What is Web3?

Michael Morales  -  May 2, 2022  -  ,  

You are a participant in the modern web if you are reading this. The internet we use is very different from just ten years ago. How has the internet changed over time, and where is it headed next?

If history has taught us anything, these shifts will significantly impact us. This article will explain how the web has changed throughout time, where it is headed next, and why this matters.

Consider how the internet influences your day-to-day existence. Platforms for social media. Apps for smartphones.

The Web's Development

The web has changed dramatically over the years, and its current applications are nearly unrecognizable from its early days. The web's evolution is frequently divided into three stages: Web 1.0, Web 2.0, and Web 3.0.

What exactly is Web 1.0?

The earliest version of the internet was known as Web 1.0. The majority of the participants were content consumers, while the makers were usually web developers who built websites with mostly text or image-based material. Between 1991 and 2004, Web 1.0 was in use.

Sites were delivering inert material rather than dynamic HTML-dominated Web 1.0. Data and content were served from a static file system rather than a database, and there was little interaction on the web pages. Consider Web 1.0 to be the read-only web.

What exactly is Web 2.0?

Most of us have seen the web in its current version, often known as web2. Web2 is also known as the interactive and social web. You do not have to be a developer to participate in the creation process. Many apps are designed so that anyone may become a creator.

You can create a notion and share it with the world. You can also post a video and make it available to millions of others to watch, interact with, and comment on. Web2 is quite simple, and as a result of its simplicity, an increasing number of people worldwide are becoming creators.

In many ways, the web is fantastic, but there are some areas where we can improve significantly.

Monetization and Security for Web 2.0

Many famous web2 programs follow a consistent pattern in their life cycles. Consider how the following examples might relate to some of your daily apps.

Apps' Monetization

Consider how different popular apps like Instagram, Twitter, LinkedIn, and YouTube were in their early days. This is how the procedure normally goes:

  • The company has released an app.
  • It enrolls as many people as possible.
  • Then it makes money off of its user base.

When a developer or corporation releases a popular app, the user experience is frequently highly polished as the app's popularity grows. This is why they were able to get traction so rapidly, to begin with.

Many software businesses are unconcerned about monetization initially. They are solely focused on user acquisition and retention, yet they must eventually earn a profit.

They must also take into account the involvement of outside investors. The limits of taking on venture funding sometimes have a negative impact on the life cycle and, ultimately, the user experience of many of the applications we use today.

When a firm raises venture capital to develop an application, its investors typically expect a return on investment in tens or hundreds of times what they invested.

This implies that, rather than pursuing a more organic growth model, the company is frequently driven down one of two paths: advertisements or data sales.

More data means more targeted ads for numerous web2 businesses like Google, Facebook, Twitter, etc. This results in more clicks and, as a result, more ad money. The exploitation and centralization of user data are fundamental to the functioning of the web as we know and use it today.

Privacy and security

Data breaches are common in Web2 apps. There are websites dedicated to keeping track of data breaches and informing you when your personal information has been hacked.

You can't control your data or how it is stored in web2. Companies frequently track and save user data without their consent—users who live in nations where the negative implications of free expression are a concern.

When governments believe someone is expressing an opinion that contradicts their propaganda, they frequently shut down servers or seize bank accounts. Governments can easily interfere, control, or shut down applications using centralized servers.

Governments frequently intervene in banks since they are likewise digital and under centralized control. During periods of high volatility, excessive inflation, or other political instability, they can close bank accounts or restrict access to funds.

Many of these flaws are addressed by Web3, which intends to radically rethink how we construct and interact with applications from the ground up.

What Exactly is Web 3.0?

There are a few key differences between web2 and web3, but their foundation is decentralization. Web3 improves the internet as we know it today by adding a few new features. web3 stands for:

  • Verifiable
  • Trustless
  • Self-governing
  • Permissionless
  • Distributed and dependable
  • Stateful
  • Payments made by natives

Web3 programmers rarely create and deploy apps that run on a single server or store their data in a single database (usually hosted on and managed by a single cloud provider).

Instead, web3 apps are built on blockchains, decentralized networks of numerous peer-to-peer nodes (servers), or a hybrid. These programs are known as dapps (decentralized apps), and you will hear that term a lot in the web3 community.

Network participants (developers) are rewarded and compete to deliver the highest quality services to anybody using the service to establish a stable and secure decentralized network.

When it comes to web3, you will find that bitcoin is frequently mentioned. This is because many of these systems rely heavily on cryptocurrencies. It offers a monetary incentive (tokens) to anyone who wishes to help create, govern, contribute to, or improve one of the projects themselves.

