What is Web3 and Why is it important?

What is Web3?

Web3 has become a catch-all term for the vision of a new, better internet. At its core, Web3 uses blockchains, cryptocurrencies, and NFTs to give power back to the users in the form of ownership. A 2020 post on Twitter said it best: Web1 was read-only, Web2 is read-write, and Web3 will be read-write-own.

The key concept of Web3

Although it’s challenging to provide a rigid definition of what Web3 is, a few core principles guide its creation.

• Decentralized:- Instead of large swathes of the internet controlled and owned by centralized entities, ownership gets distributed amongst its builders and users.
• Permissionless: everyone has equal access to participate in Web3, and no one gets excluded.
• Native payments: It uses cryptocurrency for spending and sending money online instead of relying on the outdated infrastructure of banks and payment processors.
• Trustless: it operates using incentives and economic mechanisms instead of relying on trusted third parties.

Why is Web3 important?

Although Web3’s killer features aren’t isolated and don’t fit into neat categories, for simplicity we’ve tried to separate them to make them easier to understand.

Ownership

Web3 gives you ownership of your digital assets in an unprecedented way. For example, say you’re playing a web2 game. If you purchase an in-game item, it is tied directly to your account. Web3 allows for direct ownership through non-fungible tokens (NFTs). No one, not even the game’s creators, has the power to take away your ownership. And, if you stop playing, you can sell or trade your in-game items on open markets and recoup their value.

Decentralized autonomous organizations (DAOs)

As well as owning your data in Web3, you can own the platform as a collective, using tokens that act like shares in a company. DAOs let you coordinate decentralized ownership of a platform and make decisions about its future.

DAOs technically imply agreed-upon smart contracts that automate decentralized decision-making over a pool of resources (tokens). Users with tokens vote on how to utilize the token. Then, the code performs the voting outcome algorithmically. However, people define many Web3 communities as DAOs. These communities all have different levels of decentralization and automation by code. Currently, we are exploring what DAOs are and how they might evolve in the future.

Identity

Traditionally, you would create an account for every platform you use. For example, you might have a Twitter account, a YouTube account, and a Reddit account and now you want to change your display name or profile picture. You have to do it across every account.

You can use social sign-ins in some cases, but this presents a familiar problem—censorship. With a single click, these platforms can lock you out of your entire online life. Even worse, many platforms require you to trust them with personally identifiable information to create an account.

Web3 solves these problems by allowing you to control your digital identity with an Ethereum address and ENS profile. Using an Ethereum address provides a single login across platforms that is secure, censorship-resistant, and anonymous.

Native payments

Web2’s payment infrastructure relies on banks and payment processors, excluding people without bank accounts or those who happen to live within the borders of the wrong country. Web3 uses tokens like ETH to send money directly in the browser and requires no trusted third party.