What is Web3 and Why Does It Matter?

If you’ve spent any time around the tech or crypto world, chances are you’ve come across the term “Web3.” Some people talk about it like it’s the future of the internet, while others are more skeptical, calling it a buzzword or a passing trend. However, what is Web3 and why is it important?

Breaking it down in simple, human terms. Let’s have a look at why this thing is making so much noise.

Breaking Down the Evolution: Web1, Web2, and Now Web3

Let’s quickly take a flashback before we get going on Web3 and understand how the web evolved over time.

Web1: The Read-Only Web (1990s to early 2000s)

Web1 was a read-only network, the first iteration of the internet. Web pages were not dynamic: you could visit and view what was on offer, maybe download an image—but not much else. Think about viewing an electronic brochure. It was a one-way discussion.

The majority of people were consumers of information. There were no social networking websites, video websites, and doing things in terms of doing more than just clicking links. It was like a massive library.

Web2: The Social Web (mid-2000s onwards)

And then Web2—the web we know. It added interactivity. Websites became platforms. You could no longer just read on the web, but you could create and disseminate content.

Social media went crazy and the corporate titans like Facebook, YouTube, and Twitter were at the center of it all. Online communities were formed, and ordinary individuals became influencers, entrepreneurs, and content creators. E-commerce went crazy, and the internet became a way of life.

But Web2 also brought problems: power with a few large tech monopolies, huge data collection, and privacy concerns. Humans created the content, but the platforms owned it. Your information was the asset, and corporate giants became rich off of selling it out.

Say hello to Web3: The Ownership Web

Web3 is a vision of the internet of the future, where humans, not goliaths, will once again have power. The biggest difference? Ownership.

Whereas Web2 is membership, Web3 is ownership membership. It takes advantage of technologies like blockchain to make it so that people not only can get access to platforms but also own parts of them, be members of decisions about how they’re made, and be in charge of their data.

Uh-huh, sounds wonderful. Let’s dive in.

What Exactly Is Web3?

Fundamentally, Web3 is a decentralized web powered by decentralized networks, blockchain technology, and cryptocurrency tokens.

Key Features of Web3:

1. Decentralization:

No single company or institution controls the network. Rather, it is dispersed among numerous computers across the globe.

2. Blockchain Technology:

A permanent, open-access digital record of transactions and ownership. Web3 is an evolution in the same direction for cryptocurrencies like Bitcoin and Ethereum.

3. Token Economy (Cryptocurrencies & NFTs)

Tokens are virtual tokens that give users an ownership interest in networks, platforms, or content items.

4. Smart Contracts:

Programmed contracts that execute autonomously whose terms essentially become code. They carry out actions without intermediaries.

5. Self-Sovereign Identity & Data Ownership

Users are in charge of their own data and have the freedom to decide when and with whom to disclose it.

6. Interoperability:

Web3 apps are simpler to connect up, creating an ecosystem instead of a set of discrete “walled gardens.”

Real-Life Example

Consider YouTube in Web2, as an example. You upload, and YouTube puts ads over them. You may earn some slice, but the company makes the real money and controls what you can upload.

On a Web3 version of YouTube (such as decentralized video platforms like Theta or Odysee), you can:

• Be paid cryptocurrency by viewers directly,
• Own your own content,
• Decide how the site is run
• Share in profits as an owner, rather than a user.

Why We Should Care About Web3

It’s a reasonable question: why should you care? Let’s talk about the real world problems that Web3 is trying to solve.

1. Ownership Of Personal Data

And now that you come to a website like Google or Instagram, they collect heaps of data about you. You can even not be aware of how intimate that data is. They know what you’re interested in, your location, who your friends are, what you buy, and even what you’re probably going to buy.

You own your data in Web3. You choose whether or not you sell, share or lock it up to yourself. You’re no longer just “the product” either.

2. Economic Freedom and Access

Traditional financial systems tend to leave the rest behind, particularly in the context of the absence of banking systems. Web3 presents us with decentralized finance (DeFi)—a system through which any individual with an internet connection can borrow a loan, make payments, or earn interest without the need for a bank account.

It is similar to granting financial instruments to everyone everywhere simultaneously.

3. Ownership of Digital Assets

You actually own digital assets with Web3. They can be art (NFTs), something within a game, or holdings in a decentralized business. If you buy an NFT, say, it’s not revocable by you on the blockchain. Nobody company can just get it from you or delete it.

