Web5: Empty Promise or Open Web free from VCs & LPs [2024]

Web5 is out before Web3 establishes its foothold. On June 10, 2022, TBD, which is backed by Jack Dorsey’s bitcoin-focused company Block, announced a new project called Web5. The Web5 announcement follows up on Dorsey’s previous criticism of Web3, and its spat with VCs such as Mark Anderson who has invested heavily in Web3 start-ups. In his tweet about Web5, he was not shy about taking it to VCs one more time. All of this drama and reactions from the likes of Elon Musk and Snoop Dogg have made Web5 a hot topic among the crypto and tech community, but what is Web5 and how is it different from Web3?

What is Web5? 

TBD describes Web5 as decentralized web apps (DWA) that are developed using decentralized identifiers (DIDs) and decentralized web nodes (DWNs). Web5 will be built on the Bitcoin blockchain. 

It is claimed to give users ownership and control over their data and identity.

TBD presented the differences between Web5 apps and Web2 apps in their presentation (Figure 1).

Figure 1. Progressive web apps vs decentralized web apps 

Web5 components

1. Decentralized identifiers (DIDs)

DIDs can be made universally discoverable (everyone can verify them) and they are generated and maintained by users and there is no centralized provider for them. It will run on ION which is a layer 2 network on Bitcoin. It provides censorship and tampers resistance identities. 

2. Decentralized web nodes (DWNs)

The data storage for Web5. It stores public and encrypted data that allows decentralized web apps to be built on top of it.

3. Self-sovereign identity SDK ( SSI SDK)

According to TBD “this SDK encapsulates a set of standards related to Self Sovereign Identity. The ssi-sdk intends to provide flexible functionality based on a set of standards-based primitives for building decentralized identity applications in a modular manner: with limited dependencies between components.”

Figure2. Self-sovereign identity SDKs 

4. Self-sovereign- identity service (SSIS)

In order to understand self-sovereign identity service, you must be familiar with verifiable credentials(VCs).

VCs hold the same information as physical credentials such as issuer (US government, a certification body), and subject’s information (photo, name). VCs are more tamper-resistant compared to physical credentials due to the digital signature that they carry. Copy of VCs (labeled as presentation) can be created by its holder and sent to verifiers. 

Figure 3. How VCs work

Self-sovereign identity service facilitates all of the operations related to DIDs and VCs such as creating, signing, validating, and verifying credentials. 

Figure 4. Self-sovereign- identity service

Use case

A use case of Web5 is the transfer of music playlists. Since the related data are stored in the DWN, users can grant access to their information on any platform that they want. It enables the transfer of music playlists to different platforms easily without the need to create them from scratch.

Web5 vs Web3

Jack Dorsey has been skeptical of Web3 and blockchains outside of Bitcoin, which is why it is not surprising to see elements such as smart contracts and crypto tokens that are heavily used in Web3 are not used in Web5. 

Web3 is labeled to be decentralized but Web5 takes it a step further and labels itself as extra decentralized. Dorsey also answered questions about the difference between Web3 & Web5 on Twitter. 

Problems with Web5 

Energy consumption 

Bitcoin consumes energy on a massive scale due to its proof of work (PoW) consensus protocol that requires a massive amount of computation energy. Bitcoin energy consumption is higher than in countries like Thailand and Poland. (Figure  5)

Figure 5. Bitcoin energy consumption comparison 

A Decentralized web on a centralized foundation? 

Jack Dorsey is a Bitcoin Maximalist and his new Web5 focuses on decentralization, but Bitcoin is not decentralized. Scot Galloway, an NYU Stern professor points this out. 2% of accounts control more than 94% of Bitcoins and 0.1% of Bitcoin miners are responsible for 50% of mining outputs. 

Source: Medium

Decentralization vs centralization 

The word centralization itself automatically portrays a negative landscape. The main argument against centralization is that it puts too much power in the hands of a few technology providers such as Twitter. They can control users’ online activity and collect data on them. They can allow certain content to be shown and ban or remove content that they deem inappropriate. Jack Dorsey’s Web5 utilizes censorship resistance DIDs which is ironic of him as up to 2022 he was the CEO of Twitter which has conducted censorship and removal of content that they assumed inappropriate. In a decentralized world, there will be no control, social media can be filled with types of extreme and illegal content that can not be taken down as they are not possible to censor.

Decentralization aims to give ownership of data to users. However, data has become an integral part of the digital world. Many companies rely on data to optimize and develop products. If the data becomes scarce it can increase costs and lower product quality which eventually makes the end customers suffer from higher costs and lower quality products. 

The level of centralization can be thought of as a spectrum, both extreme sides take away so much from the users and companies. Extreme centralization hurts the freedom of users and extreme decentralization provides an unnavigable wild west-like landscape with no structure. Finding the right balance between user’s freedom and an efficient structure that ensures innovation and quality is the real challenge.