Web 3.0: An Introduction
Web 3.0 or Web3 is a decentralized internet that leverages the power of blockchain technology on which a wide range of decentralized applications (dApps) are developed and operated. Also known as the Decentralized Web or Semantic Web, Web3 offers a more transparent and secure way to access services online without relying on Big Tech companies to handle users’ data and privacy.
Unlike most centralized online services in the mainstream internet today, Web 3.0 takes back the control from large tech companies and empowers internet users by giving them greater control over their online data and security. The dApps that power Web3 are built on public blockchain networks like Ethereum and include numerous categories - from gaming and social networking to decentralized finance (DeFi), NFTs, and the metaverse.
As of 2022, Web 3.0 is still in the early stages of development, and new use cases and applications for the decentralized web are constantly being discovered. While Web3, based on decentralized ledger technology and smart contracts, is yet to go mainstream, its supporters believe it has the power to take on Big Tech and usher in a much-needed wave of transparency, openness, and security into how we access services and interact over the internet.
The term Web 3.0 was coined by Ethereum’s co-founder and Polkadot’s founder, Dr. Gavin Wood, in 2014. Gavin envisioned Web3 as a way to improve trust in the World Wide Web, removing the reliance on a few private companies.
The Predecessors: Web 1.0 vs. Web 2.0 vs. Web 3.0
Before Web 3.0, there were Web 1.0 and Web 2.0 - the previous iterations of the internet as we know it. Let’s learn more about them before we go further.
Web 1.0
The Internet, or the World Wide Web as it was called back then, was primarily a read-only service. Companies and businesses put up their websites with information that could be viewed and read, but there was no genuine concept of interaction online in this static web.
The Web1 phase of the internet era lasted approximately from the technology’s launch in 1989-90 until 2004. It was driven by static content on web pages that could be accessed online.
Web 2.0
In 2004, the internet transformed with the advent of social networks. From becoming a read-only experience, social media platforms made the internet a place where users could access information and interact with other users or businesses. This stage is also known as the read-write period in the history of the internet.
Social media brought on the most significant change in how users interacted online, empowering them to share their thoughts and communicate online instead of merely consuming information posted by someone else on the internet. However, with the web's evolution, the emergence of large corporations controlling social networks and, by extension, the data shared by web users became an emerging concern over the years.
Web2 started roughly in 2004 but continues into today, although concerns and awareness about data privacy in the digital realm are rising steadily.
Web 3.0
It only took about a decade for the general public to start seeing the cracks in how Web2 operated. Enter Web 3.0 - the third generation of web technologies, in 2014, at least in the form of a proposal.
Known as the read-write-own phase of the internet, the decentralized form of ownership of data and online access takes back the power from the internet giants and makes the Web easier to trust and safe to use. The building blocks of Web3 include blockchain technology, cryptocurrencies, and non-fungible tokens (NFTs) - all designed for decentralized, permissionless, trustless, and more transparent operations.
Although the term was coined in 2014, it took several years for innovation to bring Web3 into the limelight. As of 2022, there is greater awareness about its potential, but its reach remains significantly lower despite the rising distrust in Web2 systems.
How Web3 Overcomes Challenges of Web1 and Web2
While Web1 was limited by its scope of use cases, Web2 opened up a whole new way to use the internet for global consumers. However, it also resulted in the concentration of power in the hands of a select few tech companies who indulged in unauthorized data collection from users for monetization opportunities.
The following are the key features that enable Web3 to offer not only greater security and privacy over users' own data but also more versatility for both businesses and end users:
Decentralization
Designed on the blockchain, Web 3.0 applications are distributed and no longer allow user data to be owned or controlled by a central authority. Instead, such decentralized apps offer complete control over data to the users, limiting potential tracking and misuse of how they interact with dApps or access the internet.
Permissionless
Access to Web 3.0 services is democratized in a way that was never possible with the centralized model of Web 2.0. In Web3, users, creators, and organizations are all treated equally - everyone has the same right to create, consume, monetize, and enjoy services on dApps.
