Web 3.0 and Crypto Collaboration

The Evolution to Web 3.0: A Decentralized Future

The initial iteration of the internet, known as Web 1.0, was characterized by static webpages. Subsequently, Web 2.0 emerged as the social web. However, the forthcoming Web 3.0 is poised to be a fundamentally decentralized web.

This shift represents a move away from systems where communities contribute value without receiving commensurate ownership or financial benefit. Web3 aims to empower these communities through collaborative participation and shared rewards.

Reimagining Economic Models

Web3 challenges conventional business structures that prioritize the gains of large corporations. It introduces the potential for community-driven economies that achieve significant scale.

This emphasis on collaboration, coupled with innovative incentive systems, is attracting highly skilled and motivated developers. Consequently, projects previously deemed unfeasible are now being realized.

Defining Web3: Control and Collaboration

As Ki Chong Tran articulated, Web3 signifies “The next major iteration of the internet, which promises to wrest control from the centralized corporations that today dominate the web.”

The collaborative capabilities inherent in Web3 are facilitated by decentralized networks, which operate without the control of any single organization.

Trust and Network Effects

Traditional, closed-source models rely on user trust in a business to manage assets and deliver services. Conversely, open-source projects place trust in the underlying technology itself to perform these functions.

While network size was the primary determinant of success in Web2, Web3 operates on a different principle. In Web3, collective network building—where the largest network is built together—determines the victor.

The Power of Participation

A decentralized world fosters inclusivity, opening participation to everyone. Furthermore, the incentive structure is designed to ensure that increased participation leads to greater success for all involved.

Insights from the Linux Experience

Linux, the operating system powering a significant portion of the Web2 internet, fundamentally altered the approach to internet development. It serves as a compelling illustration of how collaborative methodologies can shape the trajectory of technological advancement.

Unlike development led by established technology companies, Linux originated from a collective of volunteer programmers employing networked collaboration – the free exchange of information without centralized authority.

Eric S. Raymond, in his work “The Cathedral & The Bazaar,” details his observations of the Linux kernel’s development and his involvement with open-source projects. Raymond contrasts this with the prevailing belief that complex operating systems required meticulous coordination by a limited, exclusive team – a “cathedral” model often seen in large corporations and financial institutions.

The evolution of Linux followed a distinctly different path. Raymond notes, “Maintaining quality wasn’t achieved through strict rules or autocratic control, but through the straightforward practice of weekly releases and rapid feedback from a large user base, effectively creating a Darwinian selection process for developer contributions.”

Surprisingly, this approach proved remarkably effective.

This Linux development methodology, termed the “bazaar” model by Raymond, operates on the assumption that defects are typically superficial when exposed to a large community of users and developers without extensive oversight.

Linus Torvalds, the creator of the Linux kernel, embraced an open development philosophy that stood in stark contrast to the “cathedral” approach.

Torvalds viewed his users as collaborators in the development process.

Fostering a community and harnessing the power of collaboration allows innovation to scale in proportion to the complexity of the user base.

Key strategies employed by Linus included frequent releases, cultivating a beta testing group, actively soliciting participation, and acknowledging the contributions of beta testers.

Similar to how Linux embodies software constructed by a network of contributors rather than a single entity, Web3 envisions an internet governed by a broad network of participants, diverging from the centralized control characteristic of Web2.

This represents a shift from corporate dominance to a more distributed and participatory model.

Proof of Stake: A Collaborative Foundation for Web3

Cryptocurrency represents a technological paradigm shift, prioritizing the user experience in project development. A key area where user involvement is paramount lies within proof-of-stake protocols. These protocols offer varying degrees of participation, effectively preventing the formation of centralized control structures – often referred to as the “cathedral” model.

While development teams remain essential, the inherent design of decentralized networks limits their absolute authority. Multiple user groups contribute at different levels, harmonizing with crucial features such as governance and scalability.

As developers move away from proof-of-work systems to achieve greater energy efficiency and scalability, an increasing number of protocols will adopt a form of proof of stake. This involves users staking their tokens – cryptocurrency holdings – to operate validators for a specific network.

Users are motivated to secure the network by locking up their tokens, receiving rewards in the form of the network’s native cryptocurrency. Validators face penalties, known as “slashing,” for misconduct like double-signing blocks or experiencing downtime. These penalties can include the loss of staked funds or future rewards.

Staking empowers users, and positive behavior is encouraged to broaden participation, fostering network growth without reliance on centralized control. Frequent upgrades are characteristic of these relatively new protocols, driven by network updates and proposals from operators and co-developers.

For example, Polkadot, a Web3 platform, utilizes a sharded protocol enabling seamless interoperability between blockchain networks. It employs user-driven governance to upgrade the network, with coordination occurring “on-chain and enacted autonomously, ensuring that Polkadot’s development reflects the values of the community and avoids stagnation.” Restrictions are imposed by the community when current staking parameters present network stability concerns, altering the terms of service rather than being dictated by a central entity.

Incentives for running nodes extend beyond purely financial gains. Successful networks require memetics, culture, socialization, and a shared purpose to attract and retain users.

The underlying blockchains are becoming increasingly abstracted in the Web3 landscape. Many of the millions of individuals purchasing NFTs through OpenSea, the first NFT marketplace to exceed $1 billion in monthly trading volume, may be unaware that it operates on Polygon. Polygon is a Layer 2 Ethereum blockchain offering a more energy-efficient structure, eliminating gas fees for creators, buyers, and sellers.

Similarly, collectors of Degenerate Ape Academy NFTs, built on the proof-of-stake blockchain Solana, are primarily focused on acquiring rare digital artwork. Unrecognized by most crypto enthusiasts and art collectors, increased network usage directly strengthens the network itself.

While abstraction can initially attract new users, institutional investors require long-term reassurance through robust technology. This sometimes leads to the support of more centralized “cathedral” structures. Provenance, a proof-of-stake blockchain developed by Figure, a home equity line of credit originator, provides a ledger, registry, and exchange for various financial assets and markets.

Large financial institutions, such as Franklin Templeton and Caliber Home Loans, operate and maintain the chain. These institutions are incentivized to run nodes due to the transaction fees they receive and the cost savings Web3 and blockchain technology offer compared to traditional Web2 processes.

As decentralized teams assume smaller roles in protocol management, individual participants can manage protocols with minimal organizational structure. However, continued incentives are crucial to secure, utilize, and develop the protocol. These examples highlight the success of Web3’s networked collaboration – a collective of autonomous users constantly stimulated while pursuing a common objective.

Linux served as a catalyst for the innovative thinking now evident in Web3. However, “cathedrals” still exist, and a complete transition from Web2 to Web3 remains uncertain. Achieving a truly people-centric technology and a wholly collaboratively driven Web3 requires a leap of faith.

Centralized structures must embrace the “bazaar” model, adapting to community-driven approaches rather than imposing top-down control. Web3 may not be the ultimate solution, but it represents the current iteration, and innovation often appears unconventional initially.

As long as skilled developers are incentivized to collaborate, Web3 has the potential to unlock a new world of possibilities. The bazaar model significantly reshaped the commercial software industry, and crypto’s networked collaboration will inevitably impact traditional business models.

Centralized organizations will struggle to compete without embracing some degree of decentralization, positioning those that do far ahead of their rivals. Networked collaboration leverages the collective intelligence of communities and holds immense promise. The surge in interest surrounding cryptocurrency mirrors the principles established by Torvalds. Ultimately, the future of the internet will belong to those who “leave behind the cathedral and embrace the bazaar.”