Web3 - A Deeper Dive

The Evolution of the Internet

To truly grasp the meaning of Web3, it’s important to understand the history of the Internet and how Web3 differs from the versions of the web that preceded it.

Web 1.0 (1994-2004)

Web 1.0 was the first iteration of the Internet we’re familiar with today, emerging in 1994 and ending around 2004 with the rise of social media giants like Twitter and Facebook. While the general public came to learn about the Web 1.0 Internet around 1994, Web 1.0 actually started as a U.S. government program called ARPANET, or Advanced Research Projects Agency Network, in 1968. ARPANET began as a small network of military contractors and university professors who exchanged data with one another.

The Web 1.0 Internet was mostly a collection of static HTML pages and afforded users limited ability to interact with each other. Although Internet gateways such as America Online (AOL) and discussion forums such as Usenet permitted private chat and discussion boards, for most the Internet remained a space where few interactions or financial transactions took place. Take a look at a Web 1.0 pizza ordering form from Pizza Hut. Credit where its due, Pizza Hut was an innovative company in the Web 1.0 space because it introduced a website that customers could use to order pizza. Payments, however, had to be made in person.

Financial transactions of any kind in Web1.0 were generally unsafe and had limited encryption and it also required speaking with an operator.

Web 2.0 (2004-The Present)

The web evolved around 2004 as user demand for social interactions, music, video sharing, and financial transactions grew dramatically due to improved Internet speed, fiber optic infrastructure, and search engine improvements.

This demand for greater interactivity gave rise to many of today’s Internet institutions and companies. Social media platforms like Facebook, MySpace, and Twitter facilitated social interaction; data-sharing applications such as Napster met the demand for online music and video; Google provided an effective means for users to navigate the huge quantity of online information. Traditional institutions such as Bank of America met the demand for financial interactions and electronic fund transfers, enabled by new encryption standards such as 256-bit AES.

This new, more interactive Internet improved users’ experiences of the web tremendously by adding new functionality. But it also presented a tradeoff that continues to define our online lives to this day: To benefit from these new functionalities and interactions, users have to delegate a large quantity of information and responsibility to siloed third-party platforms, granting these centralized entities a considerable amount of power and influence in terms of data and content ownership.

And that is, for the most part, how the Internet operates as we know of it today.

Web3 (The Future)

Put simply, Web3 is a decentralised vision of the Internet that aspires to create an entirely new system of interacting with value & data and change the way that individuals and institutions reach agreements. Web3 brings back the decentralised architecture of Web 1.0, the first version of the Internet, which was replete with user-hosted blogs and RSS feeds, and combines it with the rich, interactive experience of Web 2.0 web applications like social media platforms to provide a digital ecosystem where data is user-owned and transactions are backed by cryptographic guarantees. Rather than having to trust brand-based paper promises, users can rely on deterministic software logic to execute agreements exactly as programmed without any intermediaries or the need to trust a third party.

The Core Elements of Web3

Powering the Web3 model is a growing stack of decentralised technologies, such as blockchains, cryptocurrencies, smart contracts, oracles, crypto wallets, storage networks, and much more. Lets briefly look at the two critical components

Blockchains

A blockchain is a highly secure and decentralised network that allows people to store data, exchange value, and record transaction activity in a shared ledger that is not controlled by any central authority. Blockchain networks serve as the backbone of Web3, providing secure execution environments that allow for the creation, distribution, and trading of cryptocurrencies, as well as the development of programmable smart contracts. Blockchains are the settlement layer of Web3.

Cryptocurrencies

Cryptocurrencies are digital coins/tokens that leverage the decentralised and tamper-proof environments of blockchain networks to facilitate highly secure transactions. They are the native currencies of Blockchains hosting the Web3 decentralised applications (dApps) and can also be used to pay for Web3 services and participate in Web3 governance & economy.

Before the advent of blockchain technology, tokens were essentially units of value that could be purchased and exchanged to pay for specific products and/or services, such as tokens for highway tolls or amusement park rides and games. In these earlier applications, tokens were useful to service providers because they allowed customers to pay upfront for services that they would consume in the future and because they facilitated transactions where exact change was required.

Tokens in Web3 applications are also units of value issued to Web3 content creators, but these units of value are digital, programmable, and have functions beyond exchange. In Web3, a token might be held as an investment in a protocol, project, or blockchain. It might have utility for that project or protocol—for paying for a service or insuring a service, for example. It might also provide a gateway to participation in the governance of the said protocol.