Web3 is, depending on who is describing it, the next stage towards a utopian internet, or a series of scams by people with more money than morals.

The central idea behind the ‘third version’ of the internet, according to its advocates, is weaving the various blockchain technologies – cryptocurrency, NFTs, and so on – together to create a web that is less reliant on the five big technology companies.

Its critics, which include former Twitter chief Jack Dorsey and Tesla head Elon Musk, argue that this is simply an attempt by other technology companies to grab the reins. “It’s ultimately a centralized entity with a different label,” Mr Dorsey tweeted this week.

Much like other internet buzzwords like ‘metaverse’ and even ‘artificial intelligence’, Web3 has a lot of hype around it in certain circles without properly existing yet; but, also like those technologies, billions of dollars are being spent to make it a reality.

What happened to Web2 and Web1?

Web1, or the ‘old internet’, started in 1991 and refers to the time when most online spaces were where people consumed content. Static webpages like the Space Jam site, poorly-designed by today’s standards, gave information to users with little interactivity.

Web2 began around 2004 and is more like the internet we know now: an interaction between user and platform. Social media sites such as Facebook and Twitter, as well as Google, rose to organise the web’s information and centralise it under their control. Apple helped mediate our relationship with the web via the iPhone (and its subsequent copycats) while Amazon Web Services all-but owns the web’s infrastructure – which is why so much of it goes dark when it crashes.

What is Web3?

Web3, a term originally coined in 2014 but which has only recently come into prominence, is based on blockchain technologies.

Blockchains are digital ledgers used to keep track of the movement of digital objects – such as cryptocurrency.

Cryptocurrency, in theory, bypasses central authorities like banks. Web3 would also, in theory, bypass central authorities. Twitter has proposed a decentralised version of its service where different parts of it would have different moderation policies from what we think of now as the ‘main’ Twitter website.

Other people, with their own computers, might decide to become nodes in a network that facilitates instant messaging rather than using the closed-system platforms of Facebook Messenger and WhatsApp.

Right now, however, these ideas are also like cryptocurrency in another way: the value of Web3 is based heavily on those hyping it up.

Could Web3 actually decentralise the web?

Competition against large technology companies, or regulating them so they can be better held accountable for mistakes, is likely to make the internet better. In that vein, a decentralised web is a tangible plus.

It is also possible that a direct-to-consumer relationship for artists, musicians, and other creators will indeed be better than, for example, Spotify, which has been criticised for not paying artists enough. Similar issues exist with Instagram and Reddit, both of which are hubs for artworks to be passed around without attribution or payment to the artist, or black creators on TikTok who are not attributed for their dances.

For some artists, NFTs are a way to make money from digital art. Royalties can be built into the artwork directly, so that each time the artwork is sold the creator receives a cut.

“It gives power to the creator,” Chris Torres, the creator of Nyan Cat who recently sold the image as an NFT, has said. “The creator originally owns it, and then they can sell it and directly monetize and have recognition for their work.”

Web3, however, is nowhere near that goal – and its need is also questionable. Musicians could be paid fairly through sales of physical media, and artists through commissions. The blockchain is not inherently necessary, except in a world where it has become the norm for digital services to be provided, or at least accessed, for free.

“Web3 is, to some extent, a meme or marketing brand around a variety of blockchain and cryptocurrency activity, which was already happening”, Kevin Werbach, a Wharton professor and blockchain expert, said.

“Like the enterprise blockchain wave of a few years ago, Web3 is being hyped as much farther along in adoption than it truly is. Lots of people are trading crypto and buying NFTs, but that doesn’t necessarily mean they are adopting distributed alternatives to major tech platforms.”

NFTs – non-fungible tokens – are a good example of when the ideals of Web3 proponents run into reality. These tokens are essentially digital receipts for pieces of online artwork. Users do not own the artwork itself, only the receipt.

NFT buyers have had well-documented struggles with keeping their purchases, such as pages disappearing from OpenSea, one of the largest NFT marketplaces. Rather than being decentralised, the ownership of the NFT is managed not by the user but by a new centralised authority.

This is also why artists, finding out that their NFT has been ‘minted’ on the blockchain, have little recourse to reclaim their work – despite Web3 advocates arguing that the technology gives the average user more control.

Critics of Web3 are harsh. “At its core Web3 is a vapid marketing campaign that attempts to reframe the public’s negative associations of crypto assets into a false narrative about disruption of legacy tech company hegemony,” an engineer and blogger Stephen Diehl writes.

“It is a distraction in the pursuit of selling more coins and continuing the gravy train of evading securities regulation. We see this manifest in the circularity in which the crypto and Web3 movement talks about itself. It’s not about solving real consumer problems. The only problem to be solved by Web3 is how to post-hoc rationalize its own existence.”

What are the risks of Web3?

The future of Web3 is one that, depending on the level of development technology companies make, ties in with the increasing digitisation of our lives or even the metaverse – whereby a virtual world with its own economy and digital goods exists in parallel to the real one.

The blockchain, NFTs, and other technologies could usher in digital landlordism. Already, digital real estate is being sold for millions in preparation for a future that does not yet exist. This is what many critics of Web3 also fear: rather than a decentralised internet, power simply moves into the hands of a new cabal of executives.

Meta, when promoting the metaverse, said that “just like the internet, the metaverse exists whether Facebook is there or not. And it won’t be built overnight”, nor will it be built by one single company. But the billion-dollar technology giant, edged out of Web2 hardware by Apple and Google, is clearly keen to place itself as central to what it believes is the future of the internet.

“The software that we build, for people to work in or hang out in and build these different worlds, that’s going to go across anything. So other companies build out VR or AR platforms, our software will be everywhere. Just like Facebook or Instagram is today”, Mark Zuckerberg has said.

“Just like NFTs, Web3 and metaverse platforms are the next natural progression in how we interact, relate, and communicate with each other,” he has also commented.

What Web3 and other speculative technologies such as NFTs, cryptocurrency, and the metaverse currently do is facilitate a great way for venture capitalists to get rich, in the same way that buying a stock that inflates makes the buyer money. More than $27 billion has been invested in the technologies already, but despite that it remains hard to predict exactly what the internet will look like over the decades that Web3 will be born out.