In this episode of Understanding Crypto, Paul Abercrombie and James Burtt correct their initial oversimplification of the term Web3, by defining its six major components. James defines Web3 as the start of the internet's third era, which blends the decentralized ethos of the first era with the expanded modern functionality of the second era. They agree that the establishment of the blockchain, which powers major Web3 tools, is the real innovation.  “If blockchain hadn't taken the turn that it's taken and and come to the fore, you wouldn't have Decentralized Autonomous Organizations. You wouldn't have DeFi or NFTs” says Paul. He recommends that entrepreneurs should employ blockchain-based technologies to solve business problems.

Righting the Wrongs: Defining Web3 

James and Paul argue that the term Web3 has been oversimplified. "[Everything] gets bundled into the name web3, crypto, or metaverse," Paul laments. He identifies six important components of Web3: crypto, NFTS, Decentralized Financing (DeFi), Decentralized Autonomous Organizations (DAOs), blockchain, and the metaverse. Each component has its own audiences, capacities, and outputs, yet is still usually placed under the umbrella term of Web3. James attempts to demonstrate the differences between them; he cites physicist Garvin Wood's definition of Web3 as a decentralized version of the internet. He states that the major similarity is that cryptocurrencies, DeFi and NFTs are all made possible by blockchain. James comments, “Web 1.0 made you a consumer, Web 2.0 made you a consumer creator/ producer…Web3 gives people property rights, essentially the ability to own a piece of the internet”.  [Listen from 1:00]

Powered by Blockchain

Paul explains that Web 2.0's internet enables all of its advancements such as social media platforms. Similarly, blockchain is the unifying Web3 technology that enables all of these breakthroughs. The metaverse, characterized as a 3D reality, is an important blockchain-powered technology that has crossed the real-digital divide by providing real-world applications for governmental and entrepreneurial systems. Both James and Paul believe that blockchain is the genuine innovation. The creation of blockchain-based solutions for and by users helps make Web3. "You wouldn't have Decentralized Autonomous Organizations if blockchain hadn't taken the turn it has and come to the fore," Paul explains. "There would be no DeFi or NFTs." [Listen from 9:56]

Real World Application

New technology such as Web3 attracts early adopters, many of whom may not be aware of the technology’s true capabilities. "Early adopters may receive great rewards, but there is also a huge risk of being an early adopter," James warns. Paul agrees, remarking on the minimal number of Web3 developers who actually utilize blockchain on a monthly basis. Paul feels that tools such as cryptocurrencies and DAOs should be used to solve problems rather than to simply follow a trend. To illustrate this point he deconstructs the practical application of Web3 tools in his own company and showcases the solutions he's discovered for specific business oriented problems. He shows how their Winners’ Club community uses Web3 tools such as a DAO to manage governance. They have also released an NFT to generate funds, and a creator coin cryptocurrency which allows them to create their own monetary policy. “There's lots of ways that a business could use blockchain but that doesn't mean you need to become a blockchain,” says Paul.

Key Takeaways 

• Web3 marks the start of the internet's third era, which combines the first era's decentralized ethos with the second era's enhanced modern functionality.
• Businesses can use blockchain in a variety of ways, but they should only use Web3 tools that help them address business challenges.

Resources

James Burtt on Twitter | LinkedIn | Instagram | Clubhouse

Paul Abercrombie on Website | Twitter | LinkedIn | Instagram 

CNBC Article: What is WEB3.0