If you've been following the tweets of Elon Musk, Jack Dorsey, or other tech insiders, you might have already heard the term Web3 (or Web 3.0). But what does it actually mean? And how might the next evolution of the internet affect you and your business? Let's take a look.
First of all, what even is Web3?
Well, if the early Internet (Web1) was a decentralized place that people were just figuring out, Web2 was when companies like Google, Facebook, and a handful of others came in to centralize everything through their platforms. Looking for a webpage? You go through Google. Consuming content? Probably through Netflix or one of Facebook's arms. We may be returning to a more decentralized Internet, however, with Web3. How? By using technologies like Blockchain and networks like Ethereum, the Internet is evolving back to a more egalitarian model outside the control of a few companies and their VC backers. Let's unpack what these technologies are a bit.
Without getting too technical, a blockchain is a data ledger that is built in such a way so that it cannot be changed or augmented retroactively—therefore, it is considered "non-fungible". Any piece of information can be tagged as a "token" (say, a photo, or a webpage, or a unit of digital currency, or a sharable user profile). When this token's metadata is built as a blockchain, it is considered a "non-fungible token" or NFT. So, if I transfer a token to you, and the blockchain data is updated to reflect that, it cannot be changed later to erase the transfer. If you were to go back in and change the data chain, it would effectively destroy the entire token.
Furthermore, the blockchain data of that NFT is stored on a digital network, but it is not stored on a privately-owned cloud. Instead, it is stored in a decentralized way—through global networks like Ethereum. These networks have no single server, but encrypt and replicate the data across every node in the entire system. If 100 people are part of the Ethereum network, then whenever data is updated, it is updated on all 100 nodes with each node serving to validate all others.
What do people say about it?
"[T]here is no CEO of Ethereum or Bitcoin, and teams working on building and maintaining the protocols are global communities eschewing central leadership," writes Roman Kropp, Managing Director at tts Transformation Consulting GmbH. By working together to ensure the success of Etherieum and blockchain technology, all players bolster its value and share in the reward—there is no company or investor at the top extracting the value.
This ability to circumvent players like Facebook and Google and the massive profits they glean is creating a new vision of the Internet and beyond. However, not everyone agrees with this picture. Jack Dorsey argued in a recent Twitter thread that institutional blockchain investors are already swooping in to capitalize on Web3 infrastructure. Dorsey stated that "you don’t own ‘web3’. The VCs and their LPs do. It will never escape their incentives.”
What does it mean for businesses?
Regardless of the role of the investor/VC in current or future technologies, blockchain and decentralization will continue to reshape the Internet over the coming years. For businesses, it further stands to reshape the nature of hiring and of work itself. The most evident changes will be in two key ways: attracting and on-boarding talent, and in equity/compensation structures.
First, let's look at equity and compensation.
Millennials and Gen Zers are less inclined to follow linear career paths. Instead, they are pursuing fulfillment and purpose and are looking for work that aligns with their values—rewarding them in the process.
“Web3 companies are poised to capture much of the young talent since Web3 ethos is about collaboration, cooperation and reciprocity,” En Canada, a Web3 community leader, recently told Forbes. And these companies will not only attract young talent with Web3 tech, but reward their collaboration with shared equity in the form of tokens. These tokens issued by the company/project will incentivize contributors to further its success in order to increase their value.
How does this work in a real-world setting?
Raad Ahmed, founder and CEO of Lawtrades, points to cryptocurrencies themselves as a test case. As he explains, they distribute tokens to users and/or allow anyone to buy tokens, which then creates direct community ownership leading to a sense of responsibility for the project's success and ultimately higher retention in the form of usage.
Tokens are not limited to the realm of cryptocurrencies, of course, and companies should embrace the technology as a way to link employee ownership with contribution and collaboration to increase value. As Ahmed notes, Braintrust Creative has already begun implementing this model by building an online marketplace for talent that has users transact in dollars, but utilize a token built on Ethereum for incentives and governance system.
Tokens also allow for far more transparency and ease of exchange than traditional equity shares. No more byzantine ownership structures and shareholder vs. stakeholder conflicts. Of course, NFTs remain unregulated, which poses some challenges and risks to be worked out as the infrastructure becomes more widely adopted.
With that being said, however, Web3 won’t just revolutionize financial incentives for work—it will revolutionize our digital identities. Most notably, hiring practices will change.
How will it change the world of hiring?
Today, most corporate hiring relies on two main tools: the interview and the resume/CV. But these are outdated practices—relics from a pre-digital age, to say nothing of their major flaws. Not only does an interview open the door to discrimination, but not all good candidates are good interviewers (and vice versa). As for resumes and CVs, work histories can be exaggerated if not flat out fabricated. With the rise of remote work (a trend that will only continue to grow), Web3 enables us to move past antiquated HR practices and streamline hiring.
“How it will work: you apply for a job, it scans the blockchain and rates your set of on-chain experiences and credentials, [and if it's] above a certain rating, you’re hired within 60 seconds,” explains Greg Isenberg, CEO of a Web3 design firm. “No prejudice, no wasted time, no pain.”
It’s an attractive idea. No more middlemen like recruiters or job sites. No more guessing about a candidate and going through the lengthy process of verifying their history. Acquired a new skill? Add it to your “resume chain”. Promoted at a job? Get it on there.
But maybe resumes themselves will become obsolete in favor of a new system—a digital ID token of sorts. "Who you know (connections), and showing your work (a portfolio), will be greater than your resume," adds Raad. "Recruiters and job seekers will pivot to 'Proof of Talent'."
That's a shift that will remake traditional HR. As Kropp notes, “with all my encrypted master data safely stored on the blockchain, I can provide a unique digital ID to anyone I do business with. No need for my counterparts to obtain – or, god forbid, store in their data base - information on my location, sex, race, or age.” Digital ID token can enable near-instantenous on-boarding while minimizing discrimination and candidate risk, and significantly reduces HR costs in the process.
Let's go one step further: the very infrastructure of employment—insurance, healthcare, retirement, taxation, and more—will be redefined by Web3. According to Kevin Owocki, founder of a Web3 crowd-funding site, "as the IoJ [Internet of Jobs] grows, new infrastructure will emerge that handles these attributes." And as that infrastructure appears, is adopted, and evolves, more and more people will join the IoJ creating a positive feedback loop.
What about legal?
For the legal community, however, Web3 poses both opportunities and challenges. Blockchain technology and platforms like Ethereum have no real government regulation and the legal precedent around disputes is very thin. The very properties that enable decentralized blockchain technology also make it hard to govern. For example, under what jurisdiction is an NFT if it exists on every node in a blockchain network (which may be spread across every country on earth)? What’s more, best practices around integrating blockchain technology into contracts and legal cases is yet to be established.
"It will likely be difficult for any organization that has to ensure effective risk management to consider a purely permissionless blockchain system without some additional protections," John Salmon and Gordon Myers note in a report for the International Finance Corporation. "Regardless of the model adopted by those seeking to use blockchain, it is important that regulators remain flexible in their approach to this emerging technology—and avoid viewing it through a lens designed for more traditional, centralized platforms."
It's clear that as Web3 develops and more organizations adopt its protocols, the transition will require constant adjustment and management. However, for those who navigate this new technology well, there stand to be exciting new potentials and massive opportunities.