There's a new buzzword in the cryptocurrency space: Web3 or Web 3.0.
And right now, there are many questions surrounding the concept of Web3:
How does it work? Why is the cryptocurrency space so hyped about it? What are the benefits of Web3?
And, of course, what is Web3, exactly?
What is Web3?
To understand Web3, you have to go further back in the history of the internet.
Web1 (Read-Only)
Also known as the static web, Web 1 or Web 1.0 was the first iteration of the internet that started during the 1990s. This read-only version of the internet wasn't really "user-friendly" as it was built on three fundamental components: HTML (Hypertext Markup Language), URL (Unique Resource Locator), and HTTP (HyperText Transfer Protocol).
Because the interface was static, Web1 was only useful for reading. There were no algorithms that could dynamically serve pages. Meaning: You can't interact, input, or edit anything inside the website. The most "functional" pages were email and real-time news sites.
It was a one-way information highway. Basically, all the information posted on a particular web page was created by the host or owner of the website.
Web2 (Read-Write)
Around 2005, the concept of Web2 or Web 2.0 was introduced. Also known as the social web, Web2 sparked a paradigm shift in the way people use the internet.
Through the advancements in web technologies and programming languages, such as JavaScript, HTML5, and CSS, developers we're able to create applications or websites that users can interact with.
In the Web2 version of the internet, websites started to offer an interactive experience to users. Now, people can make edits or generate their own content on the website, giving them a larger role in the whole process. Web2 innovations were further driven by the developments in mobile applications, games, and social media.
Web2 functions in a client-server model. If you open a website or an application, that means you are requesting information from one centralized source called a server. This server, owned and controlled by a company, contains all the data required to make the website/application run.
As you might have already experienced, there are a number of problems with our Web2 model of the internet:
Centralized Point of Failure
Centralized servers can go down, sometimes for extended periods of time. Like what happened to Facebook in October 2021, users won't be able to access their data and interact with the website/app.
Data Breach and Hacking
When you store your personal data on a website or mobile app, you trust a company to keep your data safe. It's a model that's based on "trust". However, once a website is hacked, all the data stored on its server will become vulnerable.
Permission Issues
You can access a certain website only because the company or server lets you. However, these companies can easily restrict your use or kick you out of their platforms. Technically, this is legally allowed because you've agreed to their terms and conditions during signup.
Over the years, many companies have flourished in the Web2 environment, including Facebook, Google, YouTube, Twitter, etc. From communication, entertainment, and finance up to ordering food and hailing rides, these companies are deeply embedded in people's day-to-day activities.
Since they control the platforms, they also have control over people's data and information. Big tech companies were able to generate trillions of dollars by leveraging billions of user data around the world.
Web3 (Read-Write-Own)
Also known as the semantic web, Web3 is the next generation of the internet, which is more open, decentralized, trustless, and permissionless. Web3 or Web 3.0 is built on decentralized protocols, where users can participate in content creation and governance. They'll also have the ability to own a part of the network.
What a decentralized Web3 revolution offers is turning the users into owners and developers of the web. Just like how the blockchain works, Web3 will run on a peer-to-peer network without the need for a third-party institution.
There are already many technologies that could serve as the backbone of a Web3 world. Blockchains like Chainlink (LINK), Helium (HNT), Ethereum (ETH), and storage solutions like the InterPlanetary File System (IPFS) are some of the technologies that can serve as the foundation of a decentralized internet.
In fact, there are already thousands of open-source, decentralized applications (dApps) that run through a blockchain network. These dApps include native tokens, which, in turn, add value to those tokens. Therefore, holders of these cryptocurrencies can participate in the network and share in the value being generated from it.
How Does Web3 Work?
Decentralized apps can only be built on smart contract networks.
Ethereum, for example, is like a giant network of computers, where all the participants agree on the same state of data throughout the network.
Ether (ETH), the cryptocurrency on the Ethereum network, is used to create transactions that change the state of the data. So, when you broadcast a transaction, you also offer a small amount of Ether, which provides an incentive for another computer in the network to execute the transaction. This is called a "gas fee", which fuels the operations of a decentralized application.
Normally, web developers build a website or application by writing the back-end code and deploying it on a centralized server. On the other hand, a decentralized app's back-end code is written inside a smart contract, usually in the Ethereum blockchain.
The front end of a decentralized app can be built just like a normal website. However, user authentication works in a completely different way.
Unlike Web2, applications built under the blockchain don't require a username or password. When accessing a DApp, the user should provide a Public Wallet Address for receiving payments and a Private Key for signing transactions and sending payments. The users can then connect their wallets to a browser plugin like MetaMask. User wallets can then create content and interact with each other the same way we do in Web2. They can buy NFTs, post articles, play games, etc.
Examples of Decentralized Applications (DApps) on Web3
Uniswap is a decentralized permissionless exchange built on top of the Ethereum network. Basically, it has an algorithm that allows the trading of Ethereum ERC-20 tokens. It's one of the most "forked" projects in the Decentralized Finance (DeFi) space, which means people use its code to build all sorts of decentralized applications.
AAVE is an open-source liquidity protocol that allows users to deposit (stake) their Ethereum and fund certain smart contracts. By doing so, investors can receive an interest rate and earn passive income. In turn, the system allows developers to fund their projects and build applications in the blockchain.
Cryptokitties is a decentralized game app that allows users to buy cute NFT kittens. Participants in the game can collect these kittens and breed them to create more kittens. Additionally, kittens can also be rented out to breed with other kittens. As you may have already heard, NFTs like these can be sold for thousands of dollars.
LooksRare is a community-first Non-Fungible Token (NFT) marketplace built on Ethereum that actively rewards traders, collectors, and creators for participating. Users buying or selling NFTs on the platform receive LOOKS, the native token of the NFT marketplace. decentralized, community-owned NFT marketplace. It allows users to buy, collect, list, mint, sell, and create new NFTs. Currently, the marketplace is governed by a Decentralized Autonomous Organization (DAO), but multiple structures and future plans are put in place to balance the decision-making and reward system in the project.
Orca is a decentralized exchange that allows users to trade tokens under the Solana blockchain. By cutting the middleman off the process, Orca allows the exchange of tokens with minimal transaction fees and faster data transfer. The exchange also allows users to stake their deposits and earn shares from trading fees.
How to Join the Web3 Revolution?
The world of cryptocurrency will expand further as developers build more DApps and discover more use cases of Web3. Decentralization will definitely become mainstream in many other areas over time --from finance, art, content creation, entertainment, and even the internet itself.
Disclaimer: The information and publications in this article are not intended to be and do not constitute financial advice, investment advice, trading advice, or any other advice or recommendation offered or endorsed by Coins.
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