Business & Finance

What is Web3?

If you’re reading this then you are a participant in the present day web. The web we are experiencing today is much different than what it was just a decade ago. How has the web evolved, and more importantly – where is it going next? Also, why do any of these things matter?

If history has taught us anything, these changes will matter a lot.

In this article, I will lay out the way the web has evolved, where’s it going next, and just why this matters.

Think about how precisely the internet influences your life on a daily basis. Consider how society has changed as a result of the internet. Social websites platforms. Mobile apps. And now the internet is certainly going through another paradigm shift as we speak.

The Evolution of the Web
The web has evolved a lot over the years, and the applications than it today are almost unrecognizable from its most early days. The evolution of the web is often partitioned into three separate stages: Web 1.0, Web 2 2.0, and Web 3.0.

Web3 aims to solve several shortcomings by fundamentally rethinking how exactly we architect and connect to applications from the ground up.


What is Web 3.0?
There are a few fundamental distinctions between web2 and web3, but decentralization reaches its core.

Web3 enhances the internet as we know it today with a few other added characteristics. web3 is:

Distributed and robust
Native built-in payments
In web3, developers don’t usually build and deploy applications that run on an individual server or that store their data in an individual database (usually hosted on and managed by a single cloud provider).

Instead, web3 applications either run on blockchains, decentralized networks of several peer to peer nodes (servers), or a blend of the two that forms a cryptoeconomic protocol. These software are often called dapps (decentralized apps), and you’ll see that term used often in the web3 space.

To achieve a stable and secure decentralized network, network participants (developers) are incentivized and compete to supply the highest quality services to anyone using the service.

When you hear about web3, you’ll notice that cryptocurrency is often area of the conversation. The reason being cryptocurrency plays a large role in several protocols. It comes with a financial incentive (tokens) for anyone who wants to participate in creating, governing, adding to, or bettering one of the projects themselves.

These protocols may often give a variety of different services like compute, storage, bandwidth, identity, hosting, and other web services commonly provided by cloud providers in the past.

People can make a living by participating in the protocol in a variety of ways, in both technical and non-technical levels.

Consumers of the service usually pay to use the protocol, similarly to how they might pay a cloud provider like AWS today. Except in web3, the money goes right to the network participants.

In this, like in many varieties of decentralization, you’ll note that unnecessary and frequently inefficient intermediaries are cut out.
Native payments
Tokens also introduce a native payment layer that is completely borderless and frictionless. Companies like Stripe and Paypal have created billions of dollars of value in enabling electronic payments.

These systems are overly complex but still do not enable true international interoperability between participants. In addition, they need you to hand over your sensitive information and personal data in order to work with them.

Networks like Solana offer several hundred digit millisecond latency and transaction costs of a small fraction of a penny. Unlike the actual financial system, users do not have to go through the traditional numerous, friction-filled steps to interact with and take part in the network. All they need to do is download or install a wallet, and they can begin sending and receiving payments with no gatekeeping.

A new way of building companies
Tokens also brings about the idea of tokenization and the realization of an token economy.

Take, for example, the current state of building a software company. Someone arises with an idea, but in order to start building they need money in order to support themselves.

To get the money, they take on venture capital and give away a portion of the company. This investment immediately introduces mis-aligned incentives that will, in the long run, not align well with building out the best user experience.

Also, if the company ever does become successful, it may need a very long time for anyone involved to realize the value, often leading to years of work without the real return on investment.

Imagine, instead, that a new and exciting project is announced that solves a genuine problem. Anyone can get involved in building it or investing in it from day one. The company announces the release of x number of tokens, and give 10% to the first builders, put 10% for sale to the public, and set the rest aside for future payment of contributors and funding of the task.

Stakeholders can use their tokens to vote on changes to the future of the project, and individuals who helped build the project can sell a few of their holdings to make money after the tokens have been released.

People who believe in the project can buy and hold ownership, and people who think the job is headed in a bad direction can signal this by selling their stake.

Because blockchain data is all completely public and open, purchasers have complete transparency over what’s happening. This is in contrast to buying equity in private or centralized businesses where many things tend to be cloaked in secrecy.

In web3, Identity also works much differently than what we are being used to today. More often than not in web3 apps, identities will be linked with the wallet address of the user interacting with the application.

Unlike web2 authentication methods like OAuth or email + password (that almost always require users at hand over sensitive and personal information), wallet addresses are completely anonymous unless the user decides to tie their own identity to it publicly.

If the user chooses to work with the same wallet across multiple dapps, their identity is also seamlessly transferable across apps, which lets them build-up their reputation as time passes.