4. Censorship Resistance

Since Web3 apps execute on decentralized networks, it’s likely a heck of a lot more difficult to censor or shut them down. That’s relevant in nations where freedom of speech is limited or where creators are concerned about platforms demonetizing them or banning them en masse.

5. Community-Driven Innovation

Web3 platforms are powered by communities in the guise of Decentralized Autonomous Organizations (DAOs). Instead of an executive team deciding what to do with the platform, it is the token owners who have to make critical decisions regarding updates. It’s a more democratic process in the sense of how technology should be developed.

Criticisms and Challenges of Web3

While as cute as Web3 is, it’s not rainbows and unicorns to the end. There are flat-out difficult hurdles to pass.

1. Complexity and User Experience

The majority of Web3 applications are more complicated than their Web2 counterparts. Setting up crypto wallets, seed phrases to remember, dealing with private keys—it’s daunting for newbies.

Mass adoption will still be in short supply unless UX comes in.

2. Sustainability Issues

Some of the blockchain technologies, most especially the older ones such as Bitcoin’s, have been faulted for their insatiable appetite for energy. However, some of the newer blockchain platforms like Ethereum since its “Merge” software upgrade are moving towards more environmentally friendly designs.

3. Scams and Speculation

Because Web3 is so new and unregulated, scams, rug pulls, and pump-and-dump have all become the norm. Everyone is entering Web3 solely to get rich overnight, without a vision for the tech in an attempt to drive value.

4. Lack of Regulation Uncertainty

Governments across the globe are still attempting to understand how they’re going to regulate decentralized networks and cryptocurrencies. This continues to baffle developers, investors, and end-users.

5. Decentralization Trade-Offs

Not all is improved by decentralizing. Decentralized platforms are slow, more difficult to control, or anarchy in the absence of direction from the center, others argue.

Examples of Web3 in Action

In spite of its limitations, Web3 already is sparking further innovations.

1. Finance (DeFi)

Platforms such as Uniswap or Aave enable individuals to exchange cryptocurrencies, earn interest on assets, or lend against holdings—without a traditional bank.

2. Art and Media (NFTs)

Art can be sold by artists as NFTs, and artists get a royalty upon every resale of the artwork. Previously, digital artists did not have anything coming from their art, but now they have multiple sources of income.

3. Gaming (Play-to-Earn)

The gaming technology like Axie Infinity founded the play-to-earn trend where users get cryptocurrency or NFTs simply by playing.

4. Social Media

Decentralized social networks like Lens Protocol hope to give creators ownership of their fans. Imagine not having your fans taken away just because a platform suspends you.

5. DAOs (Decentralized Autonomous Organizations)

Companies like MakerDAO or Friends With Benefits (FWB) are token-based. Token holders get a say in everything from community events to protocol upgrades.

What the Future Holds

We can’t know what Web3 will turn out to be, but here are some smart guesses:

1. Blended Internet

Rather than completely supplanting Web2, Web3 might blend together. We would use Web3 for ownership and financial transactions, but keep Web2 sites as places to watch video or browse casually.

2. Improved Interfaces

As programmers create more elegant, more natural instruments, Web3 can go mainstream before we even fully understand it. Like no one quite gets the internet but everyone still uses it every day, Web3 could eventually “just work.”

3. More Regulation

There are some aspects of Web3 that governments, especially the financial ones, will regulate. It can stabilize but also constrict some of the liberty that is in decentralization.

4. Synthesis of AI and the Metaverse

Web3 could fuel virtual world and metaverse platform economies. Throw in AI assistants, and you could have whole digital lives with decentralized protocols.

Conclusion: Why It Matters

Web3 is an attractive model shift in how we consider the internet. It puts us out of a time where companies have your data, your online identity, and your digital property, and into a time where you do.

It’s about enabling people with access, authority, and redefining digital ownership.

• Is it there yet? No.
• Is it hype-stuff at times? Yes.
• But is it worth listening to? Absolutely not.

Just as with the Wild West internet of the 90s, Web3 now is messy, experimental, and full of promise. Whether you go whole hog and just sit back and watch, one thing is for sure: Web3 could be one of the most revolutionary tech changes of our time.

It isn’t even a tech issue. It’s who gets to own the future of the internet—and who gets to profit from it.