Explaining Web3: From the blockchain and crypto to NFTs and the metaverse

Last week on Twitter, Jack Dorsey trashed the buzzy tech trend known as Web3, telling consumers to be wary and dismissing it as a tool for venture capitalists hyping cryptocurrency. Tim O'Reilly, the author who coined the phrase Web 2.0 back in 2004, also warned this month it was too early to get excited about Web3. Time Magazine's Person of the Year, Elon Musk, trolled simply, "Web3 sounds like bs."

Is it? Web3 is tech's hottest buzzword. Yet the term is amorphous and evolving rapidly, its meaning often changing depending on who's talking about it. 

Used by enthusiasts to describe the next phase of the internet, Web3 is characterized by internet services and mobile apps rebuilt on decentralized blockchain technology. It often includes a broad spectrum of emerging technology like cryptocurrency, DAOs and digital assets like NFTs, or non-fungible tokens. Some enthusiasts also associate gaming, the metaverse and augmented and virtual reality with Web3 because some virtual worlds rely on blockchain-based digital assets.

"Web3 is the internet owned by the builders and users, orchestrated with tokens," Chris Dixon, general partner at venture capital firm Andreessen Horowitz, said in an article on the company's website.

Web3 advocates like Dixon say that building on blockchain technology will force companies to be interoperable and "give users property rights: the ability to own a piece of the internet." Skeptics, however, argue that because VCs are so heavily invested in bitcoin and the mechanisms upon which Web3 is based, their advocacy of decentralized technology from a user standpoint is disingenuous. Said Dorsey, Web3 is "ultimately a centralized entity with a different label."

Okay, what does that mean for you? CBS News asked technology experts to explain the basics of Web3 and why — or if— it matters. 

What's driving the hype?

Facebook's rebrand as Meta in October, along with the tech giant's renewed support of cryptocurrency, likely nudged Web3 ideas about blockchain and decentralized technology into the mainstream, said Brian McCullough, host of the "Techmeme Ride Home" podcast.

"Web3 is a repackaging of some particular technologies," McCullough told CBS News. "Blockchain went down a kind of tech culture cul-de-sac and consumers got tired of the hype. Traditional crypto never became currency; NFTs became this cultish thing; and VR has been 'the next big thing' for decades. Web3 is a brand that knit all these ideas together into a plausible whole."

McCullough says Web3 is hot now because Silicon Valley influencers like Dorsey and Musk and Andreessen Horowitz and other venture capital firms started talking about it after the Facebook pivot. "The tech's not new," he said, "but the marketing is."

Made for business, "not consumers"

Ignore the Web3 hype and focus on business tech, said TechRepublic editor in chief Bill Detwiler. The core blockchain technologies that power Web3 are "real and powerful and made for the enterprise, maybe not consumers."

In our current tech paradigm, Detwiler said, we think of the cloud as companies like Amazon, Google, Microsoft and Oracle providing data storage, computing power and software-as-a-service. Ethereum founder and Web3 pioneer Gavin Wood envisions a new economy built around blockchain where individuals can provide services directly to each other, where no one entity owns or has control of the system, and where the ability to trade items of value exists inherently within the system.

But revolutionary decentralization? That's a long way off, Detwiler said. 

"Wood's vision will require larger social, political and economic shifts. Enterprise companies today use blockchain to track how lettuce gets from the farm to the supermarket," Detwiler explained. "It's not revolutionary, but it's real."

Marcus Estes, founder of cannabis distribution firm Chroma Signet, agrees that Web3 tech is built for business, not consumers. "We use public blockchain to help small cannabis companies release limited edition products in specific neighborhoods in Detroit," he explained. "We couldn't do that with previous web tech because we are delivering a permissionless solution enforced by blockchain, not people. It's an evolution of open-source business models."

Bottom line 

Musk, Dorsey and other big tech founders may have their own reasons to hype or attack Web3, said Drew Olanoff, a startup analyst and former TechCrunch VC reporter. "It's fun to watch them spar on Twitter, but I don't take it seriously."

"I collect sports jerseys and I get the appeal of collectables" like NFTs, Olanoff said. "In the future, it might be revolutionary, but I doubt it. Web3 is just marketing speak. Web 2.0 was the same."

Podcaster McCullough agrees. A new form of cryptocurrency could indeed become the currency of the metaverse, he noted. "NFTs and digital items could be our clothing, our identities, our status signifiers. And VR could be more than just a side alley of gaming. That would be cool, but it's not reality," he explained. "Right now, Web3 tech is still primitive. It's plausible that blockchain tech along with AR and VR could become the next big thing, but not today."

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• Cryptocurrency