What is Web3? The Internet of Money Explained

Key Takeaways

• The internet has evolved from Web1’s static pages to Web2’s dynamic content and user-generated platforms. We’re now transitioning into Web3, which integrates decentralized technologies and the internet of money.
• Web3 is the latest iteration of the internet. It includes cryptocurrency, NFTs, and blockchain technology, shifting towards increased ownership of personal data, identity, and digital assets.
• Web3 impacts various industries, including finance with asset tokenization and decentralized ledgers, fashion with virtual reality experiences and NFTs, and gaming with platforms like Roblox facilitating decentralized virtual worlds and digital asset ownership.
• The internet is constantly changing, and Web3 is the latest in a series of big transitions that have changed the way we interact online.

A brief exploration of the internet’s timeline shows how far we’ve come. We now have over 5 billion internet users globally. Remember the early days of Web1? It was all static pages and simple interactions. Then came Web2, bringing social media, dynamic content, and user-generated platforms, transforming how we connect and share information.

Now, we’re on the brink of another monumental shift: Web3. This new phase promises to change our online experiences by integrating decentralized technologies and the internet of money. As we transition into Web3, we need to understand its foundation and potential impact.

So, what exactly is Web3, and how does it differ from its predecessors? Let’s explore the internet’s next frontier.

What is Web3

Web3 is the latest iteration of the internet. Valued at around $2.25 billion in 2023 by Grand View Research, Web3 is expected to grow at a compound annual growth rate (CAGR) of 49.3% from 2024 to 2030. This rapid expansion highlights its potential to change our online interactions by addressing data privacy and centralized control.

The meaning of Web3 extends beyond a single innovation. It’s a collective term for various key developments that are creating a different internet with entirely new use cases. Web3 includes cryptocurrency, NFTs, and blockchain technology, highlighting the shift towards increased ownership of personal information, identity, and digital assets.

Here are the main elements driving this transformation:

• Using cryptocurrency for digital payments.
• Exercising direct control over your identity, content, and assets.
• Digital liberation from banks and big tech intermediaries.
• Building transparent applications on public blockchains.
• Empowering everyone to form and govern online platforms.
• Building upon existing applications to create a more valuable online ecosystem.

Web3 is built on decentralization principles, blockchain technology, and token-based economics. Its model returns power to individuals, moving away from the corporate-controlled model of Web2. Basically, Web3 is changing our perception and experience of the internet.

What is Web3 Being Used For?

Web3 is already making a big impact in different industries, sometimes without us knowing it. Let’s explore real-world use cases where Web3 changes how we interact with technology.

Big banks like JPMorgan, Goldman Sachs, and Citi want to use Web3 technologies in finance. They plan to tokenize assets and use a decentralized ledger to cut out market makers and brokers, changing the financial sector. Payment giant Visa is also embracing Web3. Visa has been trying out stablecoin settlements since 2021 and started using the Solana network in 2023.

The fashion industry is also exploring Web3 through immersive reality experiences for marketing and branding. In 2023, over 50 brands, including Adidas, DKNY, and Diesel, participated in the Decentraland Metaverse Fashion Week. These brands displayed digital fashion items and NFTs, operating in a virtual space similar to traditional fashion weeks. Using the metaverse showcased how fashion brands can use technology to engage with consumers.

Roblox and similar platforms are paving the way for decentralized virtual worlds and NFT trading.

• Gucci has a Gucci Garden in Roblox where you can trade special Gucci NFTs.
• Nikeland in Roblox lets users dress their avatars in Nike products.

These virtual worlds let you engage with brands and own digital assets.

Web3 is everywhere, from money and fashion to gaming and the metaverse. Its influence will only grow, changing our experience with technology and each other.

Why is Web3 important?

Before getting into Web3’s importance, we need to unpack the problems with the internet as they are. We’re currently transitioning from the Web2 to the Web3 era, with most platforms still running Web2.

Web2 is a centralized ecosystem. Large servers and cloud storage services control our data, creating a power imbalance and significant security risks.

