Web3 101 Part III- The Decentralized Web: Removing the Middleman

Aug 11, 2021

Last updated on Aug 11, 2021

Web3 101 Part III The Decentralized Web

In our previous Web3 101 articles, we explored the issues surrounding the current state of the web. In case you missed those, here’s the TLDR:

Today’s web is highly centralized - largely owned and controlled by a handful of entities. These companies offer “free” products, then generate an overwhelming percentage of their revenues by collecting and renting out user data to advertisers. As users of the web, we are no longer the customers, we are the product. The websites and services we use are no longer made with our best interest in mind - they are made to capture as much of our attention as possible. Addicting users and harvesting data has become the default business model of today’s web. 

Thankfully, the decentralized web is creating an antidote.

The Decentralized Web

First off, what is the decentralized web?

The decentralized web, or Web3, is a digital world that is owned and governed by its users. It removes countless layers of centralized institutions along with the many issues and speed bumps that they bring along. Data and personal information are given back to their rightful owners, and advertisements no longer serve as the core financial mechanism supporting the web. 

So, how does Web3 achieve all of this? It all starts with cutting out the middleman.

Cutting out the Middleman

Dangers of Middlemen

Trust is tricky on the internet. You can never be certain as to who is on the other side of the screen, but any transaction requires some level of trust. In order to make up for this uncertainty and facilitate trust, we have turned to using middlemen. The use of middlemen, or intermediary figures, allows individuals to place their trust in an established third-party. On top of facilitating trust, intermediaries help individuals reach each other, and help businesses reach wider audiences. 

These intermediaries are everywhere — banks are intermediaries for payments, DNS is an intermediary between users and websites, Google is an intermediary for information, Facebook is an intermediary for community, YouTube and Spotify are intermediaries for content distribution, and Amazon is an intermediary between consumers and vendors. 

Until recently, facilitating trust and transacting online was virtually impossible without these middlemen, and our strong reliance on them has contributed to their astonishing growth. While intermediaries have been essential to the web, the threat they pose has begun to outweigh the value they provide.

Data Centers

As we covered in the previous article, intermediary giants like Google, Facebook, and Amazon collect massive amounts of sensitive information from their users. All of that information — everything from DOBs to email addresses to credit card info — is held privately by these companies and stored in massive data centers. Some of this info is used to prove user identities, thus forming trust, while other info is used for business and advertising purposes. 

Unsurprisingly, these large data collections are prime targets for hackers. While these companies utilize many layers of security to keep this data out of the wrong hands, a quick visit to haveibeenpwned.com will show you that data breaches are alive and well. 

Facebook was hacked in April of 2021, resulting in the information of 533 million users being stolen and made available to cyber criminals. In 2013, Yahoo was infamously hacked, resulting in all 3 billion of their users’ accounts being compromised. Yahoo didn’t even discover the full scope of this hack or report it until 2016. 

There are hundreds of data breaches every year, leading to millions of records being exposed. And those numbers are only going up. As our reliance on the web grows, so too does the impact of these data breaches.

Data breach stats by haveibeenpwned.com

Concentrated Control

On top of storing data, more and more of the web itself is being stored and served up by a small number of companies. Instead of businesses buying and maintaining their own web servers and databases, many simply rent another company’s hardware. This is what is known as cloud computing -  the delivery of content and computational resources over the internet. Cloud service providers like Amazon Web Service, Microsoft Azure, and Google Cloud act as intermediaries between users and a very large portion of the internet. We’re not talking mom and pop sites - Netflix, AirBnb, eBay, and PayPal all rely on the cloud.

The potential issues here are less about power outages taking Netflix offline for a few hours, and more about the increased control that these providers are gaining. If the current concerns surrounding big tech are anything to go off of, allowing those companies to own, store, and manage even larger swaths of the web may be a path we want to rethink. 

In a similar vein, social media sites and content platforms have turned into battlegrounds for free speech, leaving it to CEOs and shareholders to weigh in on increasingly complex sociopolitical issues. To respond to this, lawmakers are forced to choose between meddling in private businesses or making those businesses accountable for censorship on their platforms. The former is a slippery slope for the free market to go down, and the latter grants these social sites and content platforms even more control. As this issue currently stands, it’s a real lose-lose.

Concentrated Value

Needless to say, all of this data and control has enabled today’s internet giants to amass some pretty incredible market caps. While some of this wealth is the result of ingenuity and breakthroughs in technology, a large portion of it actually comes from the creations of users. 

YouTube, TikTok, Spotify, Instagram - all of these platforms simply act as intermediaries between content creators and consumers. That in and of itself is not an issue. The issue becomes evident when we see these platforms taking the lion’s share of the value their users create. Without sufficient alternatives, and no good way of migrating their followings, content creators are effectively locked into using these platforms and accepting their increasingly small slice of the pie.

Artists receiving a small slice of the industry pie

The Decentralized Alternatives

All of these business models were made possible because we needed intermediaries to connect us online and allow us to trust each other. But now, we have a new way to do exactly that, and it’s rooted in blockchain.

Blockchain

Blockchain is a decentralized, distributed, immutable ledger. Essentially, it is a secure way to record and keep track of information without the use of middlemen or centralized institutions. 

