A man with salt-and-pepper hair leans over an open laptop. He uses one hand to type something and the other hand to hold a smartphone to his ear. The man wears glasses and a black-and-white plaid shirt. Behind him is a metal shelving unit holding many large plastic bins and boxes.
Although Web3 is still just a concept, it doesn't hurt to stay up to date on ongoing developments in related technologies. — Getty Images/shapecharge

In the news, Web3 has been hailed as the next generation of the internet, one that is more democratic and decentralized. Advocates for Web3 envision a world in which access, content, and commerce aren’t controlled by big tech companies such as Amazon, Twitter, and Facebook.

The reality of Web3 has yet to match this vision, as many technologies that would underpin Web3 are still in development. Business owners looking to get ahead of the Web3 trend can start by understanding the philosophy behind this version of the internet, as well as the adjacent tools that will bring this version to life.

What is Web3?

The theory behind Web3 presents a more democratic way of running the internet, one in which corporate entities aren’t in charge of how information is shared and used. Web3 internet would be one built on the blockchain and replace corporate platforms with open protocols and decentralized, community-run networks, according to the New York Times.

The benefits of using blockchain-based internet are threefold. First, content creators and even regular internet users would have the opportunity to directly monetize their activity without social media giants taking a cut. For instance, a YouTube creator could receive cryptocurrency directly from followers who support their series.

Secondly, Web3 is believed to be more democratic in how it offers access. “Internet behemoths like Facebook and Twitter are essentially autocracies. They can unilaterally seize usernames, ban accounts or change their rules on a whim,” wrote the Times. “A blockchain-based social network could delegate those decisions to users, who could vote on how to handle them.”

And lastly, Web3 could offer more privacy, reducing the role of advertising on the internet. Users could visit websites without being tracked via cookies or having to hand over their personal information to view content.

[Read more: What’s Essential to a Mobile Business Strategy? Here’s How ‘Progressive Web Apps’ Drive Shopper Engagement and Sales for Lancôme to Carnival Cruise Line]

What is the status of Web3?

It can be hard to separate the hype of Web3 from reality. A deeper analysis by McKinsey found that there are many obstacles Web3 has to overcome—and not every challenge is technological in nature.

Web3 could offer more privacy, reducing the role of advertising on the internet.

“The chief challenge is regulatory scrutiny and outlooks. Regulators in many countries are looking to issue new guidance for Web3 that balances the risks and the innovative potential, but the picture remains unsettled,” wrote McKinsey.

Coupled with regulatory challenges are questions about security, user acceptance, the risk of fraud, and the need for technology to develop enough for mainstream adoption. Cost is also a factor as elements of Web3 rely on cryptocurrencies, which remain inaccessible for many businesses and people.

How should your business prepare for Web3?

For now, it’s worth paying attention to two key trends related to Web3: consumer demands driving this trend and the adjacent technology that underpins Web3 development.

First, it’s clear that consumers are concerned about their privacy and use of their data. A KPMG survey found that 86% of the respondents felt a growing concern about data privacy, and 78% expressed fears about the amount of data being collected. Implement clear and transparent business practices around the collection of your customer data to build trust. Give customers a way to determine how and if their data is used by your business. And make data anonymous where possible to protect customers in the event of a data breach.

Second, it’s worth monitoring the technology trends that will influence the development of Web3: blockchain, cryptocurrencies, and the metaverse, among others. Monitor how social media platforms, advertisers, and gaming companies are using these technologies. And engage with others in your industry to see if there are any early adopters paving the way in Web3.

[Read more: How to Monetize the Metaverse: Big Brands' Tech Partners Share Tips]

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Published November 21, 2022