The internet has come a long way since its inception. Now it’s a powerful and influential tool that is an integral part of our lives. Yet, it’s not without its flaws. Many people recognize its pressing problems, and that is the lack of privacy, security, and centralized power.
Web3, the idea of a new version of the internet, is set to resolve those issues by bringing the power back to the user and revolutionize the whole internet as we know it today.
Being in its infancy, Web3 already has a great disrupting potential for both people and businesses if it goes mainstream. That’s why it’s essential to understand this new concept to be aware of a potential revolution in the Web.
In this article, we look at what Web3 really is, its features and structure, why it seems so appealing, see its limitations and learn how it evolves these days.
- What does this fuzzy Web3 mean?
- Web1, Web2, Web3 explained: evolution in overview
- What will Web3 look like: Web3 vs Web2 comparison
- Building blocks and elements of Web3
- Web3 advantages or why it’s so appealing
- Web3 disadvantages or why it is sometimes criticized
- Looking ahead
What does this fuzzy Web3 mean?
You’ve probably already come across various definitions of Web3, and it might seem quite fuzzy to you. That is because this concept is relatively new, and Web3 is still being built. Currently, public awareness of Web3 is not high, yet it is growing even despite the crypto winter.
Ok, now let’s quickly define Web3.
In a nutshell, Web3 is a new iteration of the internet which aspires to be a fair and transparent network where all web applications, sites, etc., will no longer be controlled by a few big tech companies like Google and Amazon who own the content we create on their infrastructure and who collect our personal data without our consent and monetize it to their own favor.
Instead, they will run on the blockchain and be decentralized and termed as dApps (decentralized applications). “Decentralized” in Web3 context means that our activities and data would be hosted and stored by users with their computers acting as servers rather than hosted on servers of centralized big tech companies.
Web3 is a true revolution of the internet. That’s why when we talk about Web3, we also mean by it the technological infrastructure on which it’s grounded: blockchain, smart contracts and digital assets (crypto tokens and NFTs). We’ll elaborate on this later in the article.
What does Web3 mean for the users?
Put briefly, it will give users power once stolen by centralization.
Web3 will ensure permissionless (no gatekeepers control the network), censorship-free (no one can block you), and trust-worthy(no middleman) access to the network and return the users full control over their own data. Users become the sole owners of their data and may choose to sell it to earn tokens or keep it private(encrypted) if they want to.
Why is Web3 important?
It’s important for two main reasons:
- Not only will Web3 change how users experience the internet, but it will also uplift their status in the network. Now big tech companies won’t have access to user data so easily and can’t trade it to marketers.
- Such a shift in user status will inevitably bring major changes in business models and force businesses to adapt and seek new ways of approaching consumers in the new digital landscape.
Web1, Web2, Web3 explained: evolution in overview
Every good explanation of Web3 points out what previous versions of the internet looked like.
If you’re already familiar with this, you may skip it; if not, here’s the gist.
Web3 is a blend of the previous two eras of the internet – Web1 and Web2.
Open protocols and decentralization(Web1) + advanced tech and massive user interaction (Web2) = Web3
Now, you might have a quick idea of how different Web3 is from the internet of other eras.
To better understand what will change, let us see the difference between current Web2 and what Web3 promises.
What will Web3 look like: Web3 vs Web2 comparison
Web2: applications run on centralized databases or web servers provided by big tech companies.
Web3: applications run on a decentralized public ledger/database (blockchain) and are distributed across a network of computers (nodes) on the blockchain. Thus, in Web3, web applications become dApps.
Ownership and Profit
Web2: big tech companies provide infrastructure for web applications we use and, in fact, own our content there. If they decide to restrict access to some platform, for example, users will be left with nothing.
Because they provide us with infrastructure, they also collect our personal data, store it in their private databases and sell it for their own financial benefit.
Web3: only users own the content they generate, and their ownership is recorded on the blockchain and can’t be somehow manipulated or deleted.
Users own their personal data and can set it private. That’s why it’s assumed that in Web3, companies might pay users to get their data.
Web2: users don’t own their digital identities and need to create a username and a password whenever they sign up for a website.
Web3: users own their digital identities, which are tied to their crypto wallet. The private key and wallet address will ensure smooth user interaction across different platforms.
Web2: networks are established through massive investments into marketing to gather and grow the audience.
Web3: networks reward the users for engaging with the application and use various incentives to grow the audience.
Web2: big tech companies control and govern everything across the web and act as trustees. They can censor the content and approve network participants.
Web3: users have a say through decentralized autonomous organizations called DAOs and vote on how dApps should operate. Anyone can join the network, and no content censorship is imposed.
Web2: users need a centralized intermediary company (bank) to execute a transaction that acts as a trustee between two parties.
Web3: payments are made directly in the browser, without intermediaries, using native tokens (cryptocurrencies of a specific blockchain).
Now that you see how it differs from Web2, let us discover what Web3 consists of.
Building blocks and elements of Web3
Web3 is made up of three 3 tech fundamentals and that is blockchain, smart contracts and digital assets. Let’s briefly explore each of them.
Put simply, blockchain is a big shared database. Any participant can read and add data to it, but nobody can change or delete anything there. That’s all because any shift affects the following blocks, and any change can be easily traced within multiple copies of the database. Thus blockchain is often called ‘immutable’ or resistant to change.
Blockchain is used for recording and storing information on the internet. Currently, it’s mostly data on asset ownership (e.g., cash, land, intellectual property, etc.) and the history of transactions.
