Web 2.0 to Web 3.0 Continuum
The crypto industry has always had an ethos of disrupting the monopolistic approaches we have witnessed by heavily funded Silicon Valley startups who tend to build platforms with unstoppable network effects, and who leverage those effects and users’ and gig workers contributions for shareholder gain.
The promise of Web 3 remains, although the volatility of the crypto markets, coupled with scandals and frauds creating contagion has left a stench in the industry. Many pundits are predicting the demise of the industry while builders who see the future are not so worried.
While many in the industry are moving on from the use of Web 3 altogether in part because it now has a bad name amongst many, and in part because it is used so widely it no longer actually represents the entire industry.
However I think there is value in reflecting on the continuum of Web 2.0 to Web 3.0 and in particular shine a light on the grey areas in between.
I have taken a stab at reflecting the continuum from Web 2.0 to Web 2.5 to Web 3.0 on the horizontal axis and a loose framing of a continuum from digitizing physical assets to purely digital solutions on the y axis.
I have then placed sectors of more classical Web 2, Web 2.5 and Web 3.0 where I feel they belong. This is of course a) subject to interpretation and b) hard to do because within sectors there are also continuums.
But here is a short explanation of why I think each sector belongs in the different quadrants or grey areas.
Web 2.0
FAANGs
Let’s start with the industries all of us have known about and experienced for the past few decades. Leveraging the internet to build platforms supercharged by network effects really is what Web 2.0 has mostly been about. Yes while Web 2.0 allowed users to not only read, but also write and contribute content, videos, texts and more. Yet the FAANGs as they have generally been referred to, have tended to monetize all of this and share little to none of the revenues with the users who are the network itself. Most of these platforms are almost entirely focused on digital networks and connectivity. There are exceptions, especially with Amazon which provides a combination of digital goods (e.g. books and video content) and physical goods.
Uber/Airbnb
These are just a few examples of massive Web 2.0 companies who have digitized physical assets but leveraging Web 2.0 network effects business models. Of course in the case of Uber, they connect more than 3 million drivers and their cars worldwide with millions of users worldwide to facilitate a transformative ridehailing experience. It is easy to criticize Uber and other such companies for issues related to their impact on legacy taxi businesses, historical lack of collaboration with cities and concerns over employment practices, but it also must be recognized that Uber created a truly transformative user experience along the way. There are also signs they are turning a new page, especially with embracing more green vehicles and engaging more in partnerships with cities and transit agencies.
Similarly Airbnb disrupted the hotel industry. While Airbnb has been subject to slightly less public scrutiny, there are many cities around the world, including my home city, Barcelona, who has had very public manifestations and protests against Airbnb for contributing to constraints on housing supply and increasing housing costs for locals.
Web 2.5
The term web 2.5 has been around for a while. At times it has been used in a derogatory way to challenge Web 2 wannabe’s or digitally native startups claiming to be Web 3 but failing to embrace the core tenets of decentralization. Yet I think Web 2.5 (or some other term that may replace it), may actually be poised for a massive breakout this year, and really through the whole decade and beyond.
To me web 2.5 is about blending some of the things that Web 2 is superior at (for example seamless UX and UI) with some of the best of Web 3 (decentralized and democratized ownership, users own their contributions and digital assets, etc.)
And perhaps most importantly, as we reflect on the scandals of the past year, the industry and its supporters are pushing for evidence that crypto rails are having a positive impact on the world. What I am personally seeing is that the projects touching users most (and the planet) in ways that could make a difference are frequently Web 2.5 models.
ReFi
Many, myself included, are very bullish on the Regenerative Finance (ReFi) space. While the space lacks a uniform definition, at its core, ReFi is about leveraging crypto tools to make socio-economic and ecological impacts. The space is really exploding and this is not the place for a deep dive into ReFi. For those new to the space, I created this post to help newbies go down the ReFi rabbit hole.
The diversity of projects we are seeing in ReFi that really fit well into the Web 2.5 conversation relate to taking a more “legacy” and opaque system of voluntary and regulated carbon offsets and bringing transparency to them on chain. Leveraging DeFi tools to provide universal basic income (UBI) or to allow local communities to crowdfund micro-finance or impact projects is another such example. Finally, I am bullish on tools like our own WheelCoin to gamify user adoption of real world, green mobility services. (See this post about other ReFi projects leveraging gamification to achieve impact.)
RWA
This year is a big year for the tokenization of Real World Assets (RWA) as well. By blending defi tools that support tokenization and fractionalization of assets, Web 2.5 projects are able to accelerate more inclusive access to everything from real estate and fine art while bringing much more transparency to these markets. As I am in the mobility space, crypto projects in mobility always interest me. I recently came across eloop which tokenizes Tesla vehicles for EV carsharing where each token holder has a share of the revenues from the use of those cars.
CeFi
I believe CeFi (Centralized Finance) also belongs in this Web 2.5 category. Unlike TradFi which has nothing at all to do with crypto, or DeFi (see below), CeFi is about leveraging more traditional legacy and Web 2 banking services for the crypto industry, but operated as centralized actors. This approach has gotten us into big messes with SBF and FTX, 3 Arrows Capital, Celsius and more. But it also has brought us industry stalwarts such as Coinbase and Kraken who help to bring more “normies” and institutions to crypto. One benefit of these actors for some users is that, especially in the US, they fall under much stricter regulatory regimes which can reduce the risk of fraud and retail investor losses.
Web 3.0
Truly decentralized, web 3.0 native protocols have helped fuel recent bull markets in decentralized finance (DeFi) and NFTs for example are primarily well classified as Web 3.0, digitally native crypto projects.
Obviously there is a spectrum of how decentralized many of these projects are, and we have learned that painting NFTs with one brush is a terrible idea. Yes the original NFT projects like crypto kitties or even those that kickstarted the NFT bull market like crypto punks and bored apes were built on crypto rails and started at least with no connectivity to the physical world. Of course since then NFTs have been used across the spectrum including for RWAs.
Conclusion
Crypto will continue to go through cycles and yes we are in a bear market. But builders will do what they do best and build. What we are witnessing this year in particular, is a heightened focus on how crypto can have impacts on real people, on society and on the planet. I believe Web 2.5, or whatever new term we end up calling it, may turn out to be the most important part of the industry as we transition from projects focusing on degens to cross the chasm and reach a critical mass as the industry goes mainstream. Watch out especially for ReFi and RWA as shining examples of the industry’s ability to bring billions of users and facilitate trillions in transacctions of blended digital and physical goods.
About the Author
Boyd Cohen is CEO and co-founder of Iomob, which is building the Internet of Mobility network and WheelCoin Move2Earn to gamify green mobility and is a contributor on ReFi to CoinDesk. Since obtaining his Ph.D. in strategy and entrepreneurship at the University of Colorado in 2001, he has spent the past two decades focused on accelerating the path to a low-carbon sustainable economy. He has published three books, multiple peer-reviewed articles and started a handful of ventures in the smart cities and sustainability arena.
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