Currently, most online data “transfers”–communicating with friends and family, working with colleagues and clients, purchasing goods and services, and reading articles and social media are all facilitated with Web 2.0 infrastructure. This means that Web 2.0 is the foundational technology of our economy and society. So what about Web3, or Web 3.0?
One of the issues of the Web’s current iteration is that it is centralized. Centralization results in several limitations: being owned and controlled by a few central systems, it is vulnerable to hacking, corruption, and nefarious manipulation. There is a lack of data protection, and the data that is owned by that central authority usually belongs to big tech or the government.
Web 3.0 has grown from an imagined concept of a digital world starting in the mid-2000s to one that is possibly decentralized in the mid-2010s. In the current decade, the tech industry has begun to acknowledge the vast potential possible with an online ecosystem built from a decentralized Web 3.0.
This shift would require the complete replacement of the current internet architecture we see with Web 2.0 and replace it with blockchain-based infrastructure.
The result would be more democratic, with a shift to decentralized data ownership, peer-to-peer exchanges of data and assets with no intermediaries, protection from bad actors, and information that has guaranteed, blockchain verified sources. This shift to a decentralized Web 3.0 would fundamentally change how our businesses, financial systems, and societies are run for the better.
Web 3.0 Is Already Happening
There are already several projects working on designing the foundation of a decentralized Web 3.0. They are the Layer One foundation that is sitting at the base of Web 3.0, and they are designed to support the next iteration of the digital world.
Many prognosticators have a vision of Web 3.0 with an open-source technology stack, with their code available for anyone to review, improve and build upon, creating an even better end-user experience in the long run. Ethereum, Polkadot, Avalanche, Cosmos, and several others are trying to do just that.
All of the named blockchain projects already have decentralized applications (Dapps) live and running, providing their users with ways to communicate, share stories, transfer data and assets, and nearly all of the other general tasks we conduct on current Web 2.0 versions. These new projects are the bridge that is forming to shift us to Web 3.0.
The Current Blockchain Networks Remain Siloed
Even with the progress that this new class of decentralized Layer-One blockchain networks is making, they remain siloed from each other to their detriment. These are like independent fiefdoms utterly separate from each other with their own social and economic activities and opportunities.
They, however, have few if any pathways that connect them with each other. These are like hermit nations that have walled off the rest of the world. In the long run, this isolationist policy reduces the power of the projects that would gain from the total network effect possible by joining them together.
The Need for Connection
There is a growing need for this connection–a unified, seamless, decentralized method for sharing assets and information between blockchain projects, building a combined ecosystem that will benefit all the constituents and their users.
This need is based on overall liquidity and the volatility that results. Without a global connection, these projects’ economic structures will have digital assets with low liquidity, high volatility, and poor ways to unload the assets. By having a lack of interoperability and cross-chain communication, every project will have a more difficult time gaining traction and becoming successful.
Imagine if our current Web was divided into 12 parts, required the use of 12 different browsers, and you needed to have separate banking facilities for each to make a purchase?
Each had its own content and services, but you could not take that data from one and use it easily on another. That is the current state of a siloed blockchain network.
If these issues are not resolved, the migration to a decentralized Web 3.0 will be impossible, and we will be stuck with an edited VR/AR version of Web 2.0 run solely by big tech.
Moving Past the Issues
The acknowledgment of the problems resulting from a siloed industry of individual blockchain projects has resulted in the different protocols allocating a significant amount of time and money into building their own bridges that will allow users to share their data and assets between multiple protocols.
There are so many DeFi Dapps that are running on Ethereum that there has been a need for bridges to be built between Ethereum and Polkadot, Binance Smart Chain, Avalanche, and others over the years since their inception.
These bridges require dedication of time, money, and other resources to build and require diligence to maintain. Still, these bridges provide nothing more than a way to send specific assets between two smaller branches of the ecosystem, not the full spectrum of data and assets.
Beyond the resources needed to build and maintain these single-use bridges, they are often centralized. They are built, and operated by a single entity that is an intermediary working between the protocols, but are bottlenecks between the systems and have the sole authority to decide which tokens are supported and to which networks are worth connecting.
Therefore, these intermediaries are exactly what decentralization is designed to prevent, a central authority with control over assets and information that increases security concerns due to potential corruption and a single point of failure.
A second impact that results from a siloed blockchain space is the choice needed to be made by developers and thought leaders—choosing what protocol to use for their Dapps. If they are only able to run on one network, they will have several disadvantages.
Their potential user base is immediately limited, which means that a single network’s Dapp success and mass adoption will also be limited. For a developer to deploy a Dapp across multiple networks, they will have to devote more resources to their apps, fragmenting their liquidity across the various network-specific applications.
Interoperability Is the Web 3.0 Solution
The drain on resources and struggles that we see with the one-off bridges between networks means that a universal interoperability solution is the best way forward for the industry.
Blockchain tech is one of the most innovative sectors in the world today, with talented programmers who should prioritize the requirements of universality, accessibility, security, and decentralization all on equal footing when considering interoperability. This strategy is the only viable solution to the problems that Web 3.0 faces today.
To build such ubiquitous connectivity, there is a need to develop open protocols that provide standard pathways, which will require industry collaboration. An industry where protocols compete against each other is now history. Protocols should evolve for their own use cases, but they need to assume that interconnection is a requirement to reach scale.
Like our fiefdom’s analogy, projects must create their goods and services, but to thrive and gain from the other projects–they should communicate, exchange, and grow from the mutual knowledge and skills of the neighboring cities.
Much of what is going on in the blockchain space focuses on blockchain infrastructure and interoperability. Achieving the purest form of interoperability means that both users and developers must be able to operate seamlessly across multiple blockchain platforms, not realizing there was even a change.
When we use the current Web, we do not think of the protocols behind an email, text, or video conference. The same must be demanded of Web 3.0 for it to be successful.
Interoperability is becoming a focal point for several protocols that have realized that cross-chain communication is required to protect their futures. Cross-chain communication empowers developers to utilize the network that best fits their needs while knowing that the new application can be accessible to a user on any platform. This structure allows a network to focus on the applications native to its protocol, optimizing its infrastructure instead of devoting the resources to building individual bridges.
The Path to Web 3.0
2021 saw the seeds of digital assets’ potential planted in the minds of consumers, institutions, governments, and their regulators. The movements of big tech into the metaverse, the rise of the NFT market, the creation of Central Bank Digital Currencies (CDBCs), and the moves toward the regulation of crypto in several sectors proved this change was manifesting.
Moving forward, we are in the position to capitalize on the achievements that have been made to date and build on them with a scalable and efficient system. We cannot get caught up focusing on what is best for a single protocol while neglecting the big picture. Interoperability underpins Web 3.0 and must remain the objective for the near future.
Disclaimer: The author of this text, Jean Chalopin, is a global business leader with a background encompassing banking, biotech, and entertainment. Mr. Chalopin is Chairman of Deltec International Group, www.deltecbank.com.
The co-author of this text, Robin Trehan, has a bachelor’s degree in economics, a master’s in international business and finance, and an MBA in electronic business. Mr. Trehan is a Senior VP at Deltec International Group, www.deltecbank.com.
The views, thoughts, and opinions expressed in this text are solely the views of the authors, and do not necessarily reflect those of Deltec International Group, its subsidiaries, and/or its employees. This information should not be interpreted as an endorsement of cryptocurrency or any specific provider, service, or offering. It is not a recommendation to trade.