Blockchain has no centralized owner or manager. Instead, it is managed and maintained by its entire network of users. Blockchain effectively creates a giant shared computer, with individual devices, called nodes, replacing data centers and server farms. This removes these single points of failure, as well as the potential for a centralized figure to assert control over the network. 

Most importantly, blockchain bakes a level of trust into the system itself. This is done through the use of cryptographic keys, which allow individuals to prove their identity without handing over sensitive information. By retaining ownership over their data, Web3 users enjoy a level of security, privacy, and data portability that is simply not possible on today’s centralized web. 

This ability of blockchain to create trust between individuals is fundamental to the decentralized web. By building trust into the web itself, Web3 removes the need for intermediary figures along with the reliance on misaligned economic streams like ad revenue. While intermediary platforms do still exist on Web3, there is a very important distinction to point out - they are not owned by centralized figures. Instead, ownership is sliced up and spread out amongst the users.

This opens the door to a new world of possibilities.

Data Ownership

What happens when you gain ownership of your data online? To most of the world, this is a foreign concept. But it looks something like this-

On Web3, you log onto the web itself, not individual sites and platforms. Instead of handing over data and personal information to create separate accounts all over the web, that data and info is all held in your wallet. Think of your Web3 wallet like a real world wallet combined with a real world passport - it contains your personally identifying information as well as your digital assets like cryptocurrencies and NFTs.

Your wallet is your master account to all of the decentralized web, allowing you to prove your identity to any website or application you interact with. Trust is formed, no data collection required. You know what else isn’t required? Separate accounts and passwords for every site you use. And all of those data centers full of our sensitive information? They will be relics of yesterday’s web. Sorry, hackers.

Many keys needed to use the traditional web, only one key needed to use the decentralized web

Community Control

Okay, now that users have control over their own data, where does the rest of the web’s data live? On the decentralized web, that too is spread out amongst users. This is made possible by projects like IPFS.

IPFS, or the Interplanetary File System, takes the idea of cloud computing and splits it up. At the core of IPFS is a fundamental shift in how content is stored and served. As we discussed earlier, our current web stores content on centralized servers. Every time a user wants to access a specific piece of content, they have to send a request to that server, and the server sends the piece of content back to the user. This is known as location based addressing. 

On IPFS, though, any device can store and serve the web’s content. You, yes literally you, can become a node on the IPFS network from your laptop. Every piece of content on IPFS is then given its own unique code, called a hash. Instead of retrieving content from a specific server, users are able to locate a piece of content itself by sending a request for its hash. The network then serves up the content from the nearest node, regardless of where it originally came from. If you have ever torrented content (it’s okay, we won’t tell anyone) then you are already familiar with this process.

By leveraging a distributed network of hosts and servers, IPFS is able to remove the single points of failure and potential for censorship that come along with centralized web servers. This introduction of a secure, peer-to-peer file sharing system gives businesses a real alternative to storing content themselves or relying on a centralized entity to do it for them. Now, in terms of competing with cloud computing and other centralized options on an enterprise scale, Web3 has some catching up to do. But keep in mind this technology is still in its infancy. To put it into some context, if the decentralized web was the cellphone, we’re probably somewhere around the Motorola Bag Phone days. So, the potential is great, but the execution hasn’t quite caught up yet.

Community Value

Similar to the IPFS model, other Web3 applications can also be decentralized. These decentralized applications, or dapps, are open-source and executed on the blockchain. 

Dapps like Audius, a decentralized music streaming platform, put content creators directly in touch with their audience and remove the need for middlemen almost entirely. While the Audius team created the platform, they are no longer its sole operators or beneficiaries. Audius lives on the blockchain and is owned and governed by its users through the platform’s native cryptocurrency, AUDIO.

Audius distributes AUDIO tokens to its users for contributing to the platform. On top of being transferable for real world cash, AUDIO tokens give their holders the right to vote on changes to the platform. This ensures that any changes to the platform are in the best interest of its users. 

The ability to pay creators directly for their work and give them a say in the platforms they use is a massive shift in the creative world. This is especially true of the music industry, where the majority of revenue and decision making power still go to middlemen. This same method of ownership and value distribution can be applied to any application — it won’t be long before we start seeing decentralized alternatives to platforms like YouTube and Instagram gaining traction.

Audius tweet about creating a decentralized and fair streaming platform

The Decentralized Web is Here

Now, there is no denying that decentralizing the web will bring new issues to the surface. The path to decentralization will be an uphill one, riddled with landslides and roadblocks. And decentralization itself is not the end all be all solution to the problems caused by today’s web. Still, it is a necessary pivot away from the cliff that we are currently racing towards. Decentralization is a restructuring of the system, made to even the playing field and return power, value, and opportunity to the many. Ultimately, it will be up to us, the users, to create the web that we really want. 

Now that we have seen how users can decentralize the web, you may be wondering why they would want to. Surely, there are plenty of people who will support IPFS and dapps out of their desire to create a free and open web. But relying on volunteers isn’t exactly the best way to bring a world-changing technology to life.

In order to incentivize Web3 builders and ensure they have the user’s best interest in mind, Web3 utilizes its own native incentive mechanism — cryptocurrencies. Yup, as it turns out they’re much more than speculative assets used for ransomware attacks. In our next Web3 101 article we’ll take a closer look at cryptocurrencies and find out how they are powering the creation of the decentralized web.

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