Think about it: 

• Web2 applications require personal data. Platforms like Facebook, Netflix, Google, and banks hold vast amounts of data about you. This data collection attracts hackers, raising concerns about data security.
• Your data also becomes a commodity, traded and used without your control. In the age of social media, your content keeps platforms running, but you get little or nothing in return. You don’t own your data or content.

Web3 technologies aim to overcome these issues and restore power to you, the user. Here’s how:

• Web3 does not rely on centralized servers but on decentralized networks. Your data moves from centralized to decentralized storage, reducing security risks and data misuse. 
• You receive direct ownership of your identity, content, and assets. Web3’s transparency and open protocols ensure developers build their applications on public blockchains, promoting trust and security.

Additionally, an internet based on blockchain offers digital freedom from intermediaries. You can manage transactions and data without relying on banks or big tech companies. This also enables the development of interoperable applications, allowing the entire ecosystem to grow and benefit everyone involved.

Web3 is about putting power back in your hands. It promises a fairer, more secure internet where you control your data, identity, and digital assets.

How does Web3 work?

Web3 provides a decentralized internet through blockchain. A blockchain is a public ledger distributed across a network of computers. Decentralization ensures no single entity has control data. Let’s explore how Web3 works to improve the internet. 

Censorship resistant

Using blockchain as a foundation means censorship resistance – in other words no single authority can take down content or block users. The distributed power creates a freer online space, like a public library with no banned books.

Web3 native payments

Web3 introduces a more direct method for financial transactions with cryptocurrencies acting as the native payment rails. Unlike traditional systems reliant on banks, Web3 payments facilitate secure, peer-to-peer exchanges directly between users. The disintermediation streamlines the transaction process, enabling faster settlement times and enhanced security within the Web3 ecosystem.

Ownership and control of personal data

You can own your data directly via blockchain. Web3 gives you control over your data without relying on third-party platforms. Additionally, you can monetize your data or content through crypto payments, creating new revenue opportunities while preserving your privacy and autonomy.

Trustless payments

In this system, you don’t need intermediaries or banks. Web3’s inclusive DeFi ecosystem allows anyone to transact without sharing personal data or meeting specific criteria. You can access financial services and start banking without traditional hurdles, promoting greater economic independence and inclusivity.

Permissionless – anyone can build

Bringing power to the people, Web3 platform blockchains like Ethereum and Solana are permissionless, allowing anyone to build applications. Web3’s open access encourages innovation in DeFi, NFT marketplaces, metaverse platforms, and the creator economy. Anyone with an idea can contribute and create, breaking down barriers and enabling a more inclusive internet experience.

Web3 vs Web2 vs Web1 – What are the Differences?

To understand where Web3 stands, we need to look back at its predecessors. Web1 was the read-only era, with static web pages and limited user interaction. Web2 introduced the read-write phase, where users could interact, share, and create content but had to rely on centralized platforms. 

Now, Web3 brings the read-write-own concept, emphasizing decentralization and user ownership. Let’s break down these differences.

Web3 vs Crypto & Blockchain

Cryptocurrency, Web3, and blockchain are often confused because they serve the same purpose: decentralization. Let’s break them down.

Blockchain is the backbone of cryptocurrency and Web3. It’s a distributed ledger technology that securely records transactions across multiple computers. Blockchain ensures transparency and security, as a network of nodes verifies each transaction, which becomes immutable once recorded. Blockchain technology, popularized by Bitcoin, is now embraced by numerous industries.

Web3 builds on blockchain but aims to redefine how we use the internet. Instead of relying on centralized platforms, Web3 promotes a decentralized web where users control their data and digital identities.

Crypto, short for cryptocurrency, is often the first thing people think of when they hear blockchain. Cryptocurrencies like Bitcoin and Ethereum use blockchain to facilitate digital transactions. However, crypto is more than just a currency; it includes tokens used for various purposes in decentralized applications (dApps), such as governance, staking, and more.

In summary:

• Blockchain is the technology enabling secure, transparent transactions.
• Web3 is the vision for a decentralized internet where users have more control.
• Crypto is the digital currency and tokens operating on blockchain.

