What is Web3?

Last updated 16th Feb 2023

In this informative guide on web 3.0, we have uncovered the wonders of this emerging technology and how this innovation will bring a difference in the way we interact with the internet. Web 3.0 is associated with the vision of creating a decentralized Internet. Moving forward, you will also find a section dedicated to explaining how web 3.0 is different from its predecessor viz. web 2.0.

Blockchain technology is the foundation of this next-generation web and to help you understand this sophisticated technology in a better way, we have shed some light on the popular projects leveraging this technology. However, these projects are still evolving and the web 3.0 landscape is expected to look different and better when fully formed.

Finally, you will also explore the drawbacks of web 3.0 so you can have a balanced and 360-degree understanding. By the end of this guide, you’ll understand how web 3.0 technology can push the adoption of cryptocurrencies and decentralized exchanges.

What is Web 3.0?

Gavin Wood, the co-founder of Ethereum, coined the premise of web 3.0 shortly after the project launched in 2014. The entrepreneur shared that the internet requires too much trust, whether it’s registering your personal details with a centralized financial institution or relying on large social media platforms acting in your best interest with your data. No individual or small business could pay for vast months of data traffic delivered through these social media platforms. On top of that, the network effect took place.

However, Web3 gives ownership of how the internet runs to users through decentralization, NFTs, and cryptocurrencies. The core idea of web 3 is made of several components including but not limited to the following:

  • Trustless: Web 3.0 applications are based on economic mechanisms and incentives instead of relying on third parties to provide a safe network for interaction

  • Native payments: Web 3.0 offers native payment infrastructure driven by cryptocurrency, allowing users to trade using secure transactions. This eliminates the need to rely upon outdated financial infrastructures like banks and fiat currencies.

  • Permissionless: Web3 is not gated by people or organizations, so anyone can access these systems.

  • Decentralized: Ownership is distributed among users instead of concentrated in the hands of centralized organizations.

Web 3.0 is the next stage of the internet evolution that will make the internet more intelligent and/or process information with near-human-like intelligence. The next version of the ​​internet is expected to bring a paradigm shift in the way we browse, interact socially, or even shop on the internet. While Web 2.0 improved communication and online interaction, Web 3.0 will focus on improving personalization, collective ownership, and sharing of content.

The world wide web is the major tool used by billions of people to exchange, read and write information and communicate with others over the internet.

Web 3.0's two cornerstones are the semantic web and artificial intelligence (including machine learning). The semantic web will aid in teaching the computer what the data means, allowing AI to develop real-world use cases that can make better use of the data.

What Technologies Are Required for Web 3.0

In this section, we have shared the technologies that contribute to the development of web 3.0. These are just some of the main components that are pooled together while building Web 3.0 applications. Additional technology breakthroughs will add to the richness internet’s future.

  • 3D Graphics: The development of 3D graphics is required for the birth of functional and practical metaverses. Check out our guide on “What is the Metaverse” to learn more about this topic. In a nutshell, it’s a way of connecting users in a 3D world via VR headsets. Through a combination of communication channels, NFTs, cryptocurrencies, and other technologies, metaverses aim to improve the way we connect digitally.

    While the quality of 3D graphics is not far off from being metaverse-ready, the technology needs work. For example, VR headsets can cause some people to feel dizzy after prolonged use. Also, the concept of NFTs is not yet something that most people understand and use daily.

  • Cryptocurrencies: The prime vision of web 3.0 is decentralization, which can be achieved only if the community is transacting in the ecosystem through cryptocurrency. Built and designed on the top of the blockchain, cryptocurrency aka “crypto” is a form of payment that can circulate without the need for a central monetary authority such as a government or bank. Cryptocurrency empowers users to seamlessly make transactions in a peer-to-peer ecosystem at speed and without the involvement of any intermediary in the process.

  • Artificial intelligence: AI allows computers to better understand the context and relevance of information, which will greatly expand the scope of digital technologies. Web 3.0 programs can help people manage daily tasks via AI automation. Some of the use cases of AI in web 3.0 have been illustrated below:

    • Generation of more personalized and relevant recommendations

    • Smarter decentralized applications

    • Intelligent NFTs integrated with self-learning capabilities (Example: Alethea AI’s Alice)

    • Robust safety of content metadata

  • Machine learning: through AI Another piece of the Web 3.0 puzzle was dreamed of way back in the 1990s. The idea was computers would be able to contextualize information much like the human brain.

  • Blockchain: Blockchain is a distributed ledger technology containing the immutable record of the transactions executed within the network. The transactions are verified by the network participants using a consensus mechanism like Proof-of-Work or Proof-of-Stake.

    When the transactions are verified, they are added to the block and once a block reaches its storage capacity, the next block is added in the sequence, creating a chain of the blocks- hence blockchain.

    The blocks are chained together using a hash. In addition to the data, every block also has a hash which can also be compared to a fingerprint. Hash identifies a block and all of its content and is always unique, just like a fingerprint.

Once a block is created and added to the chain, its hash is calculated. Every block not only has its own hash but the hash of the previously linked block as well. This is how different blocks are interconnected with each other.

