NatSpecs

Clash for the Future of the Internet: The Metaverse vs. Web3

By Andrew Jensen on March 23, 2022

NextGen Internet series #3/3

Since the widespread adoption of the Internet in the 1990s, rapid innovation has catapulted forward new ideas and proposals for what the Internet is and what it should be. As the Internet continues to progress, two proposals for the future of the Internet have arisen—the metaverse and Web3—that represent an emerging competition over the priorities, policies, and technologies of the Internet of the future; a fight between large technology companies and venture capital firms.

In the first generation of the Internet, Web 1.0, or the period from 1991-2004, the Internet was largely developed as a “read-only web”, where most of the content was published rather than created. Developing a website was difficult and only done by those with advanced technical skill sets or large organizations with teams of developers. This led to a disproportionate balance between the produced content, and the amount of consumed content. Primarily, users of the Internet would consume news, messages, and information provided to them by organizations with the technical expertise to do so. 

In 2004, that model changed radically. With the introduction of Facebook, a new type of website evolved, one that allowed users to connect with one another and eventually publish their own content in a user-friendly way. This second generation of the Internet, Web 2.0, is referred to as the “read-write web”, in which users could both read and write content on the Internet. In this period, the balance between those producing and consuming the content became more equal. Web 2.0 also acted as a herald for the platformization of websites; the move by an organization to become a one-stop-shop that provided a variety of content needs to users. Online platforms, more accessible than previous types of software, allowed users to easily generate and publish content. This has ushered in an explosion of engagement within the Internet. Whereas the number of users of the internet in 1999 was 147 million, that number rose to 1 billion in 2005, with the advent of Web 2.0. The massive increase in users on various platforms ushered in a period of centralization, where power and data coalesced within individual platforms. This period also sparked a conversation around ethical practices of using and selling user data.

Web 3.0, the next generation of Internet technology, seeks to answer many of the questions and dilemmas around Web 2.0 by focusing on decentralization and security enabled by blockchain technologies. Importantly, the next generation of Internet technology will likely seek to include the billions of people in the world who have little or no access to the Internet today. This means that the future of the Internet will have a significant impact on the future of economics, security, and even geopolitical influence.

Proposals for Web 3.0

As explored in two previous blog posts, the metaverse and Web3 are the two primary proposals for Web 3.0 that will radically reshape how content is stored, perceived, and created on the Internet. These proposals, sharing some similar enabling technologies—like blockchain, artificial intelligence, and edge computing—are somewhat competing, with the metaverse proposing a persistent, public, and synchronous immersive world, and Web3 promising anonymity and security as the centerfold of a new connected Internet ecosystem.

Although the metaverse and Web3 are built on similar underlying infrastructure, they are funded by different backers. The metaverse has been funded primarily by large technology companies with vast resources like Microsoft, Meta, and Nvidia. Each of these companies makes more than $1 billion in revenue each year, meaning that they have the capacity, tools, and resources to invest heavily in this emerging space. Large gaming companies like Roblox and Epic Games have also been critical to advocating for the expansion of metaverse technology. Importantly, both the largest companies pursuing widespread adoption of the metaverse are also the companies funding their individual pursuit. This has led to the centralization of metaverse technology among these large technology companies.

Alternatively, Web3 has been funded primarily by large venture capital firms like Andreessen Horowitz, Pantera, Paradigm, and Coinbase Ventures. Through these large venture funds, small software companies developing Web3 infrastructure have been able to rapidly and exponentially grow in revenue and user base. Since venture capital firms don’t actually build software, the largest players in the Web3 space are independent (and often decentralized) organizations like Alchemy, Ripple, OpeaSea, Dapper Labs, Paxos, and others that large venture capital funds like Coinbase Ventures and Andreesen Horowitz support. In 2021, venture capital firms poured more than $30 billion into Web3 startups, according to a report from Forbes.

In this way, the metaverse and Web3, funded by two different groups that both emerged from the Silicon Valley explosion of the early 2000s—Big Tech and VCs—are in a strategic competition for the future of the Internet, and by extension user’s time, attention, and money. This strategic competition highlights a widening gap and deepening identity crisis in Silicon Valley—a region famous for pushing software innovation and ingenuity to new levels.

