The buzz around cryptocurrencies and NFTs have resurfaced another blockchain-based buzzword–Web3. But what is Web3? Web3 is a vision for a new version of the internet. One that is decentralized and provides users with more control. Devoid of any central governing authorities, Web3 promises to be more secure, fast, and public.
Web1 and Web2 refer to the first two eras of the internet. Each is distinct in its evolution and the technologies used. Web1 was the internet between 1991-2004. It was primarily read-only and composed of static websites. Web1 users were mostly content consumers. Static websites served this content from file servers and not from any databases.
Web2 is the internet that we currently know and use. It revolutionized the idea of the internet as a platform and was built on several key tech innovations, such as full-featured web apps, dynamic HTML, and relational/non-relational databases. In addition, anyone can create and monetize content on Web2. As a result, a plethora of custom content has given rise to blogging, social, e-commerce, and video sharing websites. The Web2 era began in 2004 and continues to this day.
Web3 is the internet of the future. One that is entirely decentralized, permissionless, and driven by peer-to-peer technologies like blockchain. Web3 represents a world wide web that is open, secure, and devoid of any centralized governance.
Dr. Gavin Wood coined the term Web3 back in 2004. Fresh off helping develop Ethereum – a cryptocurrency now second in market cap only to Bitcoin – Wood proposed an alternative to Web2 where users did not depend on conglomerates like Google, Apple, Amazon, Microsoft, and Facebook to access and use the internet. Instead, his core idea has since developed into a cluster of organizations.
The decentralized ecosystem of Web3 does not run on a single cluster of servers or databases. Instead, applications and data are spread across numerous networks that communicate using peer-to-peer protocols. Online public blockchain ensures that all information is tokenized, making them harder to hack or manipulate.
Web3 network is also permissionless – that means data transmission between two peers does not need a central authority to be ‘verified.’ Instead, authentication happens at the user level. This borderless, frictionless concept of the future web is most prevalent in its idea of payments and smart contracts. Web3 has a native payment layer built on tokens, just like modern-day cryptocurrency. Decentralized service providers have millisecond latency and removes gatekeepers, enabling a faster, more secure method of monetary transaction.
Web3 may sound like an ambitious project today, but Decentralized Finance (DeFi) has already begun laying the groundwork to meet its goals. DeFi ecosystems offer blockchain-driven, decentralized alternatives to standard finance apps.
Web3 is built on decentralized, peer-to-peer technologies like blockchain and NFTs. Rising interest in cryptocurrencies and NFTs is making blockchain technology mainstream. Web3 takes it one step further by replacing the foundations of the internet we know today with practical uses of blockchain technology.
At its most basic, a blockchain is an append-only digital ledger of records and transactions, dubbed blocks. Instead of a central repository, a blockchain is split between all nodes in a network, with each device handling a portion of authentication and communication. This peer-to-peer nature makes blockchain-based activities faster and more secure compared to traditional, packet-based data transmission.
In Web3, peer-to-peer networks are used to decentralize online content, including services and tools. Instead of paying providers a monthly fee to use the internet or access digital content, individuals own a part of the internet or the content. Individual ownership is validated by unique, non-fungible tokens and does not need to be validated by any central authority. So instead of requests being routed to a central server, all content stored in the decentralized network is pulled, logically combined, and presented to users – much like current BitTorrent downloads.
NFTs have a special place in the Web3 universe. They allow users to buy or sell digital goods online and authenticate their ownership of the goods they obtain. This means that artists no longer need to rely on a handful of centralized platforms to showcase and sell their products. More ambitious NFT projects are also in the pipeline, including more secure and anonymous logins and speedier hiring processes.
To simplify what this all means and its significance, Web3 affords ownership and control of internet services by users. Users will be able to control and benefit from their own data, activity, and content on the internet (as opposed to the big tech companies of Web 2.0). Additionally, because of the immutability, transparency, and authenticity of blockchain, Web3 allows for distributed, community-based governance.
The development of Web3 is also primarily decentralized.
Though the enthusiasm and investments around cryptocurrency continue to grow, the plans around Web3 remain primarily aspirational. Web3 advocates have been pouring money into its development and research. The decentralized nature of Web3 also raises questions about its eventual implementation when the technology behind it is finally ready.
There are other factors to consider as well. Blockchain’s initial promise of building a serverless computer lingered for half a decade before it morphed into a platform to build cryptos and NFTs. The massive energy and environmental cost of blockchain-powered transactions, along with crypto mining helping fuel the current chip shortage in consumer hardware, has further increased skepticism of this technology. Additionally, the promise of an unregulated, decentralized future is making traditional investors nervous, and the backlash has already caused governments to take action. Countries that have banned or put restrictions on cryptocurrencies include China, Russia, Indonesia, Bangladesh, Vietnam, Turkey, and Algeria, among others.
Despite all this, the idea of Web3 continues to gain traction. One thing is for sure – the transition will not happen overnight. Just like blockchain, it is likely decentralized technology will slowly make its way into regular internet endpoints like apps, browsers, and devices. Block by block – we will move into the Web3 era, ushering more freedom, security, and agency over our virtual lives. How it happens and what else this new era brings remains to be seen.