How does blockchain work?
Instead of a centralized entity, regular users of the network carefully validate blockchain transactions to earn rewards (tokens) and reach an agreement (consensus) and authenticate transactions. Once validated, transactional data is added to the blockchain, and the new ‘block’ (data segment) is created and permanently linked or ‘chained’ to the previous blocks.
This original block is then duplicated across the network, and all nodes receive an encrypted copy of the block. Each time a new block is added, all nodes update to reflect the change.
Why it’s cool?
- decentralized and encrypted;
- ensures transparency among all stakeholders;
- can’t be hacked or manipulated.
Smart contract is software stored on a blockchain. It represents application logic and can perform tasks autonomously based on a predefined set of rules written in the code of the ‘contract’.
No one owns the code of the smart contract; it’s transparent for all stakeholders and can be changed if the users find it necessary. It will happen through a form of collective governance called decentralized autonomous organization or DAO.
DAOs are blockchain-based organizations that operate towards shared goals: all users vote on changes and modifications and define dApps future direction in such a way.
Ok, and how do smart contracts work?
When someone attempts to, let’s say, make a payment, smart contract checks whether conditions meet predefined criteria and executes the transaction if everything is alright.
Smart contracts facilitate direct interaction between stakeholders without any central authority, in our case, without a bank.
Digital assets and tokens
Digital assets and tokens are the final element of Web3. They are verifiable and ownable digital items that represent units of value in the Web3 ecosystem. These assets are an indivisible part of the digital user experience as they exist on the blockchain across the dApps and can engage with smart contracts.
Information on asset ownership is no longer stored in centralized databases but on blockchain as a decentralized database. This means they can be put to use, for example, traded, anytime without a third party being involved.
In general, there are five types of digital assets as of now:
- Native tokens – digital monetary assets of a specific blockchain used to reward nodes for maintaining and updating the data on that blockchain.
- Stablecoins – fixed-price cryptocurrencies that represent cash on the blockchain. Their value is backed by the market value of fiat currencies like the US dollar or central bank digital currencies (CBDCs), regulated by a central bank.
- Governance tokens – a type of cryptocurrency that gives its holders the right to vote on proposed changes and shape the future of the platform.
- Non-fungible tokens (NFTs) – are “one-of-a-kind” digital items that contain a unique digital signature that proves the user’s sole ownership; almost everything can be converted into NFT, even a tweet.
- Digital assets – represent ownership of a real-world asset such as land, commodities, or intellectual property that is “tokenized” into divisible digital assets on the blockchain.
Web3 advantages or why it’s so appealing
Web3 has a lot of advantages that make it so much better than Web2 currently. Let’s have a look at each of them.
Privacy – no central entity controls the digital environment – only users have control over their personal data and digital identity, and only they decide what to do with it (set private, sell, etc.)
Users empowerment – beyond data, users can also own digital assets and content they create (intellectual property), and this ownership is recorded and easily proved through blockchain.
Freedom of speech – once added to the network, blockchain records cannot be changed or deleted as they are chained to the previous records and all copied across the network.
Security – as blockchain records are being encrypted, duplicated, and spread across the network of computers, it becomes impossible to hack or manipulate them. Any change will be easily detected due to multiple copies of the database stored across the network.
User centricity – users shape and grow the network of a dApp and receive incentives for that. Instead of a central entity, each dApp has a DAO where users collectively govern and decide its future.
Peer-to-peer finance – instead of a bank, financial infrastructure in Web3 relies on blockchain and smart contracts. It is powered by cryptocurrencies, thus ensuring more transparency, security, lower fees, and better interest rates. Users deal with finance directly in the browser without any middleman facilitating the whole process.
Interoperability – whenever users move from platform to platform, their data always stays with them, as well as the digital assets and audience – all of that is due to the crypto wallet, which represents users’ digital identity and is independent of the platform.
No server downtimes – dApps run on the blockchain, which is maintained by a large network of computers participating in the blockchain. If one server goes down, the whole system still runs, as all the rest stay and keep the blockchain up and running.
Yes, that’s why Web3 seems so appealing and praised. But like every new technology, Web3 also has challenges to conquer and risks to be addressed for it to go mainstream.
Web3 disadvantages or why it is sometimes criticized
All in all, the main Web3 limitations as of now are issues with regulations, user experience, and risks concerning underlying infrastructure.
Currently, investments and strenuous efforts are being made to conquer these challenges, and the regulatory landscape could eventually brighten up one day, as the number of Web3 enthusiasts is growing and many people find the idea of decentralization quite appealing.
As technology advances we may one day wake up in the whole new era called Web3. It’s a better version of the web which has a large list of advantages. As Web3 is still immature, it has its drawbacks, but lots of investments and efforts are being made to reduce them.
For some new iteration of the web might seem alien or unrealistic. For some, it might seem superfluous, but let’s remind ourselves at first place that the idea of the internet itself seemed very much the same.
Because who could have thought back then that technologies would reach so far and disrupt our life so exponentially?
And coming back to our present-day reality, who can be sure of what the future holds? Maybe in 10-years time this ‘Web3’ thing will be a new norm.
Reality check: many big tech companies and businesses all over the world are already in the process of figuring out the ways to approach Web3. Think of the recent name change of Facebook to Meta, for instance. That’s a clear business move that shows its growing ambitions beyond social media and focus on the metaverse.
That’s why it is crucial for businesses to not stay aside and prepare for the disruption unless they want to be left behind one day.