Have a look at the top characteristics of blockchain technology:

  1. Transparency: The distributed ledger is public, hence anyone can use a blockchain explorer and create an audit trail for all transactions that have occurred on the network.

  2. Decentralization: Blockchain does not need a central authority to validate the transactions and hence, no one can just simply edit the content of the blocks or characteristics of the network.

  3. Immutability: Once the data has been recorded in the block, it can be changed or tampered with.

  • Smart contracts: These are self-executing programs that honour an agreement between two parties. Users can inspect the lines of code of a smart contract before use to ensure they are happy with the deal. Smart contracts exist on distributed ledgers, so blockchains are a vital part of the technology. Some of the top uses of smart contracts include digital identity, mortgages, supply chain management, insurance, and asset management.

  • Decentralized exchanges: DEXs allow users to exchange cryptocurrency anonymously without access restrictions, and the fees are lower than centralized systems like banks. These peer-to-peer platforms require no oversight by any third party, which means users can interact directly.

    Users need a compatible DeFi wallet to connect to a DEX, so no registration or KYC verification is required. The system is non-custodial, which means users control the private keys and access to their funds. DeFi (Decentralized Finance), is a Web 3.0 feature that is gaining popularity. Real-world financial transactions must be carried out on the blockchain without the assistance of banks or the government. In the meantime, a lot of large companies and venture capital firms are investing heavily in Web 3.0, and it is difficult to imagine that their involvement won't lead to some kind of centralized power.

How is Web3 Different From Web2?

In this section, we will cover the differences between web 2.0 and web 3.0, so you can better understand the transition and what will change. This builds upon the included technologies you learned about in the last section.

Financial Systems

Web 2.0 financial systems include fiat currencies like the USD, banks, and centralized rulemaking. Therefore, governments or banks can change trading rules at a moment’s notice, and common people have no choice but to go along with the changes. Some of these might be negative and often lead to inflation, increased mortgage costs, and limits on the amount of money you can send.

In comparison, web 3.0 financial systems include cryptocurrencies, smart contracts, and decentralization. These systems are transparent and consistent because lines of code and community govern the functioning of features.

Content Ownership

In web 2.0, the system has complete control over various aspects of data ownership, which leads to a lack of anonymity, poor data protection, access issues, and storage limits. Whereas, web 3.0 allows data to be exchanged in various locations at the same time. It promotes anonymity, and data security is improved because of the advanced cryptography protocols.

Access and Permissions

Web 2.0 systems can block access if you fail a background check or are from the wrong region, limit transactions if their rules are broken, or cause loss of income when systems go down. For instance, Twitter can block access to your account, and banks can stop transactions if they feel it does not match their criteria, which could change at any time.

Whereas web 3.0 is more stable since systems cannot simply go down or decide to change based on a centralized decision. For example, the Ethereum network is distributed over thousands of nodes. When one node goes down, others step in to take over the workload.

Centralized vs Decentralized

Web 2.0 systems are centralized, which means power, decision-making, control, and computational resources are focused in one location or a small number of people. This causes problems such as ease of gaming and manipulation of the system.

On the other hand, Web 3.0 follows a decentralized philosophy where no single person or organization controls the system. The community running the protocol is put into power. Also, computational power is spread among many nodes, which allows transaction records to be stored across the network.

Examples of Web 3.0

Web 3.0 is included in the concept of a world wide web based on public blockchains. The concept is based on machine readability, also called Web 3.0.

Web3 (also known as Web 3.0) is an idea for a new iteration of the World Wide Web which incorporates concepts such as decentralization and blockchain technologies among others.

In this section, we will focus on revolutionary decentralized autonomous organizations and projects building Web3 technologies. There is a long way to go until we live in a truly web 3.0 world, but looking at ongoing progress is exciting.

A New Way of Building Companies

With web 2.0, building a company requires raising funds from sources such as venture capitalists, which scoops out a significant percentage of the business. Investment from such sources can lead to incentives that are not in the best interests of the company or users.

In comparison, projects in the web 3.0 ecosystem are crowdfunded by the community through ICO (Initial Coin Offering), IEO (Initial Exchange Offering), or IDO (Initial DEX Offering). These offerings open the gates for the community to buy the native tokens of the projects if the prospects are promising.

The community members holding the project’s token are often granted exclusive access and perks followed by the right to vote through DAO proposals. Voting rights are granted to the community members holding tokens, hence, they get the power to control the direction of the project, not the board of directors.

3 Interesting Examples of Web3 Projects

1. OpenSea

OpenSea is the first and largest NFT marketplace in terms of the trading volume. Founded in 2017, more than 800 employees work for OpenSea from different parts of the globe. You can think of OpenSea as the eBay of digital collectibles (NFTs). The platform offers various features, including:

  • Create NFTs and set up a collection

  • Browse through various NFT categories

  • View NFT statistics and analytics

  • Filter the NFTs to narrow the search

  • View the transaction history of NFTs

In September 2022 alone, the data from DappRadar revealed the execution of more than 1.85 million transactions, the interaction of 300K unique wallet addresses with the platform’s smart contract, and an immense trading volume of 350K ETH.

