Web3: Everything to Know
By Beluga Research July 24, 2023
- Web3 is a concept for the next generation of the internet to be built using blockchain technology
- This will be a more decentralized form of the internet
- Decentralization means it will not be controlled by major entities like Google
- Web3 will ideally be more secure, more private, and less prone to censorship than web2, the current version of the internet
Web3 is a concept for the next generation of the internet to be built using blockchain technology. Web3 will be built on blockchains and with cryptocurrencies rather than developed and controlled by large tech firms such as Meta, Amazon and Google. The current tech firms that control the internet offer users little privacy. Many users have seen their accounts hacked and privacy violated.
A Brief History
The concept of web3 has been around since 2013, and the emergence of blockchain technology is helping this new form of the internet become a reality. In 2008, the anonymous creator of Bitcoin introduced the world to the concept of a decentralized, peer-to-peer (P2P) electronic cash system. This system was built on top of a decentralized ledger known as "blockchain". A blockchain enables secure and transparent transactions without the need for intermediaries like banks.
Over the years, blockchain technology has evolved to offer new use cases. One such use case is decentralized applications (Dapps) that run on top of blockchains. Dapps are built on decentralized networks owned and operated by communities, and their establishment is the start of web3.
What Is Web3?
Web3 is a new, emerging form of the internet, built on blockchain technology. It offers a decentralized way of accessing content on the internet and engaging with other users. Unlike the current form of the internet, web2, web3 is not owned and controlled by several large companies. Instead, web3 is composed of user communities such as cryptocurrency communities.
Web3 is still in the process of being developed, and, as of mid-2023, comprises decentralized networks, Dapps and digital wallets. Decentralized networks are responsible for maintaining the integrity of web3. The fact that these networks are owned and operated by communities makes them more secure and transparent than centralized networks.
Dapps are applications that run on top of decentralized networks. These applications are built on open-source code and anyone can contribute to their development. Dapps are more transparent and secure than traditional applications because they are more resistant to censorship and hacking.
Digital wallets are the gateways to web3. These wallets enable users to easily interact with decentralized networks and Dapps. Digital wallets are more secure than traditional wallets, as they use advanced encryption techniques to protect user data.
- Decentralized. Since web3 is built on blockchain technology, it shares a decentralized, distributed ledger that displays a full history of transactions. A user does not need to interact with and wait for a third party like a bank to see cryptocurrency exchanges from the previous day.
- More secure. User information related to web3 is held by users in devices such as digital wallets, rather than behind firewalls in company databases.
- Private. Information on web3 is protected through different types of encryption, rather than by companies.
- More control. In web3, users can interact with dapps to engage in transactions. They do not need to engage with a credit union or other intermediary to trade cryptocurrencies.
- Web3 is not as susceptible to government or corporate censorship. This could change if national governments pass new regulations.
- Focus on privacy and security. With web2, users must trust centralized platforms with their data and databases can be easily hacked or stolen. Web3 uses cryptographic protocols to ensure user data is secure and private. Users can interact with Dapps with less fear that data will be compromised.
- Ability to enable new types of applications and services. Dapps are not subject to the same restrictions as centralized platforms. Web3 developers can create applications that are more innovative, efficient and user-friendly. For example, certain Dapps allow users to earn crypto if they provide the blockchain of that cryptocurrency storage space or computing power.
- Ability to enable trustless interactions between parties. Transactions on the blockchain are verified by a decentralized network of nodes. There is no need for intermediaries like banks or payment processors, and users can interact with each other directly without having to trust a third party. This is important for people who live in countries with unstable governments and/or weak financial systems, as it allows them to participate in the global economy without having to rely on traditional institutions.
- Decentralization . Web3 is built on decentralized networks. This makes it more difficult for malicious actors to disrupt the network. It also allows for greater privacy and security.
- Interoperability . Web3 protocols are designed to be interoperable, meaning that they can easily communicate with each other. This allows for greater flexibility and innovation. Developers can build on top of existing protocols to create new applications and services.
- Transparency . Since web3 is built on blockchain technology, all transactions are recorded on a public ledger, which is transparent and immutable. The public ledger makes it easier to track transactions and prevent fraud. This allows for greater accountability.
- Ownership . Users own their data and digital assets with web3, as they do not need to rely on centralized services to store and manage such information. This gives users greater control over their digital lives. Theoretically, more user control reduces the risk of data breaches and hacks.
- Community-driven . Web3 is built on open-source protocols maintained by a community of developers and enthusiasts. This partnership between the new form of the internet and the communities that support it fosters a culture of collaboration and innovation. In addition, it adds an atmosphere of participation, inclusiveness and diversity.
- Complexity . Web3 protocols are usually complex and difficult to understand. Non-technical users, in particular, may have difficulty with the protocols. This can be a barrier to adoption, since many users may not be willing or able to learn how to use these protocols.
- Scalability . These networks are currently limited in their scalability and ability to handle large volumes of transactions or users. This can lead to slow transaction times and high fees, both of which can be a deterrent for users.
- Regulations . Web3 is still relatively new, so clear regulations and guidelines governing its use have yet to be established. This means that businesses and users may be uncertain about whether they should adopt Web3, and they may see legal and financial risks, as well.
- Security - Web3 networks are generally more secure than centralized networks, but they are not immune to hacks and attacks. These incidents can lead to the loss of digital assets and sensitive information, as well as damaging the reputation of the network.
- Adoption . The advent of web3 is still in its early stages of development, and its adoption is not yet widespread. This can limit the usefulness and value of web3 applications and services, as there may not be enough users to support them until web3 is further developed.