By Alex Tapscott

Digital asset prices have had a tremendous start to 2023, reawakening some animal spirits as investors weigh the potential for another bull market. To be sure, investors should cheer the move higher, but as with every spike in prices, we must also remind ourselves why Web3 as a technology and industry is so important to the future of business, culture and more. What do these price moves reflect, beyond speculative fervor?

The Web, and with it the Internet, is entering a new era, known as Web3. A refresher: Web1 was the so-called “Read-web,” a way to consume information digitally. Static and primitive by today’s standards, it was nevertheless a major breakthrough that democratized access to information for those with an internet connection. Web2, or the read/write web, was built on the early success of Web1. In Web2, the web became not only a medium for the presentation of information but also a powerful tool for communication and collaboration online. If Web1 democratized access to information, then Web2 democratized publishing for all internet users, ushering in the era of user-generated content. Web2 impacted many industries, such as media and retail, but the data and value that users generated online were captured by intermediaries including financial services companies and technology firms, who became gatekeepers for the digital economy, enacting barriers, imposing tolls, and extracting wealth from commerce online, in turn stifling innovation, undermining privacy, and harming economic freedom. The Web’s promise has gone unfulfilled - until now.

Web3, the “Read-Write-Own Web” is a decentralized Internet where individuals can securely trade assets like money, securities, intellectual property, and art privately and peer to peer. The potential for Web3 is a more fair, private, decentralized, resilient, and inclusive system for economic and social interactions that will empower individuals, entrepreneurs, creators, and enterprises. This is made possible through its utilization of blockchain technology, the first digital medium for value, enabling the movement, storage, and management of digital assets.

I have spent some time reflecting on what makes Web3 special and have distilled it down to four core principals. They are:

i. Ownership: Digital assets, or “tokens” give internet users an economic stake in their digital existence. They enable property rights online. For the first time in human history, two or more individuals can transact peer to peer without an intermediary. This is possible because of tokens. Tokens can best be thought of as containers for value, just as websites are containers for information. And just as there is a nearly infinite number of different websites, there is a nearly infinite number of different tokens representing ownership in everything from money to stocks, art, collectibles, data, natural assets, and much more (see next section on tokens)

ii. Commerce: Web3 is enabled by blockchains, a digital medium for value. With new digital assets at our disposal, innovators can reimagine many business models and marketplaces with this technology, everything from financial services to cultural industries. For example, in financial services, decentralized finance (aka DeFi) is reimagining many traditional financial markets such as lending, trading, funding and the moving & storing of value while stablecoins, digital assets backed by Fiat currencies, clear trillions in dollar value per year in transactions on blockchains such as Ethereum. In cultural industries, NFTs (non-fungible tokens) are enabling new ways for creators to monetize their art and connect with fans.

iii. Identity: In Web2, internet users create data, but they do not own that data and cannot monetize it. Instead, that data is monetized by data aggregators like social media companies who repurpose and repackage it for advertisers. Advertising became one of Web2’s great business models, at the expense of privacy and the user experience. Data is one of the most important asset classes of the digital age, but until now there has been no way for users to safeguard it and use it for their own sake. In Web3, individuals own their own data and can use it as identifiers, creating a self-sovereign identity.

iv. Governance: Many Web3 based products and services allow users to earn ownership of those products and services by way of a token. Ownership aligns the interests of users with the products they rely on. It also gives them economic ownership and with it a say in the governance of those platforms. For example, in DeFi, early users of applications such as Compound, Uniswap and others were rewarded for helping to bootstrap the usefulness of those applications by earning a token. Web3 extends the Silicon Valley maxim that to attract the best talent, you need to share in the upside and apply it globally to anyone who uses Web3 applications.

In the coming weeks, I will be making a renewed focus on Web3 and its impact on enterprises, including public companies. As with previous eras of the Web, Web3 has the potential to reshape and reimagine many businesses and industries. There will be opportunities for investors and with humility, I hope to be a helpful guide.