What is Web3? A Beginner's Guide to the Next Evolution of the Internet

Web3 is a disruptive shift from the first read-only version of the Internet, Web1, and the current read-write iteration, Web2.

Web3 provides a disruptive read-write-own ecosystem for Internet users built on blockchain-based technologies, such as cryptocurrencies and NFTs, and peer-to-peer networks away from centralized servers and authorities. In this article, we’ll explore the origins of Web3, how it differs from Web1 and Web2, and how to explore Web3 safely using Trust Wallet.

Before You Get Started

Before you explore Web3 in more detail, it’s important to remember that you can explore Web3 safely using a crypto wallet like Trust Wallet.

You can download Trust Wallet as a mobile app, or you can install the Trust Wallet Extension for your desktop browser.

The Evolution of the Internet

Before exploring the third generation of the Internet, we need to understand the preceding generations, Web1 (the Static Web) and Web2 (the Social Web), and their features.

Web1 (The Static Web)

Web1 is the first generation of the World Wide Web that lasted roughly between 1990 to 2004. The World Wide Web was developed in 1989 by computer scientist Tim Berners-Lee using open protocols that allowed global information sharing.

Web1 featured static ‘read-only’ pages of information on websites with fixed content accessible through browsers. It was a one-way communication in which the website owners primarily showcased information for consumption without user interaction or participation beyond clicking links.

Most websites were owned by companies with few individual content creators, limiting content diversity and monopolizing content creation to a small group. Web1 was a content delivery network that worked as an information repository where users consumed information passively.

Web2 (The Social Web)

Web2 marked a significant shift in the Internet infrastructure, focusing on reading content to emphasize user participation and contribution. The second generation of the Internet, also referred to as the Read-Write Web, is more interactive and engaging than Web1.

Web2 social network platforms like Facebook and MySpace skyrocketed in popularity, expanding Internet social participation and allowing more users to create content. The platforms encouraged user-generated content (UGC), improving connectivity and interactions among peers and content creators worldwide.

Websites have more interactive and engaging features, allowing you to comment, like, and report on the site. The Social Web also features diverse forms of content, including podcasts, blogs, videos, and social media.

Web2 also ushered in a new era of e-commerce through the rise of online shopping platforms and digital marketplaces like Amazon, eBay, and Uber. Its commerce platforms make shopping more accessible and convenient and are a user-friendly way to set up shop and interact with buyers. You can browse, purchase, and sell products or services on Web2 platforms, which offer advanced features like payment processing and customer services.

Transition to Web3

Despite Web2’s increasing popularity over the years, the Social Web had its fair share of limitations, the most prominent one being centralization.

These challenges have led to the need for a new Internet model.

Web2 platforms are governed by centralized service providers who control and have access to user activity and personal data stored on their platforms.

A handful of tech conglomerates control a disproportionate amount of the Internet and monetize user data by selling it to advertisers and data brokers.

Another limitation is the rise of the advertising-driven revenue model, where content creators don't benefit or own the content they create while platform owners earn revenue. The misuse of user data and lack of control or ownership of creator content led to the development of the next era of the internet, Web3.

Understanding Web3 (The Decentralized Web)

Web3 is the next Internet era that solves the limitations of trust and data ownership faced in Web2. It’s an ecosystem built on blockchain technology and focuses on decentralization, transparency, and giving power back to the user.

Unlike previous versions of the Internet, where a few centralized authorities monopolize ownership, Web3 distributes ownership among users without a central entity. It uses blockchain technology to give users control and ownership over personal data and its use.

Web3 aims to shift power away from companies with Internet monopolies to individual users and reduce data exploitation.

The underlying decentralized networks allow peer-to-peer interactivity and are permissionless, which promotes inclusivity. Blockchain technology also offers users immutability and cryptographic security, reducing data breaches and information leaks.

Core Technologies of Web3

Blockchain, smart contracts, and decentralized applications (dApps) are the underlying technologies that power Web3.

Blockchain is Web3’s foundational technology. It is a publicly distributed ledger of transactions and activities that can support decentralized applications and smart contracts.

Decentralized applications are open-source service applications that work on peer-to-peer networks and have diverse functions, including financial services and supply chain management. dApps are built on blockchains using smart contract codes.

Smart contracts are self-executing programs that complete an action once preset conditions are met, such as terms for sale between two parties. dApps use smart contracts to execute functions between users, eliminating the need for a third party.

Benefits of Web3

Here are some of the benefits of Web3:

• Decentralization: Distributed ledgers for peer-to-peer interactions eliminate the need for a central authority and promote interoperability in a permissionless ecosystem.

• Enhanced privacy: The ecosystem’s transparent and trustless blockchain technology uses encryption to secure data, ensure user privacy, and eliminate third parties.

• User control over data: It's a trustless network where you are in charge of your data and its monetization.

• Financial inclusion: Web3 could potentially sidestep financial barriers in traditional models, allowing anyone to quickly obtain funds, invest, and participate in the democratized economy.

The Building Blocks of Web3

Now, let’s look at the building blocks of Web3 and how they contribute to the running of the ecosystem.

Blockchain Technology

Blockchain technology is the backbone of the Web3 ecosystem. It's a decentralized ledger technology distributed across a network of computers (nodes). Data is grouped in blocks added to the network and cryptographically linked to other blocks to create an immutable chain.

