Discover Online Classes in Web3
Explore NFTs, DeFi, and more.
It’s wild to think that the internet—the thing that underpins so much of our daily lives—is really only a few decades old. In the grand scheme of technological evolution, our beloved World Wide Web is really just an angsty teenager.
The internet’s infancy and toddlerhood, known as Web1, was the start of it all. If you’re old enough to remember dial-up tones and AIM away messages, you may recall this relatively cute and innocent phase.
Childhood through the pre-teen years saw the emergence of Web 2.0, the version of the internet most people use today, a sizable portion of which revolves around user-generated content on social media platforms.
Now, we’re on the cusp of Web3, a term you may have heard alongside buzzy phrases like cryptocurrency, blockchain, and non-fungible tokens (NFTs). While the official Web3 definition is still nebulous, there’s a general consensus that this new phase will be decentralized.
In other words, no single government or corporation will control it. Think of this as the internet’s rebellious phase – breaking free from mom and dad.
What Is Web3?
Web3 is a concept to redefine the architecture and infrastructure of the internet. Whereas there are currently a few very powerful companies largely in control of Web 2.0, Web3 will be built upon open-source technologies intended to distribute that power and responsibility more widely. As such, Web3 holds promise to be more transparent and fair, as well as less susceptible to manipulation (at least in theory).
Web3 will consist primarily of systems built upon blockchain, a type of distributed ledger technology (DLT). This technological development combines two mainstays of Web3 ideology—encryption and “distributed computing,” which spreads computing power out over a massive network. These features ensure a system in which the transmission of information among users is both traceable and immutable.
Protocols, or foundational layers of code, create a framework of “ground rules” for how a blockchain works, how transactions are stored, how information is transferred, etc. (Protocols aren’t unique to blockchains—they’re also foundational to websites. HTTP and HTTPS are two you’re probably already familiar with.)
Cryptocurrencies and blockchains like Bitcoin and Ethereum have their own unique protocols, which help provide the same sort of security that centralized entities like banks are responsible for when it comes to traditional assets. Crypto protocols also lay the groundwork for users to perform various actions like creating an account, opening a crypto “wallet,” and managing their data.
Besides Bitcoin and Ethereum, a few of the most common protocols in use today include Ripple, Hyperledger, and Corda.
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To truly understand how Web3 works, it’s important to first understand that it’s not a single thing—it’s really a collection of emerging ideas or technologies, most of which have blockchain at their core.
Virtual currencies or cryptocurrencies create an avenue of exchange through a computer network unconnected to any central authority like a government, bank, or other traditional financial institution.
In the Bitcoin whitepaper, a nine-page manifesto published in 2008, an anonymous creator named Satoshi Nakamoto laid out the case for a new form of digital currency immune to interference or manipulation by outside entities. Since then, Bitcoin and hundreds of other cryptos like Ether have become hugely popular around the globe. Some countries have even adopted crypto as their official currency.
A few purported advantages of cryptocurrencies include more affordable, accessible, and faster money transfers, as well as protection against financial system collapse due to a single point of failure. Common criticisms include that crypto tends to be highly volatile, has a potentially negative environmental impact, and is frequently used in illegal activities.
Non-Fungible Tokens (NFTs)
NFTs fall under a pretty broad umbrella. Generally speaking, they’re non-interchangeable units of data stored on a blockchain. More specifically, they may be artworks like digital photos, videos, or audio files. They can represent both tangible and intangible things ranging from sports highlight reels to collectible cards to “digital land” in the metaverse.
In the same way that cryptocurrencies are the Web3/decentralized internet’s form of cash, NFTs are virtual representations of assets like real estate or fine art. NFTs have distinguishing information that irrevocably denotes ownership—the creation and circulation of NFTs are protected by the public nature of smart contracts on the blockchain.
Decentralized Autonomous Organizations (DAOs)
Decentralized autonomous organizations, or DAOs, are “member-owned communities without centralized leadership.” These crypto-enthusiast-clubs-slash-business-ventures unite users under a specific goal, and each member has a say in the decision-making process for how that goal is achieved.
Unlike in a traditional, hierarchical company, in a DAO, there is no C-suite or management team—everyone in the organization has a vote and a voice. DAOs are often responsible for raising money for a cause or committing funds to an initiative. A DAO might be created to support a specific charity, pool investment capital, or build a professional network to share work-related resources.
DAOs are deeply enmeshed with many of the concepts discussed above, including blockchains and cryptocurrencies. DASH, for instance, is a cryptocurrency that’s also a DAO managed by its own users.
The Internet’s Next Phase
As Web 2.0 grows up, users’ personal information and browsing behavior have become a hot commodity up for sale, largely to and from corporations. Social media giants have emerged, and with them, more than a few controversies about just how that information is being used and to whom it belongs.
Proponents of Web3 hope to shift this power dynamic back to users. They believe Web3 will lead to a democratized and overall more stable internet—one in which users have control over their own data.
On the other hand, critics question whether a “decentralized” internet is even possible, pointing out that many nascent concepts like decentralized finance (DeFi) still trace back to some primary authority. At least one prominent tech figure has called Web3 “more marketing buzzword than reality,” at least in its current form.
Still, it’s clear that there are plenty of individuals and organizations who want to guide Web3 into blossoming adulthood. Some groups like the Web3 Foundation are working to make the most idealistic notions into realities. Web3 Foundation’s mission is to “nurture cutting-edge applications for decentralized web software protocols.” It aims to “benefit and create stability for the Web3 ecosystem.”
The future of the internet is currently part speculation and part real progress, which is why there’s no clear Web3 definition just yet. But regardless of what this next phase looks like, one thing is assured—the internet’s continued maturation is inevitable.
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This article is not intended to be financial advice.