March 17, 2023

By: Suman Kumar Chakraborty, Senior Principal - Product Engineering, Canvas by LTIMindtree

Several factors have influenced how the web has changed, such as the creation of new tools and technology, user expectations, behavior modifications, and economic environment changes. Today, a handful of internet companies run over seventy percent of the internet landscape. In all its glory, the web was intended to be a space where decentralized hubs could share information. The term Web3 was coined by Ethereum Co-founder and Polkadots founder Gavin Woods¹ in 2014. According to Wood, Web3 is a more democratic and completely decentralized version of the current internet. An alternate internet that is permissionless, trustless, and rewarding to the contributors, like a circular economy.

So, answering the basic question, why was this required? The dominance of FAANG/FAAMG, the acronym includes brands such as Facebook (Meta), Amazon, Apple, Netflix or Microsoft, and Google (Alphabet), in owning and manipulating all data for their profit and not for the larger good. Web1 was intended to be an open, decentralized internet, but Web2, the internet we use today, gave rise to trillion-dollar tech giants that dominate the internet and control much of the infrastructure upon which it is based². Read more in my POV – Web3 Tech Stack- Semantics of 7 Layers.

Web3 vs. Web3.0

Web3 needs another distinction and this time from its closer version Web3.0 which is the definition given by Mr. Tim Berners Lee³ of the World Wide Web (WWW) foundation in 2005. He wanted to reuse the data through pods where the access is with the user and therefore called it the “Semantic Web”. This is where the distinction lies, Web3 is about decentralization while Web3.0 is about centralization. Refer to the table below for more details.

Difference between Web3 and Web 3.0 (https://productcoalition.com/web3-versus-web-3-0-the-basic-concepts-and-differences-e25f7f05ca33)

The foundations of web 3.0 have been developed on the technologies such as blockchain, artificial intelligence, semantic web, and machine learning. Currently, our main focus is on developing Minimum Viable Products (MVPs), which will guarantee that we are giving our clients what they are looking for and how they want it. Please refer to the table below to learn about the offerings:

Web3 Offerings

How is Web 3.0 different from Blockchain?

This can be answered from the first principles of the bitcoin whitepaper, written by Satoshi Nakamoto⁴ in late 2008, which was the genesis of blockchain. The problem which it set to solve was double spending or the reversal of e-payments. The idea was to make transactions decentralized (transparent) and secured (immutable). The Ethereum⁵ white paper by Vitalik Butterin further substantiated it in 2015. It was here that he introduced “execution” into the “secured ledger” created till now.

Web 3.0 will help boost the Internet of Things (IoT) with the increase in data speeds. The resultant better connectivity would help create smart and better consumer products. Decreasing data rates will help make the internet more ubiquitous and democratic. Blockchain was also intended to be decentralized through its layered distributed ledger.

Blockchain trilemma: While both the white papers increased the use cases and solutions therein, there was always the unresolved trilemma. The blockchain trilemma or scalability trilemma states that the core’s decentralization, security, and scalability are like 3 points on a triangle. The line segments or the solutions, therefore, have only two of the three met at any given time. This means that one needed to choose any two factors at the cost of the third, eg. security and decentralization at the cost of scalability.

Web3 can then be simply defined as the larger ecosystem of innovations based on the blockchain framework. These different layers added to the services can attempt to solve the scalability trilemma by combining off-chain and on-chain transactions/computations.
Let’s understand the difference between on-chain and off-chain. Since the transactions captured on the blockchain need consensus and finality, there is a cost involved in maintaining and updating each individual transaction. It is, therefore, advisable that the time-consuming computes are kept on a separate Data Bases (DB) (off-chain) while the outputs or settled transactions are saved on the blockchain itself (on-chain). This helps in time on task (transactions per second), which is related to scalability and finality, which are both metrics that ultimately define the use case effectiveness.

Protocol layers: These activities need multiple layers with different functionalities. While the blockchain or the framework is called layer 1, there is a layer 0 beneath to enable networks and customizations. The layers on top, namely layer 2 and layer 3 are the services and application layers which are further explained in the POV mentioned earlier. Refer to this diagram which is an open-source depiction of the same.

Depiction of the Protocol Layers (https://www.mdpi.com/2071-1050/14/2/913)

To strengthen my research, I quote Gartner and Alchemy reports which have put Web3 ahead of most emerging technologies to invest in the future. Additionally, 11% of all Web3 developers are in India and are contributing towards the increasing YoY ecosystem. Even when there is a crypto meltdown and investment winter, the number of developers who joined in 2022 is 14% more YoY, and total Decentralized Applications (Dapps) hosted on the main net, too, have increased more than twice in recent times.

Emerging Technologies and Trends (https://www.gartner.com/en/articles/4-emerging-technologies-you-need-to-know-about)

Way Ahead: There is a lot of interest in Decentralised Finance or DeFi, which has a total value of over USD 50 billion. Similarly, Zero Knowledge Proofs and DIDs (Digital IDs), which are self-sovereign in nature, will have large ramifications when data privacy becomes a right. Decentralized Insurance or DeIn, is another problem worth solving using the dApps and smart contracts with external triggers (oracles), which make it trustless, meaning trust the code and not the people involved. These are part of the many use cases we identified in our strategy document and have been published for better awareness.

Use Cases

All this also aligns with how we see blockchain adoption in India. The Central Bank Digital Currency (CBDC), or the e-rupee, has a Distributed Ledger Technology (DLT) as the framework which all blockchains have their genesis from. While all blockchains are DLTs, all DLTs are not necessarily blockchains, as they are sequential and not parallel processing. The growing volume of data at an unbelievably faster rate than ever before is one of the pressing concerns for web users. Web3 can not only ensure data security but also empower users with control over their own data. Considering the need for data security, decentralization, and the creation of unique digital identities in the new generation of the web, it is important to consider how web3 can introduce significant value improvements for users.

It is, therefore, imperative that we continue in this pursuit to build capabilities and assets on Web3 to ensure our readiness in time to be considered as early adopters in crossing this chasm. The chasm being the mass adoption of Web3 and underpinned blockchain technology which will happen sooner than most predict. Web3 has tremendous potential and is one of the up-and-coming technologies that companies should incubate immediately to avoid disruption and meet market expectations. Decentralization in all three technical, economic, and legal/fiduciary areas will ensure that the alternate internet envisaged with creator/ownership is realized soon.