Technology behind Web3

Let’s take a closer look now at the building blocks of Web3. 

Blockchain

Web3 and blockchain are closely intertwined. Blockchain is the foundational technology of Web3. It’s a decentralized, secure way to store and verify data. Blockchain enables decentralized applications (DApps) that operate without intermediaries, enhancing transparency and security.

Blockchain’s applications in Web3 are transformative and vast. They include Decentralized Autonomous Organizations (DAOs), Decentralized Finance (DeFi), privacy and digital infrastructure, blockchain games, the metaverse, and the creator economy. These applications are just the beginning. The potential of Web3 and blockchain technology is great.

Smart contracts

Smart contracts are self-executing contracts with the agreement terms of the contract coded into the program. They determine the online interaction rules via blockchain and decentralized applications. Because of their autonomous, smart contracts operate without a middleman. They can automate and enforce the execution of agreements, making transactions transparent, efficient, and secure.

Smart contracts’ applications in Web3 include decentralized finance (DeFi), decentralized autonomous organizations (DAOs), and tokenization. They are also crucial in blockchain fields such as gaming and the metaverse.

Smart contracts are changing how we transact, automate, and envision the future of decentralized systems. They are the backbone of Web3, carving out a fresh path of entertainment and earning.

Web3 native concepts

Web3 has given rise to new types of organizations, novel economies, and transformative digital experiences through Web3 websites. Let’s explore two well-known Web3 applications: DAOs and the Metaverse. 

DAO (Decentralized Autonomous organization)

A DAO, a Decentralized Autonomous Organization, is a collective governed by computer-programmed rules.

DAOs use a decentralized leadership model. They leverage blockchain technology to ensure transparency and collective decision-making. Blockchain allows communities to manage funds and projects collaboratively.

Take MakerDAO, for instance. It launched DAI, a stablecoin pegged to the US dollar, and transformed DeFi by enabling decentralized lending and borrowing. Another example is PleasrDAO, which pools funds to purchase culturally significant digital assets like the original Doge meme NFT. These DAOs showcase how dispersed communities can efficiently organize and achieve goals using blockchain protocols.

Metaverse

The metaverse is an expansive digital universe where you can explore and meet people through avatars. Web3 technologies facilitate these platforms by enabling true ownership of digital assets through NFTs and blockchain technology. Two prominent metaverse examples are:

• Decentraland – a fully decentralized virtual world where users can buy, develop, and trade virtual land and assets using its native token, MANA.
• The Sandbox provides a similar virtual world experience, focusing on user-generated content and experiences. Its native token, SAND, powers transactions within this digital ecosystem, allowing users to create, own, and monetize their creations.

DAOs and the metaverse are great examples of how Web3 promotes innovation that comes from the community.

What is a Web3 wallet?

Web3 is powered by Crypto. Accessing these options requires a wallet designed to secure crypto and interact with Web3’s infrastructure. Think of the Web3 wallet as your digital passport to the decentralized web.

A Web3 wallet is a secure storage for your private keys, crucial for managing cryptocurrencies and NFTs. But it does more than hold your assets. Web3 wallets enable your digital identity, providing you with a unique set of cryptographic keys. This tool acts as a gateway, allowing you to interact with blockchain networks and dApps.

Seeking a deeper explanation of Web3 wallets? Check out our Web3 wallet guide.

The future of the internet

So, what’s next?

As we look ahead, the future of the internet promises a decentralized web ecosystem. This next phase will enable users to bypass traditional gatekeepers and retain their data ownership. Web3 introduces a token economy, where users can earn tokens for their online interactions, essentially monetizing their data.

But it’s not just about money. Web3 will help build socially enriching relationships and the growth of knowledge-creating communities. Innovations in AI, VR, and AR will enable new kinds of interactions, making the Internet a place for information and a space for immersive experiences.

Imagine an internet where you control your data, where your contributions are valued, and where you can interact in new, immersive ways. That’s the promise of Web3.