Lately, Web3 and its various aspects such as Crypto, NFTs, Blockchains and DAOs have been all the hype on the internet. We are constantly hearing about how millennials are becoming millionaires selling NFTs or how putting content on the blockchain brings about better trust and security. Unfortunately, most of these terms are not common knowledge to most of us and as such a new digital divide is forming between web3 netizens and the rest of us still on web2.0.
In this article, I aim to break down the question "What is Web3", highlighting its different aspects and more importantly its benefits. After reading this you should have a beginner's understanding of Web3 fundamentals and be able to participate in online discussions around the topic.
WEB3: A brief history
Web3 is the new frontier (third generation) of the internet. It's a generation of the web consisting of decentralised apps(Dapps) running on the blockchain. To better understand this new generation, we need to take a quick history lesson from web1.0 to date.
- Web 1.0 (1989-2004)
In 1989, Tim Berners-Lee invented the World Wide Web. This was initially developed to suit the needs of information sharing between scientists in universities and institutes around the world. Because of this, the web was mostly static (read-only). Users of web1 were consumers of content could hardly create it.
- Web2.0 (2004-now)
Early 2000 marked a start for web2.0, an internet where users could also create and distribute content. Web2 is content-based and centred on user-generated content, think social media, blogs, podcasts, etc.
The unfortunate bit though about web2, is that all this data is owned by external entities e.g Google, Facebook, TikTok, etc. Users are not in control over their data and have little control over it. In Web2.0 the user is the product, their data is sold to power ad campaigns and can be easily censored by these large corporations.
- Web3 (now- ...)
Web3 is different from the current generation, Web2, which is run by companies that provide services in exchange for accessing your personal data. In Web3, you have all the benefits of Web 2.0 plus ownership and control over the content you produce. it is due to this that Web3 is referred to as “the ownership economy” because users are in control.
Key Features & Aspects of Web3
The Web3 ecosystem is huge and it includes Cryptocurrencies, Decentralised Autonomous Organisations, Non Fungible Tokens, Distributed Ledger Technology and much more. Here are some key aspects explained:
Decentralisation simply means it is not centrally managed or stored. In Web3 everything is decentralised, from the control of data which is governed through Decentralised Autonomous Organisations(DAOs) to the actual data which is stored on the blockchain.
A digitally distributed immutable public ledger that facilitates tracking assets and recording transactions, without the need for a central authority. In essence, it is just a way of recording information in a way that makes it difficult or impossible to change but easy to track and verify. Since blockchains are distributed, i.e its data is stored among many computers(nodes), they are nearly impossible to hack (unlike conventional computer systems that store data centrally).
Blockchains consist of digital records called “blocks.” which store critical information. Each block links to the previous block and once written to, make previous blocks hard to change (immutable). This makes things like censorship hard, a huge advantage for web3. Blockchains are the core technology that web3 and cryptocurrencies are built on.
DAOs or Decentralized Autonomous Organizations are internet-based communities collectively owned and run by their members. DAOs lack any central authority and operate based on rules defined in smart contracts stored on the blockchain. Members of DAOs vote on changes and are responsible for creating value. They have treasuries consisting of crypto tokens which used to ascertain voting rights and also reward member contributions. The more tokens you have the more voting power you have, and also the more you participate the more tokens you get (a pretty sweet deal😅).
DAOs typically focus on a specific project or mission, for example, the ConstitutionDAO was formed to crowdfund and raise money to buy the US constitution. DAO use guidelines specified on a blockchain to govern instead of the traditional hierarchical systems of current-day organisations.
Cryptocurrency or crypto for short is a digital currency built on top of the blockchain. They are thousands of different crypto with different use cases. At their core, cryptocurrencies represent ownership in a network or platform. They can be divided into crypto tokens and coins.
Coins are the native currency of a particular blockchain and are required to make transactions on that particular network e.g Ether is the native currency for the Ethereum network, the same as BNB coin is for the Binance Smart Network. Tokens are issued for networks and platforms built on top of the blockchain, for example, Matic is the native Token for the Polygon network, the same thing with DOGE which is also a token on the Ethereum Blockchain.
These tokens and coins can be given to rewards users of the network. For example, early adopters of a network are usually given airdrops of tokens, miners and validators of different blockchains are paid for the compute resources using coins. A real-life example of this is the Brave Browser, which pays users in Basic Attention Tokens for viewing ads. This shifts from the web2 standards where users' data and their privacy were violated and the big corporations benefited. With Brave you get paid for viewing ads, creators even get paid for creating content with their Verified Creators Network.
Even better these tokens and coins can appreciate in value over time, making users of web3 very rich in the process😉
NFTs or Non Fungible Tokens are similar to crypto coins, with one huge difference, they are non-fungible. Non-fungible simply means they are unique and one of a kind. NFT are usually issued to represent ownership of some kind of digital asset, for example, digital art, music or land in the metaverse.
NFTs like other tokens can be bought and sold, with the blockchain keeping track of NFT ownership and transfers. This presents a new and interesting way to ascertain digital ownership. However, NFTs are currently being traded for very high prices with collectables such as CryptoPunks selling for millions of dollars. This has drawn opposition, with some highlighting NFT sales could be used for Ponzi Scheme and in some cases even money laundering.
Short for "Decentralized Finance", refers to finance that does not require the use of central intermediaries such as banks, brokerages or exchanges. De-Fi eliminates these intermediaries by allowing people, merchants, and businesses to conduct financial transactions such as borrowing and lending by leveraging emerging technology. These transactions rely on smart contracts ( programs stored on a blockchain that run automatically when predetermined conditions are met) and use cryptocurrencies.
The Metaverse is a virtual world that is built on virtual and augmented reality. Like everything else in web3, the metaverse is built on top of the blockchain and utilises concepts such as Cryptocurrencies and NFTs. It seeks to create spaces for rich user interaction mimicking the real world. The metaverse unlike the real world comes with advantages of being digital such as lack of physical limitation, meaning you can interact with someone halfway across the world in a shared virtual space. It also enhances the privacy of web3 users as one can interact in the metaverse using a virtual identity.
Supporters of the Metaverse note it may provide a radical new way in how we play, work and earn. They also add it can also support the sustainability of our ecosystem as we start attending workplaces, schools, and social gatherings virtually rather than physically, saving resources.
Web3 is the new frontier of the web. It offers new experiences, platforms, use cases and its offering are growing each day. It seeks to disrupt how digital businesses operate and shift power back to the users. Organizations need to take time to study and understand it, adapting their strategies to the new user-centric direction that the web is now taking.