Speech by Kristo Lehtonen at Sitra’s “Next generation internet – towards Web 3.0” event on 29 March 2022.
The internet is evolving towards the next stage of its development, known as Web 3.0.
Sitra is Finland’s future fund. The fair data economy is one of Sitra’s three themes that we believe will most change society in the future.
Data is the most important raw material of our time. It is also at the core of the decentralised web, or Web 3.0. The decentralised model only works if data moves.
Blockchains. Metaverse. Decentralisation. These are examples of concepts associated with Web 3.0. A record amount of investment is being channelled into this area. New companies and business models are being created.
At the same time, there are concerns and questions, for instance about the energy consumption of first generation cryptocurrencies.
It is in Finland’s interest to better understand what Web 3.0 is all about and to promote the emergence of Web 3.0 competence and a Web 3.0 ecosystem. A significant amount of expertise and know-how from different sectors of society is represented at this event.
The purpose here is to help establish a shared overview of the situation in Finland. The aim is to bring together people interested in the subject and to share perspectives. A legislator’s perspective. A Silicon Valley perspective. An entrepreneur’s perspective. The academic world’s perspective. To talk about opportunities and threats. To create a space for discussion, for both hype and dissent.
Finland’s key strength has always been mutual trust and the ability to discuss across organisational boundaries. This event is one step in that dialogue.
Web 3.0 is a return to decentralisation, the roots of the internet
The 1990s saw the development of the first generation of the internet, now called Web 1.0. It was characterised by simple static websites.
Web 1.0 saw the emergence of services, such as Wikipedia, that were seen as revolutionary. Anyone could write and review content on a decentralised basis. People from all over the world met online.
There was a lot of talk at the time about internet hype. The rapidly rising market capitalisations of internet startups were seen as a bubble. After many steps and with the creative destruction of the economy, the first generation of the internet changed our world. The focus shifted from hype to practice and from market value to revenue.
The next generation of the internet, Web 2.0, brought about two-way interaction, including social media. Data began to accumulate in the hands of the digital giants. The key problem with the current generation of the internet, Web 2.0, is that users of free online services became a product rather than a customer, a modern data proletariat.
The next stage of evolution, Web 3.0, is a return to decentralisation. In a way, it represents a return to the early days of the internet. Web 3.0 thinking includes a strong emphasis on privacy. This is what makes Web 3.0 such an interesting opportunity. In a decentralised model, data needs to be accessible and shareable. This requires ecosystems, rules of the game, data protection and trust in a whole new way.
The key problem with the current generation of the internet, Web 2.0, is that users of free online services became a product rather than a customer, a modern data proletariat.
We can identify three major application areas for Web 3.0.
Management of digital assets with non-fungible tokens or NFTs.
When things began to go digital – to turn into ones and zeroes, data was created that could be duplicated. Current legislation does not recognise the ownership of data. I can own a physical painting, but not a data file of the painting. NFTs can solve this issue. NFTs are expected to become an important part of the future digital society, where virtual assets can be individually identified in the same way as objects in the physical world.
Another area of application is decentralised financial services, or DeFi. This involves the use of smart contracts. Trust is automated without the need for intermediaries or financial or legal services. This type of decentralised service or smart contract works much like a vending machine where the user inserts money and the automated machinery releases the desired product without the involvement of a salesperson. There are already many decentralised financial services, including for loans and trading.
A third Web 3.0 application that has high potential is the decentralised autonomous organisation, or DAO. This allows the creation of new kinds of organisations without centralised power or management. They operate autonomously on a community-led basis. You could call them the “Co-op 2.0” of the digital era. DAOs are already being used for various purposes, such as raising funds for environmental protection or to help people in Ukraine. When the need for a centralised authority is removed, more of the funds can be used for the desired cause.
These examples illustrate how Web 3.0 creates new opportunities, but also new problems. We will hear more about both today.
Decentralisation may reduce the power of centralised platforms
Web 3.0 is more than just blockchain-based solutions. Solutions can and will be built using a hybrid model partly based on centralised solutions. The key is that data must move. There will be a shift away from cumbersome system integration towards decentralised online systems and their collective use. This requires system interoperability, automated trust, and human-driven and user-centric design.
Decentralisation is expected to reduce the power of centralised platforms and corporate gatekeepers. This may lead to more innovation and more effective competition.
The decentralised internet may be a fairer internet, where individuals have more control and trust concerning the use of their own data. At the same time, less centralised control makes it harder, for example, to moderate online discussions and to find someone to blame when problems arise.
What Web 3.0 becomes depends on all of us: entrepreneurs, legislators, researchers, consumers and individuals.
It depends on the rules of the game, legislation, technologies and business models we develop in the future.