In second part of our mini-series we will have a look at how recent Web3 projects diverge from early blockchain concepts. In order to that let’s first rewind back to 2015’s and check out what was out there at that time.

Private blockchains in theory…

There had been a lot of discussions around how blockchain would affect various parts of businesses from early 2014’s till late 2018’s. Tons of papers were published, most from consulting firms who were desperately hungry for fees that they charge to big corporates by selling their ‘vision’ papers. In short, they promised the world to business:

Blockchain will change everything, our lives will be completely different. Use blockchain but beware of public ones. They are dangerous. Better use private blockchains - that our engineers would gladly built for you (for a small fee of course!).

aloft
Image by Andrew Martin from Pixabay

…and in practice

Reality? None of those promises were fulfilled. Blockchains by nature are natural playgrounds. Permissioned ones (those that are secluded playgrounds and are not open to outsiders) are difficult to understand and not necessary for businesses. If you are going to use a private blockchain better use a centralized database. That would be much more effective and practical.

Another potential drawback of such concept projects was their doability. Sure, when you closely examine businesses you would see lots of room for improvement: Many intermediaries that cost money, slow down transactions, create red-tape etc. It would be great to get rid of these parts. However, there is one important condition: You need full digitalization in order to actually use blockchain.

The best example for this is logistics and supply chain. You might read many reports on how there are hundreds of parties involved when a refrigerator is imported from Europe to Africa. The problem: The whole process is mostly manual. You need to first move the entire process to digital then think about using blockchain technology.

Key attributes of Web 3 initiatives

Web 3 and its underlying technology of blockchain are one of the steps in our evolution to digitalization. So what are the general characteristics of Web 3 projects?

As we mentioned in our previous post, the key characteristic of Web 3 projects is that they take decentralization into their core. Without decentralizing the intermediaries it is impossible to democratize the whole supplier-end user process.

How are you going to give the power to the user? By ensuring that the user and only the user is having the full control of their digital belongings. What is a digital belonging? Anything that the user owns, such as digital identity, digital goods (such as avatars or assets in games) or any digital history (sites visited, comments posted, likes received etc.).

What is the benefit of having full control? By having full control, the user permits the use of such data by selected parties, for certain durations and to a limited extent. Additionally, user is able to transfer digital identity from one service provider to the other with a click.

Is that even possible? Well, decentralized finance actually showed the world that this is possible. How? Through wallets. Users keep their digital financial assets in their wallets, and give limited access to DeFi platforms only when they perform financial transactions. When it was proved that digital assets are viable, then it became possible to use them in other parts of Web 3 as well.

Yes, but what exactly are we talking about when we say ‘Web 3’. Let’s have a look at it in our next post.

This piece is first published in BlockchainIST Center on March 4th, 2022.

None of the views expressed in this article should be considered as investment advice