Understanding Web3

It’s hard to believe that it’s 2022 already, not least after all the difficulties and disruption of 2021 (to say nothing of the year before that). The concept of Web3 has been steadily garnering more and more attention in recent months and will certainly increasingly influence our lives over time. With this in mind, understanding what it is and what investment opportunities and risks it could bring is key.

Web3 is a term for the next stage of the World Wide Web, which will be much more decentralized than earlier iterations due to its incorporation of blockchain technology. The term was coined in 2014 by Ethereum co-founder Gavin Wood to label the next era of the Internet’s development. The first period was Web 1.0 between 1991-2004, when the Internet was composed of mainly static web pages, and the vast majority of users were consumers. Next came Web 2.0 between 2004 and the present, which witnessed the transformation of the Internet into a platform focusing on user-generated content, blurring the lines between makers and consumers of content.

Despite the active participation of users, Web 2.0 continues to serve its audience as a centralized and, to some extent, government-controlled network. Certain states limit access to some services, as has happened with Yahoo and LinkedIn in China, and can even affect user experience, as happened with Twitter in Russia, which was slowed down to worsen local users' experience due to the publication of content that violated regulations.

Web3 is being discussed widely and supported by cryptocurrency enthusiasts, large technology companies, and venture capital firms. It has even been at the epicenter of an argument between Jack Dorsey and venture capital firm Andreessen Horowitz: they publicly argued about how decentralized Web3’s actually is and ownership influence on it. FT journalists have described Web3 as a bubble, but the numbers speak for themselves – the NFT market generated over $23B in trading volume in 2021, which became possible due to the increasing popularity of crypto and blockchain instruments and this is seen as the general trend for the next 10 years.

Cryptocurrencies have already started to represent significant value and are deeply involved in moving capital around the world. With this in mind, we are looking for more unicorns among startups that could make these technologies more accessible to less tech-savvy users and incorporate them into traditional sectors of the economy.