“Web3” is the latest in a line of phrases that media pundits and technology evangelists alike have deemed a Holy Grail of tech development. Promises of “a new internet” and killer applications have resulted in much excitement and enthusiasm.
This, in turn, has set the stage for dramatic disappointment. This year has seen high-profile collapses of tokens, a sharp drop in interest in non-fungible token (NFT) markets, and the hotly contested metaverse territory continuing to figure out what exactly it will offer. On the heels of this turbulence, commentators have been quick to proclaim the early death of Web3. Jack Dorsey even announced “Web5,” which he touted as “extra decentralized.”
Jesse Morris is CEO at Energy Web, a nonprofit developing open-source products for energy systems to help accelerate the renewable energy transition.
But it would be a mistake to move on so soon when the solutions represented by Web3 are only getting started.
With the term being used so freely, it’s worth taking a moment to re-clarify what Web3 really means. While Web2 can be characterized by central platforms controlled by tech giants, Web3 refers to a variety of technologies and services that enable a new means of exchanging data and value between parties with built-in security, privacy, and efficiency. In practice, this means networks of businesses, individuals and devices, each with their own data silos, security and policies, can exchange data in an entirely new way.
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At its core, Web3 is about decentralization. The technologies that enable it are primarily related to blockchain and cryptography, but these are the tools rather than the principle itself – a world where data from different businesses, individuals and physical devices can be seamlessly shared and verified in a privacy-preserving, low-cost way. It’s designed for a future that will become increasingly distributed, and for this reason remains foundational to how some sectors will eventually operate.
Rather than the end of the line for Web3, recent negativity can be compared to the first dot-com crash at the beginning of the millennium. It can be thought of as a readjustment in expectations that works to separate the wheat from the chaff. The current skeptical environment should be welcomed by the many developers currently working on applications that unlock actual value.
Web3 applications in real business settings have already shown themselves to be quietly transformational. For large banks, blockchain can make same-day international payments simpler and cheaper by reducing intermediaries in the process, a streamlining that couldn’t be achieved without a trusted technological infrastructure between parties. The rise of Web3 has also led to innovation in the peer-to-peer financial services space, enabling neobanks to offer services to the traditionally underbanked.
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Supply chains, meanwhile, are increasingly leveraging blockchain and other data-driven technologies to create new levels of trust, transparency and accountability across international value chains. This includes carbon efficiency and carbon accounting approaches that are pivotal to combating climate change.
Further ahead of the curve than any other, and perhaps also where there remains the most work to be done, is the energy sector. Web3 is uniquely well-suited to answer the longstanding need for a decentralized approach to energy markets and the much needed transformation of energy grids.
For the past 100 years, the model for energy markets has been the same. Large, fixed power plants produce energy flows with predictable operating parameters and peak periods. A one-way flow of power from utilities to consumers is met with a one-way flow of money in the opposite direction.
Today, this has been turned on its head. Grid management now requires factoring in distributed renewable energy assets, behind-the-meter generation, consumers who can sell back to the grid and more. The power plant is now owned by you, me and the businesses around us, a distributed but connected system composed of networks of rooftop solar systems, inverters, batteries, EVs and smart appliances, making the generation, storage and demand picture far more complex.
The central issue is that while the hardware environment has changed dramatically, the software that underpins the grid hasn’t. Web2 technologies have a difficult time enabling devices owned by different people and organizations to communicate and exchange data with one another in order for all these assets to be integrated with the grid.
Web3 technologies, on the other hand, are ideally suited to the challenge. At the Energy Web Foundation, we were able to build a system from the ground up that can put all market participants – from the world’s biggest utilities to individual electric vehicles (EV) – into conversation with one another. Rather than keeping the data necessary to run the grid separated into siloes, our operating system allows for a shared digital infrastructure where participants can maintain their own platforms and parameters while sharing data in a trusted way. In Australia, a product based on this operating system has already been deployed in collaboration with the energy market operator. Utilities and aggregators are working together to operate a shared system, which sees the owners of small-scale assets being paid for the services they provide.
This kind of shared success is the measure by which Web3 will succeed or fail. It’s why I’m not worried when I see excitement deflating in the public eye. Once the rubble of hype cycles and overpromises clears away, what will be left is an infrastructure for creating stronger, fairer and more flexible systems – which is where the value for everyone really lies.