What is Web3?

Web3 is the latest version of the internet, and the main difference is it incorporates Blockchain. A Blockchain is a crowd-based form of data keeping that cannot be altered. This means that all data recorded on Blockchain is publicly available. More importantly, no organization or government can block access to it.

Web3 has generated an economy surrounding cryptocurrency and NFTs. So far, the biggest day of trading was in May 2021, with traders exchanging 500 billion USD worth of cryptocurrency. 

What is Blockchain?

In short, a Blockchain is a chain of information blocks placed one after the other. The information is held and cross-verified by independently owned nodes worldwide. New blocks are added only once they have been verified by all nodes. This makes the data impossible to alter or falsify. To compromise Bitcoin, one would need to physically access half of the 13,374 nodes hosting Bitcoin’s transaction data at the same time.

Proponents say Blockchain technology can bring trust back to the internet. It forces every user to follow the same rules and access the same data. All information you record in a Blockchain is available to everyone and is there forever. 

Read more: The essential crypto glossary: Blockchain terminology explained

Web 2.0 vs. Web 3.0 vs. Web3

Since 1989, the internet has been improving with each version. Web 1.0 simplified publishing media worldwide using HTML code. Web 2.0 turned the internet into community spaces where users can share their lives with each other. 

Web 3.0, also called the semantic web, was the next upgrade. It used a combination of AI and IoT (Internet of Things) to increase the effectiveness of both. IoT strengthened the connection between the online and offline worlds. AI helped computers understand natural human language and make sense of all the data provided by IoT devices.

However, all this was still occurring within walled gardens. There, service providers control what you can see, what you can share, and how you can interact. 

Enter Web3. Using Blockchain technology, all data and content of Web3 are jointly hosted in peer-to-peer networks. This moves the content beyond the reach of any individual organization. While the previous versions of the internet were incremental, Web3 is revolutionary.

Examples of Web3 applications

Bitcoin

The most famous example of Web3 is Bitcoin; its success launched a slew of other cryptocurrencies. Unlike traditional currencies, cryptocurrency is not tied to or under the control of any government. This has the potential to change the relationship between governments and their people.

Non-fungible tokens (NFT)

Another related example of Web3 is non-fungible tokens, which use blockchains to indicate unique ownership of digital assets. NFTs can be issued for digital artwork, in-game items, real estate in a metaverse, and more. This gives artists the ability to sell NFTs to indicate unique ownership of digital art. 

Read more: Why you should care about NFTs

Decentralized apps (dApps)

Using Blockchain technology, developers have been creating decentralized alternatives to popular services. There are now social networks such as Diaspora and media repositories such as LBRY. Ethereum takes this further and hosts a wide number of apps within its Blockchain. Compared with the services provided by Big Tech, both the platform and the content within are owned by users. As a result, they do not face censorship, and users can enjoy these services without giving up personal information.

Smart contracts

Blockchains are also the basis for smart contracts. Currently, the largest smart contract platform is Ethereum. They have smart contract coding languages, which automatically perform actions agreed by both parties such as transferring assets or imposing penalties. Because smart contracts are verified, executed, and enforced automatically, there is no longer a need for middlemen such as lawyers or even laws for it to work.

Decentralized autonomous organizations (DAOs)

Organizations governed via Blockchain are called decentralized autonomous organizations, or DAOs. Unlike traditional organizations, there is no CEO or management. Instead, DAOs are governed by smart contracts that are reached via voting system. Token holders can vote based on the number of tokens they carry. This makes their governance bottom-up, with every stakeholder having a stake and a say in the organization. There are a number of platforms available for building DAOs, such as Daostack and Sapien.

Advantages and disadvantages of Web3

Blockchain technology and decentralized systems have their fans and detractors. Here are pros and cons of Web3. 

Advantages

You own your personal information: Users are able to enjoy dApps and participate in Web3 economy without giving away personal information. This gives users more bargaining power when volunteering such information. For example, Datacoup exchanges cryptocurrency for information.

No middlemen: Smart contracts enable people to make agreements without lawyers. Creators can receive better compensation for their work, with platforms taking less of a cut. Removing middlemen frees up resources for other users. 

No censorship: With content no longer tied to any specific platform, content creators no longer have to worry about being censored, demonetized, or de-platformed. 

Disadvantages

No regulation: While Web3 content cannot be censored, this also means fake news (news designed to deceive) can be freely disseminated. This requires users to exercise greater vigilance, judgment, and digital literacy.

High energy consumption: Blockchain technologies involve duplicating the same information over thousands of nodes. To verify the addition of new content, each node then has to send the information yet again to other nodes. All these activities consume large amounts of resources. As measured in late 2021, the electricity spent mining Bitcoin at a given moment was enough to power Austria or Finland.

Cover for criminal activity: The anonymous nature of cryptocurrency makes it the perfect way to finance illegal activity. It’s no coincidence that ransomware often demands payment in crypto.

Personal information cannot be erased: By nature, Blockchain is unalterable and publicly visible. This means that if you place an embarrassing selfie on a blockchain-based social network, it will be there for good. So much for the right to be forgotten.