We can have a long discussion of Web3 and Web5, when it comes to web and blockchain integration. It provides the glue to the crypto metaverse. Both frameworks have their strengths, but they also have points for criticism.
They can disrupt the legacy web in their implementation, but have not gained the level of adoption where they can be considered a transformative technology like the Internet. They can both be solutions in solving the same problem, but which one can offer us the best decentralized web? We can begin by looking at the difference between Web3 and Web5.
Web3 vs. Web5
The Web (i.e. World Wide Web) is extending into the blockchain, with innovative new technologies introduced by the Web3 development framework. It is an enhancement to the Web (i.e. Web2), which brings integration of web technologies with token-based networks using smart contracts that run non-trusted executable code. This allows features for seamless digital asset transfers and verification through a decentralized database called a blockchain (e.g. Ethereum). Ideal applications include in-game items, NFTs (Non-Fungible Tokens), digital certificates, rewards/loyalty programs and the emerging sector of DeFi (Decentralized Finance). The blockchain helps to establish ownership, by recording the data immutably and provides transparency for everyone to see. Web3 projects have strong support from a growing developer community and VC funding.
There is also a competing framework to Web3, called Web5. It is like a pun on Web2 and Web3, since adding '2' and '3' is equal to '5'. Web5 mainly provides blockchain integration for Web2, but using a different mechanism. It uses a simpler peer-to-peer network based on the original blockchain conceptualized by Satoshi Nakamoto (founder of Bitcoin). It is not based on smart contracts on EVM (Ethereum Virtual Machine) compatible blockchains, but on the Bitcoin network as the base layer. Web5 introduces us to DWN (Decentralized Web Nodes) which is like a mesh network of self-sovereign peers that share and pass data for processing. Tokens are also not required for use on Web5 networks, with Bitcoin (BTC) being the only cryptocurrency in use. This has the backing of proponents who strongly support Bitcoin due to its strong fundamentals and sound money principles.
Decentralization
An important feature that Web3 and Web5 bring to the Web is decentralization. That means independence from big tech platforms, who can control and manipulate user data. There is also a lack of guarantee with content on the big mainstream platforms in social media where there is plenty of public information sharing. Users of these platforms do not actually own the content they create or claim to own. First of all, these platforms offer the service for free with the help of ad sponsors. In no way is the platform responsible for keeping user content, especially since users are not paying for it.
Take for example a user's posts and tweets on social media apps. The platform can remove and censor content based on policy violations, but sometimes it can be done for other reasons not necessarily related to policies. It can be due to difference in opinions, political viewpoints or perceived misinformation (i.e. "fake news"). If a platform were to suddenly shut down, the data that belongs to a user can also suddenly disappear with no way to get it back. It has happened before when pre-dotcom companies that provided free web hosting suddenly ceased to exit. The users who were not able to backup their content would lose it forever once the companies shut down their servers.
A decentralized web can offer users a way to establish the ownership of a user's content. This means no third party or trusted platform is necessary for storing and moderating content. Users can own their content or items by creating a digital record on a decentralized network that run on a blockchain. Once the content has been recorded on a blockchain, it cannot be deleted or modified and serves as a testament to verify a record or a claim to ownership.
The content itself will be stored on a decentralized storage system, which can continue storing it even if the platform were to suddenly close. That means the content is less prone to deletion and getting lost since there are many copies of it made across the network. Decentralization allows content creators more control, security and privacy that is separate from the platform they use. It also allows them to be the only one who can modify or destroy the content.
Applications that are decentralized (i.e. DApps or Decentralized Applications) can validate transactions that require verification, without the need for another party to do the verification. The blockchain replaces that party, as a non-trusted non-intermediated layer that can prevent fraud and manipulation of data by a third party. The blockchain can give users much more integrity as a fair and reliable system.
For Web5 proponents the best blockchain in terms of decentralization and proven reliability is the Bitcoin network. On the other hand, Web3 proponents believe in smart contract execution on Layer 1 or EVM blockchains as a more robust solution which can be secured by a network of validators. Decentralization is important because it will be the value of using these web frameworks. Proponents of Web5 can even argue that decentralization is a more significant feature than having scalability, so speed is not as important.
The Takeaways
While decentralization can offer many benefits to users, there are some takeaways for both Web3 and Web5. These technologies are not meant to replace the existing Web infrastructure, but to offer a way to verify content that a user owns. They are also not a necessity in the current web environment, since they are more for users who have cryptocurrency.
The main criticism with Web3 is that it is highly concentrated in the hands of developers and VC investors who can exert plenty of influence. That makes it more centralized and thus more prone to manipulation. That is actually true if you see how projects like Solana can easily restart their blockchain. The same goes for digital exchanges like Binance, who have a small number of validators on their network (21 validators only). The concern here is that with fewer validators, there is too much concentration of power that is not much different from traditional platforms.
