The IT industry has never lacked revolution. Since the 1990s, in just over two decades, people have witnessed the rise and fall of the PC industry, the rise of the mobile Internet, the popularity of social networks and streaming services, and the transformation of cloud computing from concept to popularization… Among them, the most far-reaching change is undoubtedly the transition of the Internet from the Web 1.0 era dominated by static image text content to the Web 2.0 era dominated by audio and video rich media content.
In the Web 1.0 era, users mainly access the Internet through PCs; with the rapid development of mobile broadband technology, users in the Web 2.0 era mainly use smartphones to explore the virtual world. Social networking, cloud computing, streaming, mobile gaming, subscription services… All of these technologies and business models are gradually moving towards the masses with the rise of Web 2.0. Web 2.0 has also shaped the Internet business landscape we see today, With Microsoft, Google, Apple, Amazon, Facebook (now Meta), Tencent, Alibaba, ByteDance… These world’s top Internet companies have a total market capitalization of more than 10 trillion US dollars and annual profits of hundreds of billions of US dollars, and their influence has penetrated into all aspects of human life.
However, the brilliance of Web 2.0 has not stopped the industry from moving forward. Since entering 2020, a series of innovative Internet concepts and business models have begun to become a hot topic of discussion. In the process of exchange of ideas and exploration, the picture of the next generation of the Internet has gradually become clearer – this is Web 3.0, which is expected to replace today’s Internet model within a decade.
What went wrong with Web 2.0?
Before discussing Web 3.0, let’s first look at the serious problems and challenges that must be addressed in today’s Internet.
according to statistics, the total number of global internet users will reach 4.66 billion in 2021, and the internet penetration rate will be about 60%. internet users spend about 7 hours a day online, which is equivalent to the average daily sleep time of adults. such high penetration and usage rates bring huge market space. the internet advertising market alone will reach $460 billion in 2021, while the online gaming market will exceed $180 billion. in north america, a middle-class user can spend more than $100 a month on various virtual services, and his friends in china can spend $30 or more. the total value of the internet commerce market is still growing at a rate of about 10 percentage points per year, and the global epidemic that began in 2020 has even further stimulated the development of online business.
However, beneath the internet’s eye-catching market data lurks a crisis that is increasingly impossible to ignore. As mentioned earlier, the Web 2.0 era has spawned a number of super multinational Internet companies, mainly concentrated in the United States and China, which control almost half of the entire virtual world: 80% of the world’s top 100 mobile applications are from the top 10 companies; search engines, social networks, e-commerce, long and short videos, operating systems, app stores, cloud computing… Mainstream Internet platforms and services are almost all monopolized by several giants. Compared with the blossoming situation in the Web 1.0 era, the online market in 2021 is highly centralized.
on the other hand, the business model of almost all online services has a deep connection with the advertising business. most internet companies are essentially advertising intermediaries, and their main business is only the carrier and tool for spreading advertising. in order to increase advertising revenue, it is inevitable that enterprises will desperately dig up user privacy data and provide more accurate advertising at the expense of user privacy. due to the monopolistic and centralized nature of the market, users have little ability to resist the invasion of privacy rights by this business model. although the criticism of this situation has gradually increased in recent years, and more and more national governments have begun to take action to restrict the collection of private data by enterprises, the industry as a whole has accumulated a lot of difficulties, and it is difficult to expect that the head companies with huge influence and sufficient resources can voluntarily give up tens of billions of dollars of huge profits.
The problem of Web 2.0 can no longer be expected to be solved by Web 2.0, which is the birth and rise of Web 3.0.
Web 3.0: How to define
As mentioned earlier, the biggest problem facing Web 2.0 is actually a highly centralized, monopolistic business model. Since most of the revenue is concentrated in the hands of a small number of enterprises, these enterprises will naturally continue to encroach on the interests of users in the long run, hinder innovation and progress – this is also the objective development law under the market economy system.
