The term “Web3” has become unavoidable in conversations, not just about the future of the internet, but in our day-to-day life as well. It’s often referred to in a grand, enthusiastic way; evocative of alchemists discussing the transformation of lead to gold, or explorers’ waxing poetic about the Lost City of Atlantis.

But unlike alchemy or Atlantis, Web3 is very real. What makes conversations about Web3 frustrating is that despite its seeming omnipresence, it can be difficult to pin down what it really is.

What is Web3? More importantly, should we care about it? There are varying definitions depending on who you’re talking to but there are a couple universal agreements:

Web3 runs on the blockchain. Web3 is the next iteration of the internet; the successor to our current web paradigm.

The first edition of the internet looked nothing like the internet that people have come to know and love today. “Web1” was extraordinarily limited – users could only read information from content producers (i.e., personal sites and static web sites). Web1 was given the nickname of the “Read Only Web.”

Web2 is a retroactive label describing the internet paradigm beginning in the early 2000s. Web2 allowed people to create content and communicate with others. Think social media platforms like Facebook, Twitter, and YouTube. Web2 is known as the “Social Web.” It’s largely free for end-users, funded mostly by aggregation and the sale of users’ personal data.

A common criticism of Web2 is the tendency towards centralization of data and authority. Information is vulnerable to cyber-attacks and platforms can influence who uses their platform and censor content indiscriminately. Tech giants eat up users’ personal data and use it however they see fit, with little transparency or oversight.

The term Web3 was coined by Gavin Wood, founder of Polkadot and co-founder of ethereum. He described it as “a decentralized online ecosystem based on blockchain.” Web3 is also often neatly packaged as the “read/write/own” stage of the internet. While the ideals of decentralization and ownership are central to Web3’s founding mythos, the degree to which they are actualized in today’s Web3 environment is variable.

“Whereas most technologies tend to automate workers on the periphery doing menial tasks, blockchains automate away the center. Instead of putting the taxi driver out of a job, blockchain puts Uber out of a job and lets the taxi drivers work with the customer directly.” - Vitalik Buterin, ethereum co-founder.

If you’ve spent any time with crypto you may have heard the phrase “not your keys, not your crypto,” and this phrase shows us a clear example of Web3 ideals at play in comparison to traditional Web2 financial instruments.In the Web2 model of digital banking, we rely on centralized institutions or corporations to facilitate most, if not all, of our financial transactions. Paying your rent? Use your bank app. Splitting the bill with a friend? Send with your bank-connected Venmo account. Taking out a loan? Buying coffee? In each scenario, the bank has the power to send your money and the power to approve or deny your transactions. You may be limited by the bank’s hours of operations or by daily spending limits on your accounts, for example.

In conjunction with self-custody crypto wallets, decentralized finance (“DeFi”) apps bring these functions directly to the end-user without the overhead of a central authority as the arbiter. Applications such as AAVE and Curve allow users to perform many of the same functions you might find in traditional finance. Swapping between currencies is of course possible, but more advanced services comparable to traditional savings accounts or collateralized loans are also commonplace.

These transactions are performed through smart contracts written on the blockchain, without the need for any centralized body to serve as intermediary. DeFi is one of the most mature Web3 technologies, but people are always developing new ways for decentralized services to fit user needs. All of this is made possible by crypto wallets that allow users to own their own crypto tokens.

Ownership can be a tricky philosophical concept when discussed in depth, but the way in which Web3 proposes to change our idea of ownership is quite simple.

Conventional ownership is usually determined as follows: For inexpensive, moveable, personal property, ownership is often synonymous with possession. If you’re wearing a sweater, most people will accept that you own it even if you don’t have a receipt proving that it’s yours. When dealing with more expensive or immovable property, such as buildings, vehicles, or other luxury goods, ownership can be proven through official documents. These documents could take the form of a property deed, receipt, certificate of authenticity, etc.

If the ownership of an expensive item is called into question, authorities or interested parties will often refer to these official documents, as well as centralized databases, to verify ownership. For example, simply driving a car or holding the keys might not be enough to prove that you are the car’s owner in the eyes of the law. If your ownership is called into question, a police officer may check the car’s registration document and your driver’s license against a database to confirm that you are the owner. However, it can be difficult if not impossible for individuals to verify the authenticity of these documents or to query the relevant databases independently.

Web3 is still under development and society at large has still yet to decide how Web3’s proposals will map onto traditional ideas of ownership. But put simply, in the Web3 paradigm the job of traditional ownership documents is performed by digital tokens. The job of the central authoritative databases is performed by decentralized, publicly readable blockchains.

In this way, Web3 brings proof of ownership, and the ability to verify it, to the end-user without the need to rely on a central authority.

Web3 is still in its infancy, and the ways in which Web3 ideas will mesh with culture and regulations are uncertain. There are many things that Web3 will have to overcome in order to reach mass adoption, notably its high barrier to entry. Web3 and its applications will need to be made easier to understand, financially accessible, and sufficiently useful if people are to adopt it in their everyday lives.

Web3 enthusiasts may bring up the idea that every new technological advancement requires a period of adjustment and education. They may say Web3 would create a world of decentralization where people are not dependent on authorities and institutions that have arguably failed consumers. Perhaps a brief, frustrating period of re-education is necessary to unlock more personal freedom and happiness.

Of course, critics of Web3 might point out that this is idealistic thinking. Many Web3 protocols already are moving towards centralization, and there are privacy issues to be worked out with decentralization as well. There are private blockchain platforms and platforms where only a few people hold a large percentage of the tokens thus mirroring the big tech monopolies like Amazon and Google that people love to complain about.

Nobody knows for certain what Web3 will look like, but it will most likely be far less complex and far more approachable than it seems right now. Rather, it will be a mix of the old (Web2) and the new…

until Web4 comes around.

Thank you for reading!

Continue the conversation on Twitter and Discord.

Further reading:

Web3 by Cobie

Defi by JasmineXu