Web3 Explained in Simple Terms
Web3 is the next evolution of the internet that aims to build a more open, decentralized, and user-controlled network. While complex in its architecture, the core ideas behind web3 can be explained simply. Here is a beginner’s guide to understanding web3.
What Exactly is Web3?
Web3 refers to the third generation of internet services. It builds on the previous web1 and web2 versions:
- Web1 – The original internet of the 1990s focused on read-only static web pages connected by hyperlinks.
- Web2 – The social internet we know today with dynamic, interactive pages and user-generated content powered by APIs. Centralized by big tech platforms.
- Web3 – Aims to decentralize power by using blockchains, tokenized economics, and self-executing smart contracts. Gives users more control over data and assets.
So in simple terms, web3 is about:
- Decentralization – No single entity controls the network or data.
- Ownership – Users have possession over their own content, identities, currencies, etc.
- Transparency – Activities are validated through open-source code and blockchains.
- Censorship Resistance – Deplatforming becomes difficult without centralized servers.
- Trust Minimization – Dependence on intermediaries is reduced through automation.
The end goal is to evolve today’s web2 into a more user-first internet. Popular web3 concepts include cryptocurrencies, NFTs, DAOs, dapps, metaverse worlds, and more.
Properly Define the Web3
Web3 refers to the third generation of internet services focused on decentralization, user ownership, transparency, and open standards. It utilizes blockchain, cryptocurrency, NFTs, metaverse, and other technologies to shift power from centralized platforms towards users.
Which version of the web is decentralized?
Web3 is the version of the web that is decentralized. Unlike the centralized web2 platforms we use today like Facebook or Uber, web3 applications have no central controlling entity. Instead, web3 builds on peer-to-peer networks managed by community consensus to create an open and user-controlled web.
Some key decentralized technologies of web3 include blockchains like Ethereum, peer-to-peer protocols like BitTorrent, distributed data storage like IPFS and Filecoin, decentralized identity systems, decentralized finance, non-fungible tokens (NFTs), decentralized apps (DApps), decentralized autonomous organizations (DAOs), and metaverse virtual worlds with user-owned economies.
Key Differences Between Web2 and Web3
To fully grasp web3, it helps to contrast it with the web2 environment we know today. Here are the key differences:
Web2 | Web3 |
---|---|
Centralized | Decentralized |
Closed ecosystems | Open ecosystems |
Corporate owned | User owned |
Rent seeking | Asset ownership |
Permissioned access | Permissionless access |
Walled gardens | Interoperability |
Opaque algorithms | Transparent code |
User as product | User as builder |
Let’s explore some of these distinctions further:
- Centralized vs Decentralized – Web2 is built around centralized platforms like Facebook, Twitter, Uber, Airbnb etc. Web3 has no such controlling entity and is managed via community consensus.
- Closed vs Open – Web2 ecosystems tend to be walled gardens that trap user data and activities. Web3 aims for open standards that allow cross-platform interactions.
- Rent vs Own – Web2 users essentially rent temporary access to content from corporations. Web3 gives users true digital ownership that can be traded.
- Permissioned vs Permissionless – Web2 access is moderator-controlled. Web3 allows anyone to participate without gatekeepers.
- User as Product vs User as Builder – Web2 monetizes user data and attention. Web3 allows users to create economic value on their own terms.
Web3 aims to shift power from centralized corporations to regular internet users. Of course, achieving a fully decentralized web will still take much time and effort.
How Does Web3 Work?
Web3 utilizes a set of emerging technologies to create a more decentralized internet:
- Blockchain – A public ledger of transactions maintained by a P2P network rather than a central server. Enables decentralized finance (DeFi).
- Cryptocurrency – Digital money based on cryptographic proofs instead of government backing. Allows borderless payments.
- Smart Contracts – Self-executing code on a blockchain that runs automatically when conditions are met. Replaces intermediaries.
- Dapps – Decentralized Apps built on blockchains to enable peer-to-peer transactions without middlemen.
- DAOs – Decentralized Autonomous Organizations that allow leaderless groups to coordinate towards shared goals.
- NFTs – Non-Fungible Tokens that prove unique ownership of digital assets like art, collectibles, real estate.
- Metaverse – 3D virtual worlds where users can explore, play, and own virtual goods and land as NFTs.
- Web3 Stack – Set of standards (IPFS, Filecoin, ENS, etc.) that allow apps to be built in a decentralized way.
No single technology defines web3. Rather, it is the convergence of several innovations like these that allow the internet to be re-architected with users at the center. Much work remains to improve scalability, security, and usability.
Why Does Web3 Matter?
Here are some of the key benefits that a web3 model can provide internet users:
- Own your digital identity – Users control their own profiles, reputations, data.
- Own your assets – Music, art, virtual goods become true user possessions.
- Control your privacy – Share only the data you want with apps. Much greater anonymity.
- Censorship resistance – Apps have less ability to block, ban, or silence users.