These protocols may provide various services, including computation, storage, bandwidth, identification, hosting, and other online services that cloud providers formerly provided. People can earn a living by participating in the protocol in both technical and non-technical.

Consumers of the service typically pay to use the protocol, much like they would do today with AWS. Except for web3, money is distributed directly to network participants. You will see that as with many forms of decentralization, needless and frequently wasteful intermediates are eliminated.

Many web infrastructure protocols have produced utility tokens that dictate how the protocol runs, such as Filecoin, Livepeer, Arweave, and The Graph (which is what I work with at Edge & Node). These coins also reward network participants to various degrees. This is how even native blockchain protocols like Ethereum work.

Native American payments

Tokens also enable a truly borderless and seamless native payment layer. Stripe and Paypal, for example, have generated billions of dollars in value by facilitating electronic payments.

These systems are extremely complicated, and they still do not allow for true international interoperability among participants. To use them, you must also provide oversensitive information and personal data.

Web3 applications can use crypto wallets like MetaMask and Torus to make international payments and transactions simple, anonymous, and safe international payments and transactions.

Solana offers latency in the hundreds of milliseconds, and transaction costs a fraction of a penny. Unlike the current financial system, users do not have to go through the customary many friction-filled procedures to engage with and participate in the network. They only need to download or install a wallet to begin sending and receiving payments without restrictions.

A novel approach to business formation

Tokens also imply the concept of tokenization and the establishment of a token economy. Consider the current status of establishing a software company. Someone has an idea, but they will need money to feed themselves to start creating.

They hire venture capitalists and give up a portion of the company to raise funds. This investment instantly introduces misaligned incentives that will hinder the development of the optimal user experience in the long run.

Also, even if the company succeeds, it will take a long time for anybody to enjoy any value, which might result in years of labor with little meaningful return on investment.

Instead, imagine announcing a fresh and innovative idea answering a real need. From the beginning, anyone can help construct it or invest in it. The corporation announces the release of x number of tokens, with 10% going to early builders, 10% going to the general public, and the remainder placed aside for future contributor payments and project finance.

Stakeholders can vote with their tokens on changes to the project's future, and those who helped construct it can sell some of their holdings to profit after the tokens are distributed. People who believe in the initiative can acquire and hold shares, while those who believe it is heading on the wrong path can sell their shares.

Purchasers have complete transparency over what is happening because blockchain data is completely public and accessible. This is in contrast to purchasing stock in a private or centralized company, where many details are generally hidden. This is already taking place in the web3 world.


Radicle (a decentralized GitHub alternative) is one example of an app that allows stakeholders to engage in project governance. Another is Gitcoin, which allows developers to be compensated in cryptocurrency for contributing to Open Source projects.

Yearn allows stakeholders to take part in decision-making and proposal voting. Tokens have been issued by Uniswap, SuperRare, The Graph, Audius, and a slew of other protocols and projects to enable ownership, participation, and governance.

DAOs (Decentralized Autonomous Organizations) are receiving a lot of traction and funding from traditional developers and venture capital organizations.

These organizations are tokenized and turn the concept of organizational structure on its head, providing genuine, liquid, and equitable ownership to many stakeholders while aligning incentives in novel and intriguing ways.

Friends with Benefits, for example, is a decentralized autonomous organization (DAO) of web3 builders and artists that is roughly a year old, has a market worth of around $125 million as of this writing, and recently secured a $10 million financing round from a16z.

DAOs could fill an entire post by themselves, but I will just state that I believe they are the future of producing products and (what we used to call) companies. This article summarizes the current DAO landscape.

In Web3, how does identity work?

Identity in web3 functions works in a very different way compared to the past. In most cases, identities in web3 apps are linked to the user's user's wallet address interacting with the app.

Wallet addresses are fully anonymous unless the user chooses to link their own identity to it publicly, unlike web2 authentication techniques like OAuth or email + password (which almost usually require users to send over sensitive and personal information).

If a user uses the same wallet for various apps, their identity is smoothly transferred between them, allowing them to build up their reputation over time.

Self-sovereign identity can already be built into applications using protocols and tools like Ceramic and IDX to replace traditional authentication and identity layers. The Ethereum Foundation also has a working RFP for establishing a "Sign in with Ethereum" specification, which would give a more streamlined and documented manner to do this in the future. This thread also discusses some of how this would improve traditional authentication flows.

If you are interested in more information like this, here’s an article on accessibility testing and its examples.

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