: https://beincrypto.com/ethereum-upgrade-schedule-testnets/
HARD SEC DATA SHOWS FUNDS PLAN TO INVEST UP TO 15% OF THEIR AUM TO BITCOIN
Not quite sure what to make of this story, the name Marty Party doesn’t exactly lend it extra credibility, but it’s certainly worth tabling (and one to keep an eye on): according to this report, various funds have been amending their prospectuses with the SEC, and what they’re submitting might signal a much higher appetite for exposure to Bitcoin than the cryptosphere (or indeed Wall Street) is currently expecting…
In brief:
The U.S. Securities and Exchange Commission (SEC) has been a long-standing roadblock to the approval of spot Bitcoin ETFs. However, recent data suggests a shift, especially among Wall Street players, is underway.
Taking to X on January 3, Marty Party observed that a growing number of funds that traditionally invest in securities are now making amendments to their prospectuses to allocate up to 15% of their assets under management (AUM) to Bitcoin.
Link to full story: https://cryptodaily.co.uk/news-in-crypto/bitcoinist:sec-funds-plan-to-invest-in-bitcoin
That’s all for now. Wishing everyone a Happy New Year! 🌻
Love this Web3/Web 3.0 explanation.
I could use it in some content!!!
Terrific explication of the etymology of 'Web3'!