Trustless
Instead of placing trust in a tech company that owns and operates a service online in Web2, decentralized platforms that form Web3 offer a trustless and transparent interface for user interaction. Incentives in the form of tokens are designed into the operations, encouraging optimal functioning from all stakeholders and eliminating the concentration of power or trust on third parties.
Decentralized Payments in Cryptocurrency
Instead of relying on traditional currencies and banking systems with intermediaries, Web3 runs on cryptocurrency as its economic fuel. Thanks to cryptocurrency, making payments on Web 3.0 services is faster, cheaper, and peer-to-peer. This feature also makes Web3 far more accessible for the larger unbanked global population, who previously lacked access to methods for online financial transactions on Web2.
Security and Privacy
The underlying blockchain technology that powers Web3 lends the applications cryptographic security and the power of immutability inherent to the blockchain. In addition, smart contracts, used for programming dApps in the Web 3.0 world, offer higher levels of verifiability and transparency in the code - something Web2 applications do not provide. As a result, trust is implicit in Web 3.0 solutions.
Scalability
Web 3.0 is designed for higher levels of interoperability as it can seamlessly connect with multiple systems and technologies. This makes the technology more scalable while offering increased convenience to migrate from legacy tech. In addition, the flexibility makes integrating various applications and platforms easier - a fundamental limitation of Web2 technologies.
Responsive and Intuitive
One of the best things about Web 3.0 is that it is getting developed along with emerging technologies such as artificial intelligence (AI), machine learning (ML), and natural language processing (NLP). This lets Web 3.0 applications offer higher levels of intuitiveness in use right from the beginning. On the other hand, adapting Web2 solutions with these emerging technologies is more challenging.
Opportunities in Web 3.0
Web 3.0 may be hard to identify, but it’s already all around us, and its adoption is increasing. Here are some of the most promising opportunities that Web3 offers:
Decentralized Finance (DeFi)
Decentralized Finance (DeFI) is one of the most popular use cases of Web3 technology. DeFi protocols like Uniswap and Aave developed on blockchain networks make it possible to transact, trade, lend, borrow, earn, and do more with cryptocurrencies in a peer-to-peer format without relying on a centralized intermediary to process financial transactions. DeFi has enabled people without bank accounts to access financial services, conduct transactions, borrow funds, trade in the crypto market, and grow their wealth.
Non-fungible Tokens (NFTs)
Despite how the NFT craze took off in 2021, we’ve only just scratched the surface of the immense potential of this market. From tokenizing real-world assets to giving creators greater ownership, transparency, and rewards for their efforts, NFTs and tokenization could be one of the essential pillars of Web3.
The NFT sector has one of the most robust potentials in taking Web3 mainstream. From supporting the tokenization of real-world assets and making them easy to trade, own, and manage on the blockchain to offering more incentives to content creators, non-fungible tokens can do more as the market evolves and new use cases emerge.
GameFi
The Play-to-Earn (P2E) movement that generated immense buzz through 2021 was instrumental in onboarding a significant percentage of new users into the crypto industry and made people more aware of Web3. The decentralized infrastructure of Web 3.0 on which blockchain games are developed offers incentives to players for their time and effort while making it possible for game developers to earn more from their creations.
GameFi, powered by NFTs, makes gaming more economically rewarding and engaging and is one of the most fun applications of Web3. Gaming dApps like Axie Infinity and STEPN are among the most popular decentralized apps consumed or accessed in the Web 3.0 market.
Metaverse
More people worldwide have heard of the Metaverse than Web3. Believe it or not, Web 3.0’s decentralized internet powers the metaverse.
Built on the blockchain, leading metaverse projects like The Sandbox, Decentraland, and more offer revolutionary ways to engage in the virtual world like never before. Whether playing games, shopping, or hosting virtual events, the metaverse applications are only emerging now and have a long way to go. The metaverse, powered by emerging tech like augmented reality (AR) and virtual reality (VR), can transform how we live and interact in the virtual environment, making it as realistic as our lives in the real world.
