What Is Web3 All About?

From X spaces to LinkedIn audio events, everyone is talking about Web3 and Blockchain Technology or something related to these two concepts. You can't help but wonder what the fuss is about and what exactly Web3 is. In this article, you will learn what Web3 is, its core features, advantages, the problems it's solving, and how we got to Web3.

Before we go deep into the subject matter of the day, it's important that you understand what the World Wide Web is. I know you understand it, but a little emphasis is not a bad idea. Is it? Of course not.

The World Wide Web is an information system on the Internet that allows you to share documents and information. You can sit in the comfort of your house and connect with anyone you want to connect with. You can also share information with others regardless of their geographic location.

What is Web3?

Web3 is the third iteration of the World Wide Web, constructed on decentralized technologies. Similar to every app or phone update, it comes with numerous features that not only address problems but also promise to redefine the way we use and interact with each other online.

It is labeled as the third version of the web because it's not the first instance of the web undergoing a revolution or changes. We transitioned from Web1 to Web2, and now we are progressing to web3. In the following paragraphs, we will explore the evolution of the web. This will aid your understanding of web3.

Notable Features of Web3

Permissionless: Users are not required to trust any entity with their sensitive data. This is because there is no centralized control over Web3.

Decentralized: Web3 is not owned or controlled by a single large entity, as is the case with Web2. Ownership is decentralized, and data storage is distributed. This allows users to access their data from any device, anywhere, and at any time. The decentralized storage system ensures that individuals' data is free from manipulation or illicit use by companies.

Ubiquitous: With Web3, the internet is accessible to everyone at any time, regardless of geographic location.

Evolution of The Web

The evolution of the web spans three distinct phases: Web1, Web2, and the current Web3.

Web1 (1990 - 2004): Web1 marked the inception of the World Wide Web, born out of Tim Berners-Lee's vision to connect people globally for networking, business, and information sharing. Launched in 1991, Web1 allowed content consumption but lacked interaction and user-generated content — essentially, a read-only version of the internet. Initially, it was accessible only to companies and it presented static websites, which prompted the development of Web2 to address these limitations.

Web2 (2004 - Present): Web2 the current version, introduced interactive and user-friendly websites, enabling content creation and widespread participation. However, it faces challenges, notably centralization, with major control exerted by entities like Big Tech companies. These centralized platforms capitalizes on user data for targeted marketing. Despite its advancements, Web2 limitations paved the way for Web3.

Web3: Web3, the third stage, builds on decentralized technologies such as blockchain. It aims to decentralize the web, redistributing power from individuals and tech giants to the broader user base. Unlike its predecessors, Web3 gives users control over their data, allowing them to choose how it's being used. This shift addresses the centralization issues of Web2, marking a significant step toward a more user-centric and decentralized internet.

Use Cases of Web3

Web3 can be applied to several industries, but this article will focus on three.

Finance: The finance industry is faced with various challenges, primarily the inability to adequately address the needs of millions requiring access to financial services. Web3 introduces decentralized finance (DeFi), empowering individuals with access to services like micro-loans, lending, and investing. DeFi minimizes the barrier to financial services for an individual having a smartphone and an internet connection. This inclusionary approach enables more people to participate in the financial system.

The Creative Economy: Creatives often face low rewards on platforms like Facebook. With Web3, creatives can directly engage with their audience and receive better offers and rewards. Platforms like Sound.xyz, in contrast to Web2 streaming platforms, provide creatives with a more favorable deal. On this platform, 100% of support from fans goes to the artists, eliminating middlemen and maximizing earnings.

Moreover, intellectual theft is minimized through blockchain technology. Web3, powered by blockchain, enables the orderly recording of information, making it seamless to trace the origin and creator of a piece of art.

Gaming: Web3 introduces games that reward users for active participation. For example, in the Axie Infinity game, users are rewarded with cryptocurrencies.

Core Technologies of Web3

Blockchain Technology: Blockchain technology serves as the foundational framework for Web3 development, fulfilling a key promise - decentralization. Building it on distributed ledger technology is not only important but also essential for transparently recording and transferring data and information without relying on third parties.

In addition to decentralization, Web3 eliminates intermediaries, promoting the growth of peer-to-peer networks and interactions. In Web2, intermediaries like banks handle transactions and oversee financial activities. Web3, however, removes middlemen. Transactions between parties, such as Mr. A and Mr. B, don't require intermediaries; agreements are automatically executed. This is facilitated by Web3's use of smart contracts, ensuring the automatic execution of agreement terms once conditions are met.

Artificial Intelligence (AI): Web3 incorporates automation through Artificial Intelligence (AI), which is crucial for improving efficiency and reducing human errors. Unlike Web2, which heavily relies on human involvement and is susceptible to failures and corruption, Web3's integration of AI enhances reliability and performance by automating various processes.

What to Expect in Web3

Decentralized Governance: The era of waking up to abrupt changes in a company's policy and terms of service will be a thing of the past with Web3. Collective ownership of platforms and collective decision-making processes become possible through Decentralized Autonomous Organizations (DAOs). DAOs decentralize and collectivize decision-making, where members with governance tokens can vote on issues such as resource allocation. Smart contracts then automatically execute the decisions made.

Use of Blockchain and Smart Contracts: Web3 applications will be built on blockchain technology and smart contracts, ensuring efficiency, process automation, minimal human interference, security, and decentralization. For instance, Web3 company ReHold utilizes smart contracts to automate the reward distribution process for investors after each staking period, offering up to 220% APR on various tokens.

Redefining User Authentication Processes: Web3 transforms user authentication processes by replacing the need for sensitive information like age and government-issued IDs with private keys. No rigorous registration and verification processes — know your customer (KYC) — are required; all that's needed to participate, for example, in using the ReHold platform for investing your token, are your private keys.

Redefining Data Ownership: In Web2, platform owners manage and monetize users' data without consent. Web3 gives users the right to determine who accesses their data and allows them to earn from it. Users regain control over their data, ensuring transparency and fair compensation.

User Empowerment: Beyond data control, users are rewarded for contributions and active participation in Web3 spaces. In Web3 games, users receive crypto or NFTs as rewards for their engagement. Additionally, users are empowered to partake in decisions shaping the platforms they use, exemplified in DAOs.

Tokenization of Real-World Assets: Web3 enables the representation of real-world assets, such as real estate, as digital assets on the Blockchain. This not only ensures efficiency but also democratizes real estate investment, making it accessible to a broader audience.

Challenges With Web3

Lack of Regulation: Web3 is still in the process of evolution, and it currently lacks regulations governing the behavior of individuals and companies within its framework. The absence of governance or operational regulations poses potential problems, particularly for users who may lack the necessary protections that regulations would offer.

Complexity: Web3 presents a certain level of complexity, making it less intuitive compared to Web2. Its technical terminologies and less user-friendly products may pose challenges for potential users, requiring guidance to effectively navigate Web3 products.

The complexity arises partly from developers focusing more on the functionality of a Web3 product and less on its design. While prioritizing a product's quality is commendable, neglecting the design can impact user experience and the overall success of the product. Striking a balance between product functionality and user-friendly design is crucial for the broader adoption of Web3 technologies.

Conclusion

In conclusion, Web3 isn't just another hype. It signifies a shift in the web model from centralized to decentralized. As the decentralized technologies that Web3 is built on continue to develop and gain widespread adoption, the impact of Web3 on various industries will become visible. To learn more about Web3 and blockchain technology and how to embrace it, ReHold’s blog is a good starting point.