What Makes A Company Web3?

Silicon Valley has a new obsession. After years of investing time, talent, and a lot of money into the social and interactive internet, today’s talk is often focused on Web3.

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In some cases, insightful entrepreneurs are bringing novel ideas to market, harnessing the expanding market and mindshare of cryptocurrencies, blockchain technologies, and decentralized operational structures. Often, these ideas make headlines for their ambition. Famously, a decentralized autonomous organization (DAO) named ConstitutionDAO made a $47 million bid to acquire one of the remaining first edition copies of the U.S. Constitution.

Whatever an organization’s goals or ambitions, Web3 is increasingly at the forefront. As one developer recently shared on Twitter, “[a] friend in consulting told me an air conditioning company is paying his firm $3M to create a ‘meta verse strategy.'” Similarly, talent and capital are flowing to Web3 initiatives. Venture Capital firms poured more than $30 billion into crypto startups last year, reflecting the assumption shared by prominent tech journalist Kara Swisher that “there’s not one business that’s not going to be affected by it.”

There is just one problem: Most people don’t know what “it” is.

According to a poll by the Harvard Business Review, 70% of respondents said they didn’t know what the term meant. As the publication glibly notes, “Welcome to the confusing, contested, exciting, utopian, scam-ridden, disastrous, democratizing (maybe) decentralized world of Web3.”

An Overview Of Web3

As the term suggests, Web3 is the catch-all term used to describe the third iteration of the internet that emerged from its differently-focused predecessors.

Web 1.0, the internet of the ’90s, was primarily a read-only medium filled with static web pages that people could view but not interact with. This version of the web was mostly business-focused, allowing companies to create home pages that shared essential information.

Web 2.0 significantly enhanced the internet’s experience. Rather than engaging in a one-way conversation, Web 2.0 is defined by the rise of social media platforms and eCommerce—the interactive web. But there’s a catch: A complicated ecosystem of advertising based on data tracking and brokering emerged. The tech companies who provide the “free services”—search, email, shopping, video entertainment, etc.—benefit enormously from collecting peoples’ data while people often give more than they gain without even realizing it.

Web3 is the opportunity to flip this model on its head, by changing the dynamic between individuals and the services they use. Web3 was born from the demand for people—not corporations—to own and control their own data. The dream of Web3 is the creation of a more private, participatory, and equitable internet.

The Criteria For A Web3 Company

Web3 is a nebulous term that incorporates various technologies, priorities, and business models. However, three core components can define a Web3 company:

1. Decentralization

Web3 is the practical expression of blockchain technology at scale. Decentralized networks, if implemented with a consumer-first design, allow companies and individuals to sell or exchange information while maintaining rights and without compromising privacy. Today, Ethereum is the most prominent platform for these processes, but continued advancements in interoperability and scale will shape the future of decentralized networks.

Of course, decentralization is about more than just technical server arrangements. While the business model is mostly unproven to date, DAOs represent a meaningful shift in the way companies are run, information shared and power distributed. This can help ensure that the needs and interests of a whole group, and not just a powerful subset, are served, making equity a natural extension of companies that are serious about Web3.

2. Ownership

Companies that are truly embracing Web3 will demonstrate that ownership arrangements have changed. This includes ownership of digital rights, personal data, and decision-making processes, but it also accommodates a variety of other ownership stakes.

For example, If a website has a “Connect Wallet” button, that means they understand that you don’t need an intermediary to facilitate your relationship. Meanwhile, a sign-in to a Web3 service via one of the big tech conglomerates indicates that the company doesn’t really get what it’s all about. Your wallet is your property and your identity is yours; you don’t need an intermediary to perform a transaction. There’s a shift in the relationship dynamics as we transition to Web3.

Some prominent Web 2.0 companies are already envisioning a Web3-oriented future, particularly as it relates to the creator-fan and producer-consumer relationship. For example, musicians, filmmakers, and other artists can distribute their content directly to their fans without a third-party intermediary taking a cut of every sale simply to be the facilitator. In short, companies pursuing Web3 will embrace this philosophical and technical change to redefine and reenact ownership to meet the moment.

3. Technologies

Every company’s needs are different, and one business’s Web3 pivot will undoubtedly look different from another’s. However, several technologies are currently defining Web3 companies, including artificial intelligence, machine learning, IoT, and a host of blockchain-related technologies.

In many cases, companies are considering the metaverse implications of these technologies, but the real-world use cases are both immediate and more urgently required.

Taken together, it’s clear that Web3 is both conceptual and technological, driving new startups and causing existing companies to rethink their strategies. Whether Web3 is a temporary buzzword or a significant breakthrough will depend on implementation, which companies should consider carefully as they come to grips with this profound change to the power dynamics of the web.