What is Web3? 9 Applications of Web3 in the Crypto Market

1. What is Web3?

1.1. What is Web3?

Web3 is the next version of the Internet, where users have control over personal data and participate in decentralized applications (Dapps) using blockchain technology and cryptocurrency.

*Difference between Web1, Web2 and Web3*

Web1 was the first version of the Internet, emerging in the late 1990s. Web1 primarily displayed information without the complex interactive features found in Web2 and Web3. Simply put, users could only read information on these websites.

Example of Web1: A specific example of Web1 would be the world's first website, Tim Berners-Lee's "World Wide Web," developed in 1990 at CERN. This website only provided static text and links between pages.

Then came Web2, which allowed users to open and edit files rather than just view them. This version enabled people to not only use content but also create and publish their own on blog sites.

The rise of social media platforms like Facebook, Twitter, and Instagram further elevated content sharing to new levels.

Example of Web2: Facebook, YouTube, Twitter, Instagram, etc.

In Web3, users can experience decentralized applications through blockchain technology integrated with cryptocurrency. This version enables users to control personal data and ensures privacy.

Example of Web3: Uniswap, Metamask, Aave, etc.

2. Why is Web3

Technology Important?

Web3 technology brings numerous benefits and major changes to how we use the Internet.

Firstly, Web3 addresses personal data control. Instead of data being centralized in the hands of large companies, Web3 decentralizes it, allowing users full control over and decisions regarding the use of their data.

Additionally, Web3 facilitates decentralized applications (dApps), enhancing transparency and security in online transactions. With Web3, financial transactions, smart contracts, and other digital economic activities are all conducted on the blockchain, ensuring integrity and immutability.

Web3 also offers significant opportunities for developers and businesses. With the rise of decentralized platforms, anyone can build and deploy applications without relying on large platforms like Apple or Google.

3. Key Features of Web3

Web3 possesses many prominent features that form the foundation for an entirely new Internet ecosystem.

Decentralization: Rather than relying on centralized servers, Web3 uses blockchain to distribute data across the entire network. This enhances security and helps prevent external attacks.
User Control: Web3 gives users full control over their data and digital assets. They decide how and with whom their information is shared.
Smart Contracts: Web3 enables smart contracts, which are self-executing code on the blockchain when conditions are met. This removes the need for intermediaries and reduces fraud risk.
Transparency: All transactions and activities on the blockchain are recorded publicly, fostering a higher level of transparency.
Trustless Transactions: Thanks to the transparency and immutability of blockchain, Web3 allows transactions without relying on third-party trust.
Tokenization: Web3 creates an ecosystem where everything from digital assets to digital content can be tokenized. This fosters new markets and opens opportunities for innovation and growth.

4. Architecture of Web3

When we imagine a general web application, we picture an architecture that includes the following components: For Web3 applications, the user interface remains the same but incorporates some additional changes as follows:

In comparing Web2 and Web3 architecture, the Blockchain Node manages user data and performs the most intensive tasks, decentralizing this data into a network of blockchains.

Since direct on-chain storage is costly, in the diagram above, you can see the Off-Chain Decentralized File Storage and the P2P Database, which assist in data storage.

Finally, the Wallet or Private Key provides a layer of security and identity verification for individuals.

The above image is only a broad overview of the architecture. In reality, applications have a more complex structure and require architectural parameters from both Web2 and Web3.

5. How Web3 Works

Web3 operates through a decentralized and reliable approach, characterized by the following components:

Blockchain technology: Web3 uses blockchain to establish a distributed network for data and transactions. Blockchain is a chain of encrypted and signed transaction blocks stored across multiple nodes (computers) globally to ensure decentralization and reliability.
Smart contracts: In Web3, smart contracts are self-executing programs written as code, stored, and executed on the blockchain. They define and enforce the terms and conditions of transactions and applications without the need for a third party.
Control over personal data: Web3 prioritizes personal data control. Users have full control over their data and decide if they want to share it with third parties.
Digital assets and cryptocurrencies: Web3 enables the use of cryptocurrencies and digital assets like NFTs (non-fungible tokens) for transactions and asset management, providing decentralization and flexibility in asset transactions.
Decentralized applications (DApps): Web3 enables the development and deployment of decentralized applications (DApps) on the blockchain. DApps operate without third-party intervention, allowing users control over their assets and personal data.
Decentralized data networks: Web3 allows for decentralized data networks where users own and control their data. They can share or sell data without intermediaries.

