1 Introduction

Web3 is the next generation of the internet, often referred to as the decentralized or blockchain web. It aims to address the shortcomings of the current centralized web, such as privacy concerns and lack of control over personal data, by leveraging decentralized technologies like blockchain and peer-to-peer networks. The vision of Web3 is to create a more open, secure, and democratic internet where users have full control over their data and interactions. The goal of Web3 is to build a new internet infrastructure that is more secure, user-centric, and decentralized than the current web, making it easier for individuals to own and control their data.

2 Analysis

Since its invention by Tim Berners Lee in 1989, the Web has undergone a major transformation, and depending on whom you talk to, another one, Web3, is on the horizon. The original internet, Web 1.0, allowed for static web pages with links to other web pages. Anything beyond that, for example, programming user interactions with these pages to implement web applications, was complicated. With the first transformation of Web 1.0 to Web 2.0, the Web became much more dynamic. Technologies like javascript and cascading style sheets offer myriad ways to interact with users and implement complex web applications. The possibilities of the Web 2.0 sparked services like Facebook and TikTok whose primary business is to engage users to interact with content and to exploit these interactions for marketing and advertisement purposes. The user, or more precisely, the data collected about a user, became the new currency; in exchange for their data, users can use most services for “free”. With Web 2.0 dominated by a few companies only, the “Big Tech” companies like Meta or Alphabet, some people wished for a less centralized Web. Web3 might become a more decentralized Web as it incorporates concepts such as decentralization, blockchain technologies, and token-based economics.

2.1 Definition

When discussing the next generation of the internet, two terms are often heard and sometimes also confused: Web3 and Web 3.0. Even though they both designate the future of the internet and decentralization, they are not the same [1]:

Web 3.0 has been coined by Tim Berners Lee as the Semantic Web, where the pages are machine-readable. In his implementation, Solid, people store their data securely in decentralized data stores called Pods. In Web3, decentralization is not achieved by the concept of Pods owned by the users, and can be hosted anywhere and moved around quickly but by using blockchain technology. With the blockchain as a basis, Web3 wants to be a platform that goes far beyond being a platform for Web content only. It leaves the Semantic Web focus aside and strives to become the future technical, legal, and payment infrastructure for the world. Web3 also wants to “cut out the middlemen” by directly contacting producers and consumers. This allows the producers to receive more money for their work while the consumer needs to pay less.

It is, therefore, confusing that Time Berners Lee stated that: Web3 has been coined by Gavin Wood and is the name of his company that develops Web 3.0: Users own their data, not corporations; Global digital transactions are secure; Online exchanges of information and value are decentralized.

2.2 Technologies

The technology for Tim Berner Lee’s Web 3.0 revolves around the possibility of each internet user managing their Pods. Pods are like secure personal web servers for one’s data. The Solid projects write the following about Pods:

(Pods) can be hosted by the same Pod Provider or by different Providers or be self-hosted or any combination thereof. The number of Pods you have, as well as which Solid Server or Servers you use, is effectively transparent to your applications and services. This is because, in the Solid ecosystem, data is linked through your identity and not through the specifics of your Pod. This is true for your data and those that others have shared with you.

The user has complete control over who sees which part of her Pod. This allows the implementation of self-sovereign identities, which can free internet users from the need to depend on big companies like Google, Facebook, or TikTok for their identity [2].

Web3 goes much further in its decentralization and wants to promote a self-sovereign internet. This self-sovereign internet is based on a decentralized (peer-to-peer) infrastructure, currently embodied using blockchains. The goal is to replace a big part of the current infrastructure provided by the government through services based on blockchains and smart contracts [3].

In Web3, Cryptocurrencies and other financial assets like Non-Fungible Tokens (NFTs) replace the government’s fiat money. In addition, smart contracts enable the creation of Digital Autonomous Organizations (DAOs), which reflect real-world structures in the Web3 world. Using DAOs, decisions can be made with less friction than with real-world organizations. Another component, Decentralized Finance (DeFi) allows the exchange of the different crypto-tokens directly on the blockchain without going through a centralized exchange [3].

Some also include the approaching Metaverse in Web3 and propose that exchanges between different Metaverse platforms can be done using NFTs. This allows things bought in one Metaverse to be used in another Metaverse [3].

2.3 Risks

As has been shown in 2021 and 2022, significant parts of the blockchain infrastructure for Web3 are not ready for prime time yet: systems are slow, they break, and the smart contracts contain many bugs which hackers exploit to steal the funds stored in these smart contracts [4].

Another risk needs to be considered concerning the societal effects of removing parts of the government: how can Web3 make sure that the social aspects of today’s governments are kept so that people are not excluded? One unsolved question regarding decentralized finance is how to recover stolen or lost funds when blockchains are decentralized and immutable.

Finally, another hidden risk of WEB3 is that it is less decentralized and open than its advocates might say. Indeed, blockchain-based activity depends on services that are only possible with the cooperation of a handful of private, centralized companies [5].

2.4 Trends

Over the next few years, Web3 will mature, and its components will merge with current technologies. This might include upcoming Central Bank Digital Currencies [6], which could remove some of the problems linked to the high volatility of cryptocurrencies.

There is an attempt to work on the privacy problem of blockchains through the use of Zero-Knowledge proofs, which can hide the actions of a user. While this technology currently is very limited due to its low speed, it might very well mature to the point of being usable in a broader context [7].

As there is very little research on how to implement theft and fraud protection in Web3, it is expected that these problems will persist for many years to come. One of the problems is that this protection can be solved quite easily in a centralized setup, but a decentralized setup makes it very hard to make the right decisions.

3 Consequences for Switzerland

Switzerland was one of the first countries to have a legal framework for blockchain applications [8]. This made it attractive and attracted many companies to Zug and other places [9]. There is also an ongoing effort for digital identity that should be self-sovereign [10]. This puts Switzerland in a good place to profit from the positive effects of Web3.

3.1 Adoption and Efficacy

The current adoption of Web3 is low, mainly because the technology needs to be more mature and widely used. In addition, the underlying blockchains are too slow and too difficult to use [4]. Also, they are currently incompatible with the “free through ads” internet, as they all need financial implications to participate.

From an efficacy point of view, some of the underlying services start to evolve into a usable form: [11] has a decentralized cloud management system, and [12] is running a fast and decentralized generic blockchain.

4 Conclusion

Web3 promises more power to the users and the removal of intermediaries between the users and the services. This can bring more privacy and better remuneration for the service providers on the internet. Furthermore, most Web3 propositions are based on blockchains, which allow increasing trust by removing power from some controllers, like Google or Facebook. Switzerland is in an excellent position to participate in the upcoming Web3, as it already has legal regulations that allow innovation and growth. However, this dream might not come true as a new big player could control this new infrastructure.

So far, current Web3 systems still need to scale to the many billions of users on the internet. Once Web3 scales, it may deliver on its promise of a more user-driven experience.