Social Networks
Social networks like Facebook, Instagram, and Twitter have been at the forefront of driving online engagement in Web 2.0. However, they’re among the most significant reasons consumers crave the higher privacy and security that Web 3.0 offers.
Unlike the centralized Web2 social networks, decentralized social networks in Web3 do not claim user data or misuse them for monetization purposes such as targeted advertising. Some emerging decentralized social networks include Mastodon, Audius, and Steem.
Decentralized Storage
Cloud computing has been one of the biggest saviors for businesses and consumers in this era of Big Data. However, there are several risks of placing confidential data and trusting centralized database infrastructure like AWS to handle it, not to mention the high expenses of renting cloud storage in Web2.
Web3 offers decentralized, always-on, encrypted cloud storage that is more cost-effective and accessible. Web3-based decentralized data networks powered by technologies like IPFS (Interplanetary File System) are easy to use, far more affordable to scale, and offer seamless interoperability unheard of in Web2-based online storage services. Filecoin and Storj are examples of leading Web3 projects that store data decentralized on the blockchain.
Decentralized Identities
As Web3’s adoption picks up in the coming years, decentralized identities are an avenue that could witness explosive growth. Unlike traditional identities that are centralized in nature and siloed, decentralized identities through Web3 wallets and other protocols make it possible to sign on and access all dApps across the ecosystem.
Decentralized identities offer users greater control and privacy over their confidential information and intellectual property, are hard to hack or compromise, and eliminate the need to create individual accounts for each online service. A single account on a Web3 wallet like MetaMask or Halo Wallet can be used across hundreds, if not thousands, of decentralized apps.
Importance of Web3 for Crypto Investors
As discussed above, Web 3.0 is powered by blockchain technology - the same infrastructure supporting cryptocurrencies. Digital currencies and crypto assets like NFTs are used for monetary incentives within the Web3 ecosystem for user-generated content production.
In addition to offering economic incentives, Web3 uses digital assets to decentralize governance. Token holders get voting rights in a DAO (decentralized autonomous organization) and have a say in how a particular dApp should function and evolve. This distributed consensus makes decision-making far more transparent and democratized than a centralized Web2 service.
Cryptocurrencies democratize decision-making among network participants and offer a way to enable decentralization of ownership. Unlike centralized entities owned by a corporation, decentralized protocols belong to their consumers who use and engage with them. Crypto assets allow users to establish this ownership through issuing and managing native tokens.
Conclusion: Is Web3 the Future?
The next wave of the internet will focus on content creation and consumption and explore its value. This is where blockchain and crypto-powered decentralized networks offer the most promising use case - ensuring that any online service is engaging enough to sustain and grow while providing value that can be measured and quantified - for all stakeholders.
Web3 offers a far more interactive engagement model, where businesses and consumers are involved and rewarded for their efforts. Unlike Web2 and Web1, the potential of Web3's open internet to drive engagement through monetary incentives, decentralized ownership, and governance can make dApps more responsible and inclusive while setting them up for long-term growth.
With each passing day, the level of distrust and disillusionment in the current internet continues to rise. Consumers no longer want to trust a centralized intermediary who could misuse the user-generated content and data they share.
With Web3, the consumer and the creator take back control from the centralized authority that provides online applications and services. Using semantic metadata, Web3 will inevitably be the future of the internet and the way forward. The only question is, “Are you up for getting onboard”?
Key Takeaways
1. Web 3.0 represents a significant shift from the centralized nature of Web 1.0 and Web 2.0, enabling a more decentralized, permissionless, and trustless internet.
2. Decentralized payments in cryptocurrency, enhanced security and privacy, and improved scalability are some of the key features of Web 3.0.
3. Web 3.0 offers numerous opportunities, including DeFi, NFTs, GameFi, Metaverse, decentralized social networks, decentralized storage, and decentralized identities.
4. For crypto investors, understanding and embracing Web 3.0 is crucial, as it will likely play a significant role in shaping the future of the digital economy.
5. While it is still in its early stages, Web 3.0 has the potential to revolutionize the internet, making it more user-centric, secure, and empowering for individuals and communities.