Web3 is a moniker for the next generation of the internet, first coined in 2014 by Gavin Wood, the co-founder of Ethereum. It began gaining momentum in 2021 among large tech companies, venture capital firms, and crypto enthusiasts as they saw the benefits of integrating blockchain technology into their systems. Web3 will free users from the ‘walled gardens’ created by technology companies like Facebook, Amazon, and Google and grant them power and control via decentralized protocols.
Like Web2, the current iteration of the wide world web, the growth of Web3 will depend on the development of communities. Humans are social animals, after all, and interactive communities will be at the heart of the Web3 movement. Many firms are now considering whether or not they should enter Web3. However, given that Web3 will be built on entirely novel blockchain technology that espouses decentralization, firms looking to enter Web3 will have to consider factors that simply didn’t exist for Web 2.
NFTs, for instance, present an intriguing way for brands to enter Web3 as they are now entrenched in the public consciousness. Cointelegraph reported that NFT sales reached a whopping $17.7 billion by 2021, showing that there is immense consumer demand for non-fungible tokens (NFTs). Some brands have chosen to create their own virtual Web3 products in partnership with existing platforms and producers of virtual assets.
However, plenty of brands still haven’t found a way to address the lack of interoperability among Web3 platforms as well as the challenges involved in monetizing Web3 assets. For starters, NFTs may be super popular but they are still seen as PR and marketing experiments that exist outside a company’s production and merchandising operations rather than products that are designed for sale.
Aside from the lack of interoperability and difficulties with monetization, brands will also have to address a couple of other fundamental challenges if they wish to enter Web3. First is security. Despite being built on decentralized blockchain technology, Web3 is still vulnerable to some types of cyber attacks. Furthermore, Web3 still carries the risk of scams that makes the space seem less reliable to newer entrants.
Plenty of the brands in the middle ground between Web2 and Web3 will have to come up with novel security solutions if they wish to enter Web3. They will also have to contend with the development complexity involved with building Web 3 applications. These Decentralized Apps often require extensive knowledge of novel programming languages, additional frameworks, and an intimate understanding of the logic behind smart contracts.
Scalability has also proven to be a major issue for plenty of brands. Blockchain is notorious for having scalability issues, experiencing slower speeds and higher transaction fees as the number of users increases. Brands will also have to find a way to limit their reliance on cryptocurrencies as they are inherently fragile, as the recent crypto winter has highlighted.
All in all, Web 3 is the future, and the future is here. Firms that embrace this technology are likely to enjoy first-mover advantage and get a leg up on those standing on the side-lines. It is such advantages that can make all the difference in the long run.
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