The ideal of Web 3.0 is to completely solve the problem of centralization of Web 2.0 and promote the Internet into a new era of high decentralization. To achieve this, Web 3.0 will enable major innovations in both technology and business models.
technological innovation: a decentralized system based on blockchain
In fact, the concept of Web 3.0 is sublimated from the blockchain industry with a history of more than a decade. Since the birth of Bitcoin, the ideal of the blockchain industry has been to create a decentralized virtual community, completely free from the control and influence of a small number of large enterprises. On this basis, Web 3.0 hopes to build the infrastructure of the next generation of the Internet through blockchain, and then realize the decentralization of the entire Internet.
in simple terms, in the internet based on blockchain infrastructure, all behavior is recorded and propagated through the blockchain. the user’s data is stored in the decentralized network and is not controlled by the specific vendor; the interaction between the users is completed through the blockchain network and does not need to be locked on the specific social platform; the intermediary link of the platform is omitted between the production and consumption of the content, and the user can pay the producer directly through the blockchain network… wait a minute.
Today’s Internet services require huge data centers to provide computing, storage and communication resources to support, which is also the basic logic of the existence of large monopoly platforms. Web 3.0, on the other hand, distributes these resource requirements to every user and every device, fundamentally solving the market’s dependence on super-large platforms and dismantling the latter’s raison d’être. If this goal can be achieved, it will naturally be difficult to have a living space for monopolies in the Web 3.0 era.
business model change: from indirect payment to direct payment
After the technical level of network decentralization, the mainstream commercial means of Web 3.0 will naturally replace from advertising-based indirect payment to a new model. During the Web 2.0 period, users get online services for free, and the platform pushes advertisements to users to make a profit, and then shares the advertising revenue to the content producers. In the Web 3.0 world, users pay most of the online services they receive directly from content producers through blockchain networks, eliminating the need for the platform’s own share of the process. On the other hand, users can also charge directly from advertisers when they watch ads through the blockchain, and then use these revenues to buy the services and content they need. Since the blockchain infrastructure provides a decentralized transaction system, such a business model can become a reality, thus getting rid of the dependence on platform intermediaries.
Ideally, the vast majority of the annual profits made by most Internet platforms today will be returned to a large group of users in the Web 3.0 era, while the invasion of privacy by platforms will be a thing of the past as users have full control over their data. For advertisers and content producers, because they can directly connect with users and deal with each other, eliminating intermediate links, advertising efficiency and content revenue will also be significantly improved.
Taken together, Web 3.0 paints a beautiful vision for the ideal future of the Internet.
The gap between ideals and reality: Web 3.0 is a long way to go
In the IT industry, innovative technologies often go through a cycle of hype-silence-iterative evolution-popularization, and Web 3.0 seems to be no exception. To be sure, today’s Web 3.0 concept is still in the hype phase, and there is still a long way to go before it is truly practical. To achieve the ideal goals described above, the industry needs to overcome a number of extremely daunting challenges.
technical challenges
The biggest technological innovation in Web 3.0 comes from a decentralized blockchain infrastructure. However, today’s blockchain technology itself has serious problems, far from reaching the level required by Web 3.0.
FIRST, THE CURRENT BLOCKCHAIN TECHNOLOGY IS EXTREMELY POORLY SCALABLE. MEASURED BY TPS (TRANSACTIONS PER SECOND), THE BACK-END TPS OF MAINSTREAM ONLINE PLATFORMS CAN GENERALLY REACH THE MILLION LEVEL, WHILE MAINSTREAM BLOCKCHAIN SOLUTIONS ONLY HAVE HUNDREDS TO THOUSANDS OF TPS LEVELS, WITH A GAP OF AT LEAST TWO ORDERS OF MAGNITUDE. TO TAKE ON THE HEAVY RESPONSIBILITY OF INTERNET INFRASTRUCTURE, THE TPS OF THE BLOCKCHAIN EVEN NEEDS TO REACH MORE THAN TEN MILLION LEVELS, AND NO BLOCKCHAIN SOLUTION IN DEVELOPMENT CAN MEET SUCH A DEMAND.
the more severe test is that the decentralization, scalability and data security of the blockchain naturally form a mutually restrictive triangle. according to the basic theory accepted by the industry, blockchain technology cannot meet the requirements of these three levels at the same time, and to obtain security and ensure decentralization, it is necessary to sacrifice scalability, and so on. based on this “impossible triangle” theory, building a high-performance, decentralized internet based on blockchain while protecting data security and privacy is an unattainable goal.
Another major technical challenge facing Web 3.0 comes more from the hardware terminal level. As AR/VR technology matures, the concept of a “metaverse” seems just around the corner. The main devices for user access to the metacosm will be AR glasses and VR headsets, but both require extremely low network propagation latency (typically less than 20ms) to provide a good user experience. To reduce latency, the server must be deployed at the edge of the user’s device, such as a data center in the user’s city or even a micro-machine room in the community. Blockchain technology alone cannot solve this kind of latency problem, and highly decentralized network designs can even significantly increase latency, because more transactions need to store resources and provide hashrate verification through decentralized, distant, independent user devices, and the latency of this process can easily exceed 100ms. In other words, decentralized network architecture naturally conflicts with the good experience of the metaverse, how to resolve this contradiction? The industry doesn’t yet have the answer.
business challenges
The web 3.0’s platformless business model hopes to get rid of users’ high dependence on monopoly platforms in one fell swoop, allowing users to communicate and deal directly with advertisers and content producers. However, from a practical point of view, most users prefer to get free content and watch the form of platform advertising, and it is difficult to accept the “ideal model” that most of the content needs to be paid for. Taking the Bilibili video website with a strong community atmosphere as an example, the like/view ratio of popular videos is often only about 0.1, and most viewers are even reluctant to click the free appreciation button to express support. If these videos become paid to acquire, users are more likely to simply abandon them and remain in the existing platform.
If Web 3.0 attempts to incentivize user engagement and content payment behavior by providing advertising revenue directly to users, another challenge is how to fairly price ad viewing behavior and content consumption. Today’s monopoly platforms have mature and complex pricing models that can calculate the revenue of each ad click based on the big data portrait of each viewer. Once the support of user privacy data is lost, it becomes extremely difficult to calculate advertising revenue, and it is difficult for advertisers to pay for users’ viewing behavior in line with the market price level. If the business model for user revenue is difficult to promote, it is even more impossible to motivate users to pay for content. What’s more, content payment itself also has the challenge of content pricing difficulties.
Of course, today’s industry giants with deep resources and huge influence are also obstacles that cannot be ignored on the road to Web 3.0. These companies struggle to support a technological and business change that will ultimately disrupt themselves, and are more likely to take actions to prevent the idea of Web 3.0 from becoming a reality. In addition, national regulators are also vigilant about Web 3.0-related matters. Many countries are legislating to restrict the development of the decentralized blockchain industry, or trying to become a dominant force in the industry as a state. Under the dual pressures of business and politics, Web 3.0 is more difficult to achieve in a short period of time.
From the perspective of technology and business model, today’s Web 3.0 concept is still in the early stage of concept exploration, and there is still a long way to go before the technology matures and business practices. The industry can’t even be sure that some of these challenges will eventually be solved, and it is not known whether Web 3.0 will eventually be stillborn because of these issues, or it will only become a marginalized Internet segment.
Web 3.0 Industry Looking Ahead
Overall, it is difficult to make accurate judgments about the future industry outlook of Web 3.0 in 2022. But in any case, it is certain that this concept, known as the next generation of the Internet, is currently only in the early stage of thinking exploration. Whether Web 3.0 can overcome a range of technical challenges and disrupt existing business models is unknown. Even if these goals are achieved, I am afraid that it will not be something that can be achieved in the next decade.
So if there are businesses or individuals today who claim to be profiting from Web 3.0, or will be the dominant force in the Web 3.0 era, they are mostly hyping up the concept. Looking back at history, most pioneers in every wave of technological change have become cannon fodder and martyrs, and Web 3.0 will be no exception. Perhaps some of today’s start-ups that have been researched and laid out in advance will become the stars of the future ten years, but no one can finalize the conclusion in advance until they finally succeed.
Rather than start hyping up Web 3.0 early on, focus more on some of the underlying technical and business problems and try to explore their solutions. Perhaps Web 3.0 will ultimately be just a mirror, but on the way to this goal, there must be a lot of new opportunities and value fruits lurking, waiting for innovative and exploratory enterprises to pick up and enjoy.