It’s been a few years since we’ve been hearing about the birth of a new Internet or Web 3.0, and a few more since Bitcoin and cryptocurrencies. Even though several of these concepts seem the same, they are not.
We called Web 1.0 to the first version we knew of the Internet. An access-free, instant but static network we could tag as read-only - named Content Distribution Network (CDN) - where users did little more than consuming content posted by a few publishers in a client-server architecture. HTML code, banners, and web forms flooded the not-so-easy-to-read network (you’ll definitely remember what Yahoo! looked like in 1994).
Web 2.0 followed about ten years later with the birth of blogging, social media, and e-commerce that revolutionized social interactions. Dynamic content, web applications, cloud services, XML, RSS, and a new Internet that allowed users and communities to collaborate with each other: read & write was a reality.
Just ten years ago, Web 2.0 gave way to the next stage, a semantic Internet that improves the required web technologies to create, share and connect content through data analysis based on the ability to understand the meaning of words, in place of keywords or numbers. A new Internet that enables a ubiquitous omnichannel strategy with interconnected applications and devices, 3D graphics, live-streaming, mobile apps, artificial intelligence, blockchain technology, and digital money. Welcome to Web 3.0: an Internet where we can create content, share it, and execute agreements: welcome to the read, write & execute universe!
Blockchain: the cornerstone of the Web 3.0
Blockchain technology is a record of transactions and information organized in blocks in a peer-to-peer network. The blocks are linked together in a single list, called a chain, by means of a cryptographic hash making the records impossible to modify by creating a secure data structure.
All parties involved in verifying a transaction, as well as a significant number of third parties, maintain a full copy of the blockchain, creating a robust and distributed network.
Blockchain: a trust machine
Blockchain technology was introduced by scientists Stuart Haber and W. Scott Stornetta in 1991, but became mainstream seventeen years later with the birth of the Bitcoin cryptocurrency and its White Paper publication called "Bitcoin: A Peer-to-Peer Electronic Cash System“. The paper was published under the pseudonym of Satoshi Nakamoto in 2008.
Since blockchain is the underlying technology of Bitcoin, and it was the first technology use case we heard of, people inadvertently used "Bitcoin" to refer to blockchain, leading to a never-ending confusion.
Blockchain is particularly valuable in increasing the level of trust among network participants because it provides cryptographic evidence about a set of transactions. Given the use of these types of cryptographic proofs - very expensive to produce but easy for other network participants to verify - any attempt at tampering is evident. This feature removes the need for a central body to monitor and govern the information flow. The self-executing protocol guarantees the information integrity and compliance with predefined business rules.
In 2015, The Economist published an article where they called the blockchain technology a "trust machine". Since that moment, a large set of organizations has been exploring the technology that delivers trust, transparency, and helps to reduce operating costs in a wide variety of industries.
This fast-evolving technology has already captured the interest of VC investors
Bitcoin was the first, but definitely not the last one. After a frenzied start followed by a steady innovation growth, the cryptocurrency market skyrocketed in 2017, appreciating by 1,200%. Nowadays, there are several other hundred cryptocurrencies in circulation with a total market capitalization circa USD 279 Bn (according to CoinMarketCap) and several more are being developed.
Nevertheless, blockchain technology capabilities enable many more applications besides cryptocurrencies: it allows the digital representation - aka tokenization - of financial instruments such as bonds, stocks, or derivatives, the traceability of goods in a value chain, document notarization and more.
In the short but dynamic history of this nascent technology, two industries were clearly differentiated: cryptocurrencies and blockchain technology. The latter, a bit more enterprise-oriented, received USD 434 MM financing from VCs in 2019, while cryptocurrencies managed to capture USD 2.35 Bn in the same way and same period (CB Insights: Blockchain Report 2020).
The same way the Internet shaped the world by allowing democratic access to information, blockchain is paving the road for how people and organizations set new business rules and exchange assets in this new Web 3.0, replacing trust by a tamper-proof and self-enforcing technology protocol.