Web5 proponents claim that the Bitcoin network offers more decentralization. It has never been hacked or controlled by any entity or organization, thus it can deliver more security for transactions. The problem is that Bitcoin is a slow network, with block propagation time at 10 minutes on average. It has an issue with trading more scalability with the benefits of decentralization and security. In the real world, this can be too slow for handling large volumes of transactions that will be required for further adoption to grow.
There is also a common issue with Web3 and Web5, and that is high fees on the network. This occurs when the network is busy and experiencing backlogs. The cost of a transaction can suddenly increase due to demand on the network. The fee can be determined based on difficulty and miner fees for PoW (Proof-of-Work) consensus blockchains. When network resources are overwhelmed the network fee increases, such that the cost to process a transaction on the Ethereum network during the height of the NFT craze was once averaging $70 (May 2021). It would make no sense if the transaction fees are higher than the cost of an NFT.
On another note, when it comes to the problems with Web3, developers have come up with solutions to work around the issues. Developers are building Layer 1 (L1) blockchains that compete in performance to the main smart contract platform, Ethereum. Other solutions come via Layer 2 (L2) and sidechain networks that process computation off-chain and use the main L1 blockchain for settlement of a transaction. This has led to more scalability, leading to faster processing of transactions at the least cost. Improvements can be seen in the processing of NFTs via sidechains like Polygon or L1 blockchains like Solana, which are cheaper and faster than on the Ethereum network.
Addressing The Issues
Ethereum has undergone an upgrade with The Merge, shifting from PoW to PoS (Proof-of-Stake) consensus mechanism. It improves efficiency and speed, to prepare the Ethereum network for faster processing of transactions as it continues its transition to ETH 2.0. Ethereum's blockchain also has no capped limit to the number of validators using PoS, thus allowing for more decentralization. As a rule, all validators must have a minimum of 32 Ether (ETH) staked in order to participate. That means the maximum validators depends on the amount of ETH that can be staked.
For Web5, developers can make use of the Lightning Network (LN) for faster processing of transactions. This is also a Layer 2 solution, that makes use of payment channels for processing transactions off-chain. The final settlement is sent back to the main Bitcoin network. LN helps offload the burden from the network, allowing it to free up congestion and scale. This also helps to lower transaction fees, which allow for micro-transaction payments to be possible. This allows the Bitcoin network to preserve its core decentralized architecture while offering a separate or parallel layer for processing transactions.
For the issue of too much centralization, Web3 developers have come up with digital governance models used in PoS consensus. This is through a delegation system that allows voting for policy changes and implementations that affect the blockchain. The idea is to allow the power in the hands of a few, but through an election process that involves the rest of the community. Token holders are given the privilege to vote for delegates who represent their interest in the Web3 platforms they are using.
Web5 maintains decentralization through DWNs. This allows for no central authority in control of the network. Users can interact peer-to-peer with each other without having to rely on third party platforms. Users will be in complete control of their data, whether they want to make it public or private only.
Web3 or Web5?
Which is the best solution for a decentralized web, Web3 or Web5?
Web3 and Web5 both offer a solution, but neither system is perfect when it comes to decentralization. Bitcoin has proven decentralization in practice, but adding another layer to it can make it less decentralized. That is the same with Web3, which can already be too centralized from the start. If a token is mostly controlled or held by the developers, then it is not decentralized. It is possible that any transaction on a blockchain can still be reversed or even censored.
Despite Web3 projects addressing the issues of scalability with Layer 2 and sidechain solutions, there is still the element of centralization. The reason some of the Web3 projects can scale is due to a more centralized consensus mechanism, which puts the network in the hands of a few decision makers. However, there is a digital governance process that allows token holders to vote for these decision makers who can validate transactions on the network. Even if there was an election system in place, what if the validators decide to collude and consolidate their power over the network? Another concern would be if a validator holds a majority of stake, they could in theory control the network.
Web5 has a solid network in Bitcoin, that is the blockchain model of decentralization. The main problem is the design is slow despite being more decentralized and secure. Layer 2 solutions like the LN can provide fast payment channels on top of the blockchain, but if there are not many available then that system can be centralized among a few participants. Thus, more payment channels would be needed to distribute fairness. While it sounds good on paper, there is the possibility that a rogue participant can also ruin the experience for users if they are able to steal funds during payments.
A truly decentralized web allows the users full control of their data that is verified and completely separate from the platform. What we need to see from either Web3 or Web5 is more transparency to show that they are decentralized. This can be through a network where the concentration of power is fairly distributed with proofs that can also be cryptographically verified on a blockchain. At this stage there are still a lot of fine tuning and optimization in progress, so there are still more developments to come to hopefully bring the value of decentralization to users.
