Web3: Charting the Internet’s Next Economic and Cultural Frontier

Harper Collins/September 2023

Reviewed by Paul Deegan

September 24, 2023

Alex Tapscott’s WEB3 is a smart, timely, content- and context- rich, highly readable and relatable book. It is a must-read for anyone wanting to understand where the internet is headed and how it is changing everything from gaming to banking.

Tapscott, who co-authored the international bestseller Blockchain Revolution, with his father Don Tapscott, hammers home the point that Web3 is not just about crypto; it’s powerful general-purpose technology with tremendous promise, and policymakers can either derail or enable it.

The author sets the scene historically by describing Web1, or the Read-Only Web (1992–2002), a broadcast medium where people could find information from newspapers and encyclopedias digitally. That era democratized information, but there was very little active interaction. Tapscott makes the point that the first version of a new product or service resembles the old version, noting that the first electric lightbulbs were shaped like candle flames and the first Teslas had prominent front grilles, even though electric cars don’t need them.

The tech wreck of 2000-2001 demanded something new – something better. Web2, or the Read-Write Web (2002–2020), was the answer. It was all about collaboration, with Wikipedia being a prime example. During this era, social media giants including Facebook and Twitter allowed users to become publishers. Along with an explosion in smartphones, companies like Facebook, Amazon, Apple, Netflix, and Google became dominant players. While this era was characterized by amazing innovation, there were also consequences, including the stifling of competition, which regulators are now waking up to.

The viral spread of misinformation has led to polarization. User data generated from user attention has been harvested, sliced and diced, and sold to advertisers, which raises privacy concerns. Tapscott argues that Web2 advocates thought the new writable Web would remove gatekeepers. Instead, the Web2 giants became new gatekeepers. As an example, he cites Meta’s decision to block all news content when Australia introduced its News Bargaining Code and as forest fires raged across the country – something all- too-familiar to Canadians these days.

Among Web2’s shortcomings, he argues, “It funneled internet users into walled gardens and mined them for insights as advertising became the Web2’s business model. Financial intermediaries enriched themselves with little innovation. Centralized platforms created monopolies, stifling innovation.”

With that succinct set up, Tapscott introduces the reader to the nascent Web3. He traces its origins to Satoshi Nakamoto, an inventor who bootstrapped the first publicly available tool to send value over the internet peer-to-peer with nothing more than a computer and an internet connection. Prior to Bitcoin, this was not possible without trusting an intermediary. This set the stage for the much larger commercial, cultural, and political upheaval that is just beginning and is the subject of this book.

With Web3, the Read-Write-Own Web (2020–), assets can be represented digitally, owned, transacted, and secured peer-to-peer via Blockchain. Tapscott underscores that just as property rights laid the foundation for the prosperity of the industrial age, digital property rights will underwrite progress and innovation in the new information age. He sees ownership of digital assets as the foundation to Web3. Ownership allows individuals to earn, save, transact, or invest peer-to-peer. It gives users a stronger say in how platforms and services operate. He has hopes for a more representative and fairly run internet, where platforms are accountable to users, where users have privacy in transactions, sovereignty over their digital selves, and property rights for their assets online.

Through rich historical context, easy-to-understand examples, and interviews with leading practitioners and thinkers, Tapscott takes his readers on a fascinating journey. Web3, he posits, “may be the ‘new, new thing’ but its terroir is complex and generative—and, in some cases, goes back decades.”

According to Tapscott, there are six building blocks to this new internet:

• Tokens: how represent value digitally;
• Consensus Algorithms: how to reach agreement on the state of a decentralized network;
• Smart Contracts: how we automate commercial agreements;
• Decentralized Autonomous Organizations: how we co-ordinate assets and action;
• Zero-Knowledge Proofs: how we program privacy into Web3; and
• Wallets: how we manage our digital goods and identities

For financial institutions, he sees this architecture as an exciting opportunity to reimagine everything the industry does: identity, moving and storing money, providing credit, raising growth capital, insuring against risk, market making in financial products, etc.

I’m a fan of Thomas Friedman’s The World is Flat.  Tapscott must be too, and he clearly believes that Web3 will make the world even flatter. He cites how creators can now monetize a global fan base; how entrepreneurs can connect to global markets; and how stablecoins will displace legacy payment networks. The US dollar, he predicts, will be a big winner, but governments in the Global South will be destabilized because it will reduce the power of central bankers to control the main lever in their economies.

While the building blocks of Web3—blockchains—have existed since Bitcoin launched in 2009, Tapscott thinks we are just at the beginning. Interestingly, given his background in capital markets, one might expect a more bullish view on the timeline for embracing Web3. Clearly, he’s not convinced that we will adopt Web3 on a faster timeline than Web1 or Web2.  He sees the current incompatibility of the asset class with existing laws as an impediment. The collapse of FTX has also dampened enthusiasm.

But the technology has promise for financial inclusion, especially in the Global South, where far too many people are unbanked or underbanked and local currencies are often hyperinflationary. He notes that 30 per cent of Nigerians use bitcoin as an alternative cash and Salvadorans hold more in bitcoin wallets than in bank accounts.

While Web3 has emerged from thousands of contributors – not a tech giant or government program — Tapscott does see a role for government. He’s not some laissez-faire, wild west, anything goes, internet libertarian. In fact, he thoughtfully advocates for — and challenges governments to come up with — a framework for this brave new World Wide Web.

I highly recommend WEB3. It delights, informs, engages, and challenges the reader. It should be required reading for business leaders, policymakers and regulators. Alex Tapscott’s first solo effort deserves to be a bestseller at home and abroad.

Contributing writer Paul Deegan was a public affairs executive at BMO and CN. He served in the Clinton White House.