The promises of Web3: Decentralized finance & NFTS – exploring the future of internet

The Internet has undoubtedly come a long way since its inception. From static web pages to dynamic content, the evolution of the Internet has been remarkable. Right now, we are witnessing a new wave of innovation with the emergence of Web3. Web3 promises to revolutionize the way we interact with the Internet. In this blog article, Venionaire Capital’s Venture Partner and Internet Pioneer Peter Augustin will explain the differences between Web1, Web2 and its youngest sibling Web3 as well as the promises of the latter. 

Web1 and Web2: Back to the roots 

In Web1, websites were static, and the only information available was what the website owner provided. Thus it was more or less some kind of a digital business card online. There was no possibility for a two-way communication and users could not interact with the website or its content. With the rise of Web2 websites became more dynamic and operators could interact with users. Social Media platforms like Facebook or Twitter enabled user to like, comment and share content. Thanks to the “like button”, suddenly the internet became a more interactive space.  

However, Web2 has its limitations regarding digital property. Emails were not encrypted, and big data companies like Google could access and literally read our data without our consent. Of course, their motive was not spying on us like some kind of secret service, but because our lives are interesting for them from an advertising and marketing perspective. We have all experienced these re-marketing methods, haven’t we? You search for any product online and suddenly you see ads for this kind of product on every site you visit online. That can be kind of annoying.

For the user Web1 and especially Web2 means the loss of ownership of his data. This is, where Web3 comes in. 

Web3: The Promises and Potential of Cryptography 

The next logical step after Web1 and Web2 is Web3 and it promises to eliminate the limitation of its predecessors. Web3 is finally enabling digital ownership through using blockchain encryption technology, commonly known as “crypto” (short for “cryptography”). 

Cryptography is for sure not an invention of our century. It has been around for thousands of years and is based on mathematical principles. For a long time cryptography was used almost exclusively by secret services to communicate securely and safely. With the rise of Web1 and even more Web2, being online became an eventually almost permanent status. The internet found its way into every household and every smartphone. This development finally created the need for public E2EE (end-to-end encryption) and decentralized networks, thus creating an environment in which digital property can be owned, traded and most important protected. Nonetheless, the responsibility for secure storage of the “private key” that grants access to all digital assets lies in the hands of the data owners. Unquestionably they must handle it like their valuables or important documents in a secure location.

Innovations in Web3 Technology: NFTs and Smart Contracts

Bitcoin is well known to the wider public, and also NFTs are a popular example of how Web3 technology can be used. Remember the previous example about Google having access to our emails? One way to keep your emails away from Google’s goggles (pun intended!) would be converting your emails into NFTs. So every single email is a NFT, a non-fungible token that could be stored on decentralized cloud services. 

Another innovation based on Web3 are smart contracts. They have evolved from other projects, like Ethereum. Smart contracts are digital contracts that are processed between participants on the blockchain. One business area that smart contracts have enabled is called “decentralized finance” (DeFi). This is like a digital bank that processes contracts through blockchain technology rather than human processors. The customers use their wallets to interact with this digital bank.  

Challenges of Web3 

The biggest challenge in Web3 will be to make the user experience as simple as possible and the handling as similar as possible to its predecessors. At the same time, it is crucial to highlight the users’ responsibility that comes with holding digital property. Losing your private key (or the seed phrase that you need to recover it), you might lose access to data without any possibility to recover it. Likewise, the use of smart contracts or DeFi is only recommended after thorough code audits. As contracts are binding, they have to be checked before they are concluded – and in Web3 and Smart Contracts “Code is Law”. 

The future of Web3 

Web3 will not only create new professions like custodians, whose responsibility will be to keep private keys safe or code auditors, who check smart contracts for fraudulent content or errors. It has the potential to disrupt industries like banking, insurance and notary services. Real estate transactions could be completely represented on the blockchain using NFTs and Defi and even government agencies might shift use cases to the blockchain. The possibilities are almost endless. 

In Conclusion 

Web3 promises to revolutionize the way we interact with the Internet. Encryption technology enables secure ownership of digital property, and smart contracts enable new business opportunities. However, it is essential to understand the responsibilities that come with holding digital property and to ensure thorough code audits before entering into smart contracts or DeFi. With Web3, new professions will emerge, and industries will be disrupted. The future of the Internet is exciting, and Web3 is at the forefront of this revolution.