Blockchains use consensus mechanisms for nodes to agree on the validity of data added to the network. Therefore, blocks can only be added with a majority agreement from the nodes. Every node stores an updated copy of the blockchain, meaning no one can tamper with data in the network after it’s recorded.

Cryptocurrencies and Tokens

Web3 uses cryptocurrencies and tokens for peer-to-peer transactions to sidestep traditional financial systems.

Digital assets like cryptocurrencies and native tokens allow users to use various decentralized financial (DeFi) services in the Web3 ecosystem. Native tokens are also used for governance in Decentralized Autonomous Organizations (DAOs), where holders can vote on decision-making in the organization.

Non-Fungible Tokens (NFTs)

NFTs are unique digital assets that exist on a blockchain and present a unique and non-interchangeable way to represent asset ownership.

NFTs can represent various digital and real-world items, making them an excellent choice for monetizing your art, for example. Web3 allows you complete control over your digital creations, you can use NFTs to generate revenue through royalties from secondary transactions and primary sales. Because they can't be altered, non-fungible tokens help maintain the authenticity of artists' creations.

Decentralized Finance

Decentralized Finance (DeFi) consists of Internet-native financial products and services built on blockchains, including lending, borrowing, and trading.

Web3 DeFi creates a trustless economy outside the control of central authorities like banks. DeFi is an inclusionary financial ecosystem that empowers you to gain control over your finances and have access to financial services with low entry barrier levels.

Real-World Applications of Web3

Web3 is a disruptive force in several industries. Next, we’ll look at real-world applications of this ecosystem.

Decentralized Social Networks

These social media platforms utilize blockchain technology and aren't controlled by a single entity. The platforms use independent servers that aren't under a central authority, ensuring that the platforms give users more control over their data and identities.

Decentralized social networks are censorship-resistant and have increased anonymity and privacy since you can create an account without linking real-life identities. Decentralized social networks foster trust and transparency. The platforms can also utilize tokens and NFTs to monetize content and reward users.

Marketplaces and E-Commerce

Web3 marketplaces use blockchain technology and peer-to-peer protocols to connect buyers and sellers without intermediaries securely. These e-commerce sites use smart contracts to automate transactions and set payment terms between buyer and seller.

Blockchain technology enables Web3 marketplaces to be interoperable and seamlessly connect with dApps. You get autonomy over your assets, data, and transactions, eliminating data misuse in centralized marketplaces.

Gaming

Web3 integrates blockchain technology into gaming to enhance player experience by giving them complete ownership of gaming assets and self-sovereignty. It provides actual ownership of gaming assets so players don't lose their collectibles when they change gaming platforms.

It also ensures interoperability between various platforms, allowing players to move and trade their assets seamlessly across platforms.

Web3 can also provide provably fair gameplay through blockchain transparency, immutability, and smart contracts that eliminate the possibility of game manipulation. The ecosystem also fosters player-driven economies where players can earn through play-to-earn in-game features to win items and collectibles.

Identity and Privacy

Web3 prioritizes your data security and privacy. Its underlying technology uses encryption to secure data and decentralized storage solutions that fragment data across the network to reduce the chances of information leaks. The ecosystem applies strong security practices and self-sovereign identity models to give you control over your identity and enhance privacy.

Challenges and Criticisms of Web3

Despite all the benefits the new Internet era promises, Web3 still has some limitations, which we look at below.

• Scalability: Web3’s underlying technology, blockchain, has limited throughput, meaning it can only process a limited number of users before compromising speed and functionality.

• Regulation: Web3 ecosystems are decentralized without a central authority to create regulatory frameworks and procedures. The lack of a framework exposes users to legal and regulatory risks that are challenging to address. The Securities and Exchange Commission’s (SEC) involvement in crypto has highlighted this point more in recent years.

• Accessibility: Web3 has a high technical barrier of entry with complex technology that can be intimidating to mainstream users. Web3 projects also exist in their technological islands with limited interaction with other networks.

The Future of Web3

Web3 offers exciting possibilities for various sectors, including finance, entertainment, and governance. Decentralized finance will continue revolutionizing the financial sector with a growing ecosystem of autonomous protocols offering lending, borrowing, and trading services.

The entertainment industry can gain a new way to compensate artists and provide them with direct asset ownership through NFTs. It's also not a far stretch to expect governing bodies to implement decentralized governance for decision-making, voting, and fostering trust in their communities.

However, these projects don't just happen; they are driven by collaboration from communities worldwide. Community participation is a fundamental pillar in the ongoing development of Web3 technologies.

User engagement is the backbone of dApps and DeFi and can rapidly drive the growth and sustainability of Web3 projects. Projects like NFTs grew exponentially thanks to a dedicated community that advocated their use and drove their popularity in mainstream media. Communities drive development in Web3 and showcase the power of collective effort in the industry.

Conclusion

Web3 improves on the previous versions of the internet by introducing decentralization, increased privacy, and giving users complete control over their assets and data. It is poised to reshape how we handle asset management and monetize our data and creations.

Web3 could revolutionize many industries, and you can begin your journey by downloading Trust Wallet, a secure and user-friendly Web3 hub.

Trust Wallet is a non-custodial multi-chain wallet that gives you access to thousands of Web3 dApps. It lets you securely send, buy crypto, and store your cryptocurrencies and NFTs.

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Note: Any cited numbers, figures, or illustrations are reported at the time of writing, and are subject to change.