The notion of “Web3” or “Web 3.0” has been used many times over the last ten years. Ever since Web 2.0 became important, many companies have wanted to stake their claim in creating Web3. For example, Semantic Web has been touted as a candidate for this role, as well as decentralized models, including data ownership, decentralized finance models, and blockchain. Does this mean that Web3 is finally becoming real? Maybe, but we need more than enabling components – we need real business.
Web 2.0 is generally understood to mean more interactive web services, user-generated content, and social media. It changed Internet services significantly from the broadcast model to the actual interaction of people. We can say that Web 2.0 was not only a major change, but one that was fairly easy to notice.
This hasn’t been the case with Web3. One problem is that many companies and people have used Web3 as a buzzword for marketing purposes. Sure, it sounds good in a business plan and shows the intent to disrupt Internet services and pave the way for a new phase. However, users and service providers haven’t really seen these changes in their daily experience. At least not yet.
It may depend what one means by Web3 in the first place. For example, the Web 3.0 label has been slapped on Semantic Web, which covers always-on mobile Internet or virtual world web services where computers can understand content. The World Wide Web Consortium (W3C) has even created a Semantic Web standard.
Things like decentralized services, distributed data models, data ownership, and blockchain-based solutions are already a reality, and most probably will play an essential role in our internet experience – but do they add up to Web3? It’s a convenient and trendy label, but it can send the wrong signal for people who have seen too many Web3 stories. Generally, startups should focus on building real-world things and get them to work, rather than focusing on fancy terms such as AI, blockchain, DeFi, NFT, or building “next-generation products’.
Where supply meets demand
One problematic matter with decentralized solutions, blockchain and crypto is related to monetization models. It’s easy to think that you can tokenize and sell anything. We have heard stories about how NFT makes it possible to make money with your digital paintings, blog posts, and software code – by some estimates, NFT sales hit almost $25 billion last year.
But even if it is technically true that you can make money from NFTs, for example, the key question that must be asked is if there is a real market for something. Some people still remember the time before the dotcom bubble in 2000. At the time, many people thought they could sell anything on the Internet. We also remember the crowdfunding boom ten years ago, when many people believed that a technical platform would enable any startup to get funding and anyone could become a business angel. Then, creators of online investing platforms thought that enabling trading on their platform would make any market liquid.
You see the problem.
A market requires supply and demand. Of course, it is important to enable easy trading of items, lower transaction costs, and try to strive to realize other requirements of a perfect market. But if we don’t have enough supply and demand, we cannot talk about real business. I can put all my content into NFTs, but if people are not really willing to buy my blog posts, art, or software, it doesn’t really matter. In 2017, we saw many people who talked about creating their own tokens, but when the ICO hype was over, they had no demand, and consequently, no value.
Web3 and the paramount value of data
Personal data and its control are really an essential part of the future of the Internet. It is also very much linked to peer-to-peer transactions and how we don’t always need a third party to manage data or authorize transactions. But again, this doesn’t make monetizing personal data so straightforward. Companies are interested in getting more data, but new data privacy laws and cookie policies make it more difficult.
Also, it is still a fantasy that all people can start making money with their personal data. First, even if individual people could make money by selling their data, they likely wouldn’t make much. Second, it is really hard to create an optimal market that defines a fair price for data. Third, people can actually get more value by utilizing their own data by themselves than by selling it. Fourth, the market would be dominated by people with a need for small amounts of money. Fifth, as people start to realize the value of their data better, they will be less willing to sell it, especially when they cannot control the buyer.
Still, this doesn’t mean that Web3 and distributed models are not relevant for data privacy and personal data. They are very relevant. But we must move away from thinking about what is technically possible and start thinking about what a sustainable market and business model could look like. For example enabling people to buy apps they can run to utilize their personal data or share some refined data to get value is very different from just letting them sell their data.
It is also important to remember that different verticals have different understandings and business models. For example, if we look at Web3 business ideas, technically we could use similar models for finance, healthcare, and media businesses. Still, even if we wanted to disrupt all industries and not be stuck with incumbent models, such models require different competencies and solutions. Finance and healthcare regulations are important to understand. If we take a basic fintech example of p2p lending, building a successful service takes much more than just the ability to offer loans. Real success is measured by assessing whether the risk level compared to interest makes sense for lenders and borrowers in the long run.
We also know that personal data and digitalization will change healthcare services. But what we need more is parties who can build applications to utilize the wellness and health data, and then combine it with clinical data and health care services.
All of this indicates that we can’t just talk about Web3 as a catch-all tech trend – we need to build concrete solutions for specific needs.
The future is in the hands of builders and doers
Most new things come with hype – that doesn’t mean that they’re useless. But we also know very well that hype is not enough, even though some people can also make quick money with hype alone. Sustainable business requires building real solutions for a market with enough supply and demand.
Web3 is a nice term. And for sure, decentralized and distributed solutions, personal data models, and blockchain will change most businesses. But it is now time to develop much more concrete things (especially from a business point of view) rather than merely repeating eye-catching buzzwords like Web3, blockchain, and NFT. It’s the people who build those tangible things that will change the world.