Every once in a while, there’s a new iteration of the web. Over the last couple of months, it became clear that the next iteration is right around the corner. Or maybe we’re already in the midst of it. But since it’s still early days, it’s hard to see clearly through the smoke and mirrors.
Let me start by stating that NEXT is literally a conceptual child of Web 2.0. The first instalment of the NEXT Conference back in 2006 was about the “writable web”, as we called it at the time. The iPhone would only be announced the year after, but Google had been around for a few years. And, while Facebook hadn’t really arrived in Germany yet, there was a German clone called StudiVZ – now almost forgotten.
So what is Web3, or whatever we’ll call the next iteration of the web? The answer depends on where we see the greatest need for change. The Web 2.0 era saw the rise of a bunch of digital behemoths: Apple, Microsoft, Alphabet (née Google), and Amazon. Meta (née Facebook) has fallen behind a bit lately, but has set sail to dominate the Metaverse.
The Metaverse is closely related to Web3, but let’s postpone that discussion for a moment. The sheer dominance of these companies (and let’s not forget their Chinese counterparts) has led to a couple of issues we’ve discussed in great detail over the years. Today’s web is heavily centralised and controlled by a handful of companies. It’s relatively closed, and given the history of IT and digital networks, the pendulum could swing back to the open side.
The layered nature of digital networks
If you share this view, then the decentralised vision of a crypto Web3 is for you. However, don’t be surprised if it just turns out to be another layer on what already exists, rather than replacing it. Come to think of it, these layers are a natural part of digital networks. And they have been since the very beginning. Just look at the TCP/IP model.
We can see Web 1.0 as a layer on top of PC hardware and software, along with all the other hard- and software of the early consumer internet. Web 2.0 was built on top of it, rather than replacing it. The same is true for mobile. The iPhone was a success because it made the Web mobile. All the apps came later and again, on top of it. This kind of compounding innovation looks crazy.
So how can a crypto-based Web3 add a new layer to the web? It has to provide something that didn’t exist before. This could be the end of lock-ins. The promise of crypto is that we can move our digital assets freely and with the least possible amount of friction. And, of course, that we can own those assets in the first place.
Now this has been a problem since the early days of the web. How could content creators be paid for their work if everything can be copied for free? The internet is a great copy machine by design. Paywalls and subscription models have been a kind of solution, but not for every use case. And these models didn’t solve the asset ownership problem.
There is a caveat to this: Does this problem even exist in the way crypto addresses it? In the physical world, ownership isn’t hardcoded like it is in crypto, and it doesn’t need to be. There are always ways to prove ownership, but no need to do it every time and for every transaction. I don’t need to prove that I own the paper money that I hand over to a merchant. It’s enough that I have it.
Physical possession is loosely coupled with legal ownership, and that’s sufficient for most purposes. It also allows for law enforcement, i.e. rectification of illegal transfers. If someone steals my money, there’s at least a chance that I can get it back from the thief. That’s hard to do in crypto, because of its design.
It’s probably too early to call how this is going to play out. Let’s keep in mind, for now at least, that the laws are hardcoded in digital networks. Or, to put it another way, there are hardcoded and soft, non-coded laws.
What has all this to do with the Metaverse? This flavour of Web3 is more concerned with hardware and interfaces than software and assets. It’s not mutually exclusive, since crypto could well be a building block of the Metaverse. But it doesn’t apply the other way around. Crypto doesn’t need slick, immersive worlds.
This could well mean that crypto will turn out to be the next iteration of the web, and the Metaverse could follow later, on top of it. The Metaverse would be Web4 then. Again, too early to call. Zuck and his Metabook will probably be around long enough to find out. In the meantime, they are still working on cryptocurrency, even though their first attempt failed spectacularly.
The cultural dimension of Web3
There is another, perhaps more important, aspect of all these iterations and that is the cultural angle. Web 2.0 introduced a new, social dimension to the web that became shaped by what we now call social media. Part of today’s issues is that these have turned anti-social to some degree. What is the cultural dimension of Web3?
Relevance reflects the meaning of a brand in human minds. In the words of Hans Domizlaff, relevance implies for brands a way “to secure a monopoly position in people’s psyches.” Following Hartmut Rosa, resonance ultimately characterises the relationship of people and brands as a vibrating cultural system with significant feedback loops.
These are abstract terms. However, the cultural shifts of Web3 will be more important than the layers of technology. When we look back at earlier iterations of the web, we see that they started in niches and subcultures that grew into mainstream. The next layer (or web iteration) should grow even further. We’ll explore the cultural dimension more deeply in upcoming posts.
The economics of the web’s next iteration
I’d like to close this post with a few thoughts on the economic side of Web3. Ronit Ghose of Citi, the bank, estimates the size of the Metaverse as a market at $8-13 trillion by 2030. This assumes a global GDP of $127.9 trillion in 2030, with the digital economy being at around 20-25 % of GDP, and the Metaverse at 30-40% of digital.
These are interesting assumptions in their own right.
- Global GDP amounted to about $85 trillion in 2020 and should see significant growth to meet the forecast. Just this month, the IMF has lowered its growth expectations, due to the current crisis.
- A digital economy at 20-25% of GDP is huge. This is based on the Digital Spillover report by Huawei and Oxford Economics, which came to the conclusion that the digital economy grows 2.5 times as fast as the overall GDP.
- Regarding the Metaverse, Citi assumes growth along the lines we’ve seen with smartphones over the first seven years post launch. So here is the bet: the Metaverse will be the next smartphone. Or maybe not.
In Citi’s definition, the Metaverse isn’t limited to VR/AR devices, but is accessed through smartphones as well. Given the huge amount of active devices, this looks like a reasonable assumption. The next iteration of the web will certainly take off faster if it can leverage a large installed base.