RV Blog What is Web3? What it Means for Blockchain

What is Web3? What it Means for Blockchain

All Things Web3

The World Wide Web is constantly evolving. The original web, also called Web 1.0, was developed in 1990 and laid the foundation for the internet we have today. The term Web 1.0 roughly refers to the period from the 1990s to the early 2000s, where most websites were static pages and the vast majority of web users were consumers of content.

In the mid 2000, the idea of the web as a platform was born and the evolution towards Web 2.0 started. Far more users began to produce digital content, which they uploaded on social media platforms, blogs, or video sharing sites. Websites started to serve dynamic content and the bland web pages of Web 1.0 were replaced by Web 2.0’s interactive, socially connective and user-involving platforms. Web 2.0, which is the internet we know today, is characterized by the users’ ability to contribute to sites by commenting, uploading contents, creating accounts, and joining communities.

The exponential growth of Web 2.0 was driven by innovations like powerful mobile devices, mobile internet access and social networks. These developments enabled the dominance of mobile apps, which greatly amplified the trend of interconnectivity and expanded utility. The Web 2.0’s platform model allowed for strong network effects accruing to successful platform companies like Apple, Alphabet, Meta, and Amazon. They have been among the fastest growing companies in the world over the last two decades.

But with the size grew also the influence and control such platform companies have on large parts of modern society today. Their decisions impact millions of people, for the good or the bad, and they are more and more forced to perform tasks that prior were in the responsibility of nation states. Thus, alarmed individuals keep warning against the privatization of the internet, which is the contrary of what the free and decentralized Web 1.0 used to be.

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What is Web3?

Originally, Web3 was categorized as one field within the broader crypto and blockchain space and was mainly associated with decentralized storage endeavors like Siacoin, Arweave, Filecoin and others. Soon after, as more projects started to materialize, Web3 as a term became more broadly linked to things beyond decentralized storage solutions such as data processing (Oceans, Streamr, etc.) and domain name systems (ENS, Unstoppable Domains, etc.).

In 2021, Web3 has evolved into a movement that is envisioning a radically new type of internet – or the next era of the internet. Ultimately, this new internet is driven by a seismic paradigm shift towards a more decentralized, or rather more democratized internet. The various networks (or rather platforms) that the internet of today is made of are in the process of being upgraded into user-owned economies that more properly align incentives for network owners, network participants and network developers.

The defining features of these new user-owned economies are:

  • Coins and Tokens
  • Decentralization and Trustlessness
  • Permissionlessness

Through coins and tokens users are equipped with one of the most important aspects Web3 brings to the table: They establish genuine self-ownership. By knowing the respective private keys, coins and tokens (currencies, crypto equities, NFTs, etc.) can be self-sovereignly held within a Web3 wallet (more on this below).

Self-ownership is essential. It gives people the incentive to fully express their creativity, and enjoy the economic upside of what they produce. Just as important to these user-owned economies are decentralization and trustlessness. These features turn the internet networks of today into digital commons that are owned by no one, while simultaneously allowing for the existence of digital property rights. The aspect of permissionlessness makes it so, that these digital commons making up Web3 are openly accessible by everyone, anytime and anywhere.

While not obvious at first, the narrative around Web3 is genuinely shaped and molded by the blockchain and crypto phenomenon as a whole. So much so, that Web3 can nowadays be considered an overarching term that encapsulates cryptocurrencies (digital money and stablecoins), smart contract computing (smart contract platforms), decentralized hardware infrastructure (video, storage, sensors, and more), non-fungible tokens (intellectual and virtual property), DeFi (financial services to underlay Web3 assets), the Metaverse (virtual realms), and global coordination endeavors (DAOs). Link this up with AI, machine learning and virtual reality and the Web3 experience becomes entirely immersive.

Why Web3?

The pursuit of Web3 is essential to reform the internet as we know it today. After all, we don’t want it to follow the same path as regular TV that is mainly populated by private channels – making it an unpleasant experience for more and more people.

While the internet and its privately-owned platforms have provided tremendous benefits to people all around the world, users find it to be an increasingly extractive place. It turns out that the true beneficiaries are the monopolies that have formed around internet networks. They have grown to greatly control an internet user’s creative work and legacy resulting in the fact that most value is accruing with internet network providers instead of end-users.

Web3 is in the process of changing this. Users are transformed into owners with the internet going from a place built on “rented land” with monopoly overlords, to a new unbound frontier with endless possibilities. The relationship between users and the new user-owned economies in the new Web3 world will be much more symbiotic. With the emergence of Web3, the days of digital monopolies are numbered, and internet feudalism will finally come to an end. Users will be able to own the fruits of their creative energy, which makes the monetization of their own labor much easier. 

Related: The Problems and Challenges with Web3

What is a Web3 Provider?

Web3 providers are entities that run applications on blockchains. These applications have various use cases, including decentralized finance, NFT marketplaces, gaming, education, communication, social media and many more. As public blockchains are permissionless, developers can deploy whatever code they see fit on these blockchains. Like in the early days of Web 1.0 there are numerous applications spread all over Web3.

But because transactions on blockchains induce costs, using these services will never be completely free. Users of Web 2.0 services were led to believe that internet services are free, while actually paying indirectly with their data and their attention. Since with Web3, users are owners of their own data, thus these revenue sources are no longer available for Web3 service providers. Therefore, the self-sovereign user has to pay for his own expenses but in return is getting privacy and self-custody.

Furthermore, in Web 2.0 big tech companies are nowadays the main providers of web services. The reality of Web3 is different. Like in Web 1.0, most value in Web3 accrues at the edges of the network – with the users and the builders. Web3 has come full circle and combines the decentralized, community-governed ethos of Web 1.0 with the advanced, modern functionality of Web 2.0.

What is a Web3 Wallet?

A Web3 wallet, often just referred to as wallet or crypto wallet, is a software-based application that securely stores payment information and passwords. Wallets are the main interface for using Web3 applications. Without a wallet it is very hard to use blockchain-related Web3 services, be it DeFi applications or exchanging crypto assets and NFTs.

Wallets are to Web3, what browsers are to the internet: they are the gateways that grant easy and quick access to Web3 services. The magic with wallets is that they make accounts, usernames and passwords redundant in the process of connection to Web3 applications. A secure connection between a wallet and Web3 applications can be established by simply scanning a QR code.

Web3 wallets are non-custodial. This means that a wallet owner is in complete control over his digital assets but also takes ultimate responsibility. Web3 wallets don’t require the completion of Know Your Customers (KYC) and Anti-Money Laundry (AML) processes, thus preserving the owner’s privacy and anonymity.

As its main function, a Web3 wallet allows the storing and handling of crypto assets. Although we speak of a digital wallet, thereby using a physical wallet as an analogy, Web3 wallets don’t actually store crypto assets. The assets themselves exist as a ledger entry on the blockchain. What is stored inside a wallet are the private keys that are needed to access and transfer crypto assets.

A popular Web3 wallet is MetaMask, which can be downloaded for free as a mobile app or as a browser plugin. The MetaMask wallet provides users with:

       an entry point into the Web3 ecosystem

       the possibility to swap coins and tokens on decentralised exchanges (DEXs)

       a way to lend and stake crypto assets in DeFi protocols

       a place to safely store NFTs

MetaMask can communicate with different layer 1 and layer 2 blockchains. It is therefore a solid choice for a first Web3 wallet. But it cannot connect to all blockchains and Web3 applications yet, which is why for some Web3 ecosystems different wallets have to be set up.