Web3 creates a decentralized, secure, and reliable online environment where users control their assets and personal data while engaging in applications and transactions without relying on intermediaries.

6. Advantages and Limitations of Web3

6.1. Benefits and Advantages

High decentralization: Web3 distributes ownership among users and developers, removing the control of centralized organizations.
Peer-to-peer interaction: Web3 encourages direct interaction among users without needing intermediaries like Google or regulated payment platforms.
Decentralized data and ownership assurance: Web3 proposes decentralized data models that help users control and own their personal data, preventing violations and data misuse.
Dedicated payment system: Web3 promotes using cryptocurrencies and encrypted payment technology, removing dependency on financial and banking infrastructures.
Transparent, secure, and trustworthy information network: Users can verify and authenticate information on the chain, ensuring transparency and privacy.

Examples:

With Web2, transferring money requires using central banking apps, sharing personal information, and is subject to bank control. In contrast, Web3 allows users to freely transfer money to anyone using a Metamask wallet without relying on any third party. Transactions can be made anytime and anywhere. Another example is borrowing assets on lending protocols like Compound or Aave on Web3, which can happen without trust in the lender. Everything is transparent and verifiable on-chain. Hardware breakthroughs, blockchain networks, and AI technology are driving the development of Web3, creating new opportunities and enhancing important aspects of the internet.

6.2. Limitations and Challenges

Although Web3 promises significant potential for growth, it is still in an early developmental stage.

Here are some limitations of Web3:

Scalability: Compared to Web2, Web3 is still far from scalable, with lower processing speeds and higher transaction costs. Improving scalability is a challenge for Web3 development.
User Experience (UX): User experience in Web3 is still underdeveloped. To access Web3 products like DeFi applications, users often need to learn new knowledge, download new software, and go through complex steps, which raises barriers to global adoption.
Accessibility: Most Web3 applications are built independently and are not integrated with popular and familiar Web2 applications, which limits accessibility for users and creates a division between the two worlds.
Cost: Developing a Web3 project is costly, and putting code on the blockchain, especially with Ethereum gas fees, requires a significant investment. Many dApps struggle to manage these costs.

Web3 development is still in its early stages with many issues to address. However, this also brings opportunities for those who believe in the future of Web3 and are developing related products and solutions.

7. Nine Applications of Web3 with Cryptocurrency

Web3 has several important applications in the crypto and blockchain sectors, including:

Crypto wallets: Web3 provides decentralized crypto wallets that allow users to store and manage cryptocurrencies and digital assets. Web3 wallets enable users to have complete control over their private keys and access DeFi applications.
DeFi: Web3 has spurred the growth of DeFi, allowing users to engage in decentralized financial activities such as lending, borrowing, trading, and creating various financial smart contracts.
NFTs (Non-Fungible Tokens): NFTs are a popular Web3 application that enables the creation, trading, and management of unique digital assets like digital art, video games, and more.
Decentralized exchanges (DEXs): Built on the Web3 platform, DEXs allow users to trade cryptocurrencies and digital assets directly without intermediary exchanges.
Decentralized data management: Web3 enables users to own and control their personal data, manage privacy, and decide whether to share data with third parties.
Multi-application interoperability: Users can interact with multiple Web3 applications in an online environment, sharing data and assets easily.
DApps (Decentralized applications): DApps are built on blockchain platforms and use smart contracts to provide decentralized services, including financial, social, and other applications.
Cross-chain Bridges: Currently, there are many different blockchains, and cross-chain bridges connect these chains, allowing assets and data to move between blockchains.
DAOs (Decentralized Autonomous Organizations): DAOs have the potential to take on governance roles in Web3, providing decentralized management and governance structures.

8. Conclusion

Web3 is a revolutionary approach to the internet, emphasizing decentralization, data control, and direct interaction. Although still developing, Web3 promises a more reliable, transparent, and free online world, fostering innovation and creativity in the cryptocurrency and technology markets.

Read more: