Show pageOld revisionsBacklinksBack to top This page is read only. You can view the source, but not change it. Ask your administrator if you think this is wrong. ======Web3====== Web3 is a term for a potential new iteration of the World Wide Web that incorporates concepts like decentralization, [[blockchain]] technologies, and a token-based economy. Imagine the internet’s evolution in three steps. Web1 (roughly 1991-2004) was the "read-only" internet of static websites where you could consume information but not really interact. Web2 (2004-present) is the "read-write" internet we know today, dominated by large tech companies like [[Meta Platforms]] and [[Alphabet]]. We create the content on platforms like Facebook and YouTube, but the companies control the platforms and our data. Web3 envisions a "read-write-own" internet. The idea is to build a web where users, not corporations, own their data, identity, and digital assets. This ownership is meant to be cryptographically secured and managed on a decentralized network, breaking the stranglehold of Big Tech and creating a more open, equitable digital world. While the vision is grand, its practical implementation is still in its infancy, fraught with technical challenges, speculation, and debate. ===== The Evolution of the Web ===== To truly grasp Web3, it helps to see where we've come from. The internet didn't just appear overnight; it evolved in distinct phases, each defined by how we interact with it. ==== Web1: The "Read-Only" Era ==== Think of the early internet as a giant digital library. It was a one-way street. Companies and individuals put up static web pages, and your role was simply to read them. There was very little interaction, no logging in, no commenting, no user-generated content. It was revolutionary for accessing information but was ultimately a passive experience. ==== Web2: The "Read-Write" Era ==== The advent of social media, blogs, and e-commerce ushered in Web2. The internet became a two-way street. You could not only read content but also create and share it. This "participatory web" gave us giants like Facebook, Twitter, and YouTube. The business model was simple: provide a "free" service in exchange for your data, which is then monetized through targeted advertising. In Web2, you are the product. While it connected the world, it also led to the centralization of power and data in the hands of a few massive corporations. ==== Web3: The "Read-Write-Own" Vision ==== Web3 aims to fix the "data landlord" problem of Web2. Its core philosophy is to decentralize the internet's infrastructure. Instead of data being stored on a company's private servers, it would be stored on a public blockchain—a distributed ledger that no single entity controls. This shift is designed to give you, the user, true ownership over your digital footprint, from your identity to your online assets. This is powered by new technologies that form the building blocks of this new web. ===== How Web3 Works: Key Components ===== Web3 isn't just a philosophy; it's a stack of technologies working in concert. Understanding these components is key to separating the hype from the reality. * **Blockchain and Cryptocurrencies:** Blockchain is the backbone of Web3. It's a secure and transparent digital record book maintained by a network of computers. [[Cryptocurrency]] (like [[Ethereum]]'s Ether) acts as the native currency of these networks. It's used to pay for transactions and to incentivize people to maintain the network, providing the economic fuel for the system. * **Smart Contracts:** These are not legal contracts but self-executing programs stored on a blockchain. They automatically run when preset conditions are met. For example, a [[smart contract]] could automatically release payment to a musician every time their song is streamed. They are the building blocks of more complex applications. * **Decentralized Applications (dApps):** If you think of a normal app (like Instagram), it's run by a single company on its own servers. A [[decentralized application (dApp)]] is the Web3 equivalent, but it runs on a peer-to-peer blockchain network. In theory, this makes them censorship-resistant and free from the control of a single owner. * **Digital Wallets:** In Web3, your identity and assets are controlled through a digital wallet (e.g., [[MetaMask]]). This is your personal portal to the decentralized web. It holds your cryptocurrencies and [[non-fungible tokens (NFTs)]] and allows you to interact with dApps, all without needing a traditional username and password controlled by a central company. ===== An Investor's Perspective on Web3 ===== For the value investor, Web3 presents a fascinating, if vertigo-inducing, landscape. It's a world of immense potential mixed with even more immense speculation. ==== The Bull Case: A New Frontier? ==== The argument for investing in Web3 is that it represents a fundamental technological shift, similar to the dawn of the internet itself. The opportunity isn't just in buying speculative tokens but in identifying the "picks and shovels" of this new digital gold rush. * **Infrastructure Plays:** Investing in the foundational blockchains (like Ethereum) that host the majority of dApps. The thesis is that as the ecosystem grows, the value of the underlying platform will grow with it. * **Protocols and dApps:** Investing in specific protocols, especially in areas like [[decentralized finance (DeFi)]], which aims to rebuild traditional financial services like lending and trading on the blockchain. The goal is to find projects with genuine utility, a strong community, and a clear path to generating revenue (or "protocol fees"). * **Disruption:** The potential to disrupt trillion-dollar industries, from finance to media to gaming, by creating more efficient and equitable business models is the grand prize that attracts so much capital and talent. ==== The Bear Case: A World of Speculation? ==== A healthy dose of skepticism is the value investor's best friend, and Web3 demands it in spades. The critiques are numerous and significant. * **Lack of Intrinsic Value:** How do you determine the [[intrinsic value]] of a token for a project with no revenue, no profits, and a user base driven by speculation rather than utility? Traditional [[valuation]] methods are often useless here, making it feel more like gambling than investing. * **Hype and Speculation:** The space is rife with bubbles, scams, and projects with fancy whitepapers but no viable product. The fear of missing out (FOMO) often trumps fundamental analysis. * **Technical and User Hurdles:** Web3 is currently slow, expensive to use, and notoriously difficult for the average person to navigate. The user experience is light-years behind the seamlessness of Web2 applications. * **Regulatory Uncertainty:** Governments around the world are still deciding how to regulate cryptocurrencies and decentralized networks. A harsh regulatory crackdown could wipe out entire segments of the ecosystem overnight. * **The "Solution in Search of a Problem" Critique:** Many Web3 applications are criticized for being overly complex solutions to problems that are already solved more efficiently by centralized Web2 services. Does a decentralized Twitter really offer enough value to overcome the hurdles of user adoption? ===== The Bottom Line for Value Investors ===== Web3 is a classic example of an area that likely falls outside most investors' [[circle of competence]]. The vision of a user-owned internet is compelling, but the path from today's speculative frenzy to a future of mainstream adoption is long and uncertain. For a value investor, dabbling in Web3 requires an enormous amount of research, a tolerance for extreme volatility, and the discipline to treat it as a high-risk, speculative part of a portfolio. The prudent approach is to watch from the sidelines, study the technology, and wait for clear winners with demonstrable business models to emerge from the noise. As [[Warren Buffett]] might say, it's far better to wait for a fat pitch you understand than to swing at every new, shiny object that comes your way.