- Permissionless innovation – Anyone can build without requiring approval from gatekeepers.
- Transparent algorithms – Open-source code means no more opaque feeds and timelines.
- Creator incentives – New revenue models beyond ads, data exploitation, and addiction.
- Community ownership – Users collectively govern platforms and earn ownership benefits.
- Global access – Geographic and institutional boundaries matter less.
- Resilience – No single point of failure if one platform goes down.
Web3 has the potential to redistribute power on the internet in favor of public users over private platforms. It brings users greater freedom of choice, control, and transparency.
Web3 Explained Through Examples
Let’s explore some hypothetical examples that demonstrate core web3 concepts:
Decentralized Social Media
John is tired of all his data being owned by large social networks. He joins DeSo, a decentralized blockchain-based platform where he buys an NFT domain name to create his profile. His content lives across a distributed network of nodes rather than any central server. He earns crypto from his posts which can’t be censored or deplatformed arbitrarily.
Creator Revenue Share
Jane is an indie musician releasing songs as NFTs. Whenever her tracks get resold, she automatically earns 10% of the royalty fees thanks to embedded smart contracts. Listeners become invested in her success.
Virtual World Ownership
Liam buys a plot of virtual real estate in the metaverse platform Decentraland using the MANA cryptocurrency. He builds a virtual store on his land that sells digital merchandise, earning more MANA from user purchases. His ownership rights are verifiable on the blockchain.
Decentralized Finance
Sarah wants to buy ETH cryptocurrency without going through a centralized exchange. She uses a DeFi app to connect her bank account directly to a liquidity pool of ETH holders and seamlessly completes a peer-to-peer purchase. The entire transaction history remains public on the blockchain.
DAO Membership
MoonCatRescue is a DAO where members coordinate to fund animal shelters worldwide. Akash joins by purchasing the governance token. He submits funding proposals and votes on others to steer the group’s investments. All accounting happens via smart contracts in a transparent manner.
These examples illustrate how web3 gives users greater control, ownership, and transparency compared to traditional web2 services. While still early stage, web3 products are now emerging across social media, content creation, gaming, art, finance, and more.
Frequently Asked Questions About Web3
What are some key challenges facing web3 adoption?
Some major hurdles include:
- Technological barriers like blockchain scalability and usability
- User education around new concepts like wallets and crypto
- Regulatory uncertainty and questions around legal obligations
- Building sufficiently decentralized infrastructure
- Overcoming resistance from incumbent web2 giants
- Poor mainstream perceptions due to speculation and scams
How is web3 different from the idea of a decentralized web?
A decentralized web refers broadly to a internet model where no centralized entity controls the network. Web3 represents one specific approach to achieving decentralization using blockchain, cryptocurrency, NFTs, and other recent innovations. However, decentralization is also possible through other technologies like peer-to-peer networks.
Can web3 really be decentralized given concentrations of wealth and power?
Early evidence suggests wealth and power may inevitably concentrate around foundations, organizations, and early adopters in any new technological shift. This risks replicating existing centralized dynamics. Strong governance and broader user adoption will be vital for web3 services to remain distributed and user-controlled at scale. The jury is still out on whether true decentralization is feasible.
Does web3 require blockchain technology?
Blockchain provides critical functionality for decentralized identity, payments, assets, and transparency in web3 systems. However, decentralization can theoretically be achieved through other means as well. Alternative solutions like distributed databases, IPFS, and zero-knowledge proofs are active areas of research. But blockchain remains the most mature and robust technical enabler of web3 currently.
What are some promising web3 projects to watch?
Some interesting early web3 projects across different categories include:
- Social – DeSo, Lens Protocol, Mastodon
- Content – Audius, Theta Network, Flow
- Identity – Handshake, Ceramic Network, Sign In with Ethereum
- Gaming – Axie Infinity, The Sandbox, Decentraland
- Finance – Uniswap, Aave, Compound
- Infrastructure – Filecoin, Stacks, Helium Network
This is just a small sample as the web3 space is evolving rapidly. New disruptive projects are launching frequently.
Conclusion
While still in its early days, web3 promises to transform the internet into a more user-owned and decentralized peer-to-peer network. It draws upon a mix of bleeding-edge technologies like blockchain, cryptocurrency, decentralized apps, and smart contracts. By reshaping digital ownership, governance, transparency, and incentives, web3 offers users the opportunity to take greater control over their online lives and digital footprints. However, it remains to be seen how much decentralization is technologically feasible and if early ideals can withstand the test of time. Going forward, web3 is likely to be one of the most important trends shaping the evolution of technology and society in the 21st century.
To learn more, check out these additional web3 resources:
- The Web3 Primer by Anish Agnihotri
- Web3 Masterclass Course
- The Blockchain Developer Guide
- Introduction to Cryptocurrency Playlist
- The Metaverse: A Beginner’s Guide
I hope this overview gives you a good understanding of the core concepts and potential of web3. Let me know if you have any other questions!