 

Web 3.0 Winners & Losers

The reality is that neither technology is likely to surpass the other. With so much initial capital invested in both worlds, they will likely continue to develop parallel systems that share similar underlying technology. Where the metaverse advocates for some decentralization of the typical centralized networking commonplace in the era of platforms, the Web3 world offers a new and unique network architecture; one that prioritizes distribution, equality, and equity. For big technology companies pursuing the development of the metaverse, the benefits include utilizing edge computing to lower processing power and lag times by creating new decentralized networks that maintain tough security controls but utilize more nodes in a given network. Critically, this outline still allows large technology companies to maintain their walled-garden systems that drive more users to their platform. For the Web3 world, the benefits passed on to the venture capital firms include more access to individual users and people through the use of distributed ledger technologies that rely on a network of interconnected devices.

Without a fundamental restructuring of the policies that have governed the use of technology over the past 30 years, the same issues around the Internet that humanity struggles with now will almost certainly be issues that humanity struggles with going forward. With either technology, the risks present are pervasive and important.

There are a number of cybersecurity concerns that will come to light with the advent of Web3. More complex Web3 technologies (like NFTs, mixers, Dapps, DeFi, and DAOs) will allow anonymous users to launder money more easily and drastically increase the amount of data required to be able to trace and manage illicit transactions. For example, in a comprehensive Web3 world, a cybercriminal could accept payment in cryptocurrency to a new anonymous wallet, pass that same cryptocurrency into a DAO that issues a different token in exchange for staking, withdraw those new tokens into a different cryptocurrency, pass that cryptocurrency through mixers, and eventually withdraw the new currency through a different exchange. Though still technically feasible to trace, proliferated Web3 technologies would increase the necessary resources to identify, trace, and attribute payments to and from illicit actors. 

In the metaverse proposal, edge computing on decentralized network nodes to decrease lag time and increase connectedness could open hardened centralized systems to new vulnerabilities and introduce new challenges for cybersecurity. In either case, both the metaverse and Web3 require more technically challenging setups, and as the complexity of this technology surpasses the capacities of individual users, insecure setups (whether created through malicious exploits or user inexperience) will proliferate quickly across the space, allowing cybercriminals to take advantage of data, money, and digital assets.

Disinformation and misinformation are also likely to expand across the worlds of the metaverse and Web3. In the metaverse, the near-ubiquitous requirement for XR devices that change the way humans perceive the world, alongside the improvement of disinformation and misinformation tools like deepfake technology, could seriously increase the challenge of maintaining processes that counter misinformation and disinformation in the metaverse. Further, both Web3 and the metaverse, as community-building tools, could compound the ability of like-minded extremists to silo themselves in digital worlds built around security and anonymity. For example, like-minded extremists could create a metaverse-type world that allows them to shift the way users perceive them and the world, lending more support to their cause. From there, Web3 technologies could allow these same extremists to create large, hard-to-trace, community funding pools that bring users closer together.

Web 3.0 Geopolitical Influence 

The metaverse and Web3 also present unique new challenges to geopolitical influence and strategic competition. The race to create the next iteration of the Internet also represents a front in the race to set digital norms worldwide. In China, Baidu, Alibaba, and Tencent are moving towards a functional metaverse platform, with alleged support from the Chinese government, as long as it remains an open-source technology. Further, China and Russia are pursuing country-wide bans on cryptocurrencies, in favor of government-owned and -operated Web3 infrastructures like Central Bank Digital Currencies (CBDCs). Meanwhile, in the US, government oversight and regulatory bodies are still unsure of how to approach technologies in the Web 2.0 environment, assuredly leaving the country behind in the race to govern and manage metaverse or Web3 technologies. This means that in the US, these emerging technologies will likely continue to proliferate against a largely reactive regulatory ecosystem, which will push the US back in the race to set digital norms.  

Snow Crash, the book that lent the metaverse its name, is based on a fatal failure in early Macs in which a failure in software forces the CPU to spew random bits onto the bitmap, causing a snowy-looking display. Key to this failure was a defect in the design, process, or application of a particular software. New technology is not necessarily good, and the future of the Internet will be filled with new technologies that will either benefit humankind or cause a stressed system to crash. Both the metaverse and Web3, as competing proposals for this future, are largely being driven by the technology companies and venture capital firms that own those technologies. Moving forward, it will be important to continue the work of think tanks, governments, and regulatory bodies to manage these technologies and ensure a more just, equitable, and accessible future for the Internet.