OpenSea supports transactions through cryptocurrencies, but Ethereum is the most popular one - after all, this NFT marketplace is built on top of the Ethereum network.

2. Meta

Meta, formerly known as Facebook, is arguably the biggest technology firm investing billions in the expansion of the metaverse. The company aim to revolutionize the way people play, work, and communicate. The portfolio of Facebook’s metaverse is diverse and includes:

  • Horizon Metaverse

  • VR Fitness

  • Metaverse Gaming Hunt

  • VR Messenger Calls

  • The Presence Platform

  • Spark AR

  • Investment in Education

There are many other companies working on the development of the metaverse like Microsoft and Apple, but Meta’s strategic acquisitions of companies like Oculus and Spark AR followed by a diversified metaverse portfolio and the personal interest of Mark Zuckerberg is creating the lead position for Meta.

Furthermore, the metaverse team at Facebook is also creating a lot of opportunities for brands and businesses to interact with customers in a virtual environment. With brands including but not limited to Nike, Adidas, and Prada understanding the capability of commercializing their products in a virtual setting, Facebook’s metaverse initiative has a long way to go.

3. Ethereum

Ethereum is a decentralized and open-source blockchain protocol empowered by the Ether (ETH) that allows users to execute transactions, earn interest via staking, play blockchain games, use and store NFTs, trade cryptocurrencies, use social media, and more.

Ethereum is a web 3.0 network that is driven by the community and supports decentralized concepts like DApps (decentralized applications), blockchain games, decentralized exchanges, and DAO (Decentralized autonomous organization).

Instead of a centralized server, the Ethereum network runs on thousands of different computers known as nodes, allowing the network to achieve decentralization, immunity to attacks, and 100% uptime.

DeFi (decentralized finance) is the most important web 3.0 innovation from Ethereum allowing users to send, receive, borrow, earn interest, and even stream funds from any part of the world without experiencing any downtime.

Ethereum is a pioneer in the emerging web 3.0 ecosystem and this can be verified from some interesting stats as listed below:

  • Daily transactions exceeding 1M

  • $47B value locked in DeFi

  • 8637 nodes across the globe

What’s the Importance of Web3?

In this section, we will focus on the advantages of web 3.0 and why it is important for the evolution of the internet. You’ll see that there is a lot at stake, and if the theory becomes reality, then the advantages of web 3.0 will change the social and commercial landscape.

Decentralized Autonomous Organizations (DAOs)

There are many web 3.0 projects that allow their native tokens to be used as a medium for voting in the proposals meant for the improvement and evolution of the project. These tokens, (known as governance tokens) are held by the community members, hence instead of the board of directors, it is the community holding these governance tokens that decide the development direction of the project. The voting power is based on the number of tokens held or locked by a member.

Web 3.0 tokens are digital assets that are associated with the vision of creating a decentralized Internet.

All the voting process is executed on-chain, which means that the community members sign and record the votes on the blockchain. This enables complete transparency within the community and decentralized growth is ushered. The user only needs to have an internet connection and own some governance tokens to become part of the DAO and contribute to building the future of web 3.0.

Furthermore, the rules and regulations and guidelines in the DAO are not managed by an individual or a group but by a smart contract. The smart contract technology is encoded with all the crucial information that is necessary to ensure fair and transparent voting on the proposals.

Censorship Resistance

You might have heard about users on Twitter getting banned for various reasons. It’s a form of censorship that would not exist on decentralized web 3.0 applications. In August 2021, OnlyFans shared their intentions to ban sexually explicit content, which is how most of the creators on the platform made money. This outraged many content creators and would lead to a loss of income. Consequently, OnlyFans reversed the decision, highlighting a problem with web 2.0 applications - a massive imbalance between content creators and platforms.

If a social media platform for the web 3.0 ecosystem is built, then the development team of such platform do not have the rights to control the content on the platform, but only the community members. For example, if a political opinion is posted, then the platform cannot censor it but only the users by voting against the content, hence the power is shifted into the hands of the community, making the project decentralized.


The ownership of digital assets on web 2.0 is unstable and can be taken away from you without warning. For example, most games nowadays are directly tied to your account, and you don't own them after purchase - they reside in a centralized cloud infrastructure. Therefore, if companies like Steam decides to close down your account or delete the game from the library, you will lose the access.

Web 3.0 aims to overhaul this approach by giving you direct access to digital assets like cryptocurrency and NFTs (non-fungible tokens). You can store these digital assets in a non-custodial wallet and sell them later whenever you want. To access the assets in your self-custody wallets, the private key is required which must be protected by you. Hence, without these private keys, nobody can exercise any right to take those digital items away from you.

Native Payments

The payment systems in web 2.0 have too many loopholes. The need to trust the centralized application, unpredictable changes in the policies, and the freezing of funds are just a few examples. High transfer fees and slow processing times also contribute to the inefficiency of these legacy payment solutions.

Utilizing cryptocurrencies like ETH allows users to save money on transfer fees and send money directly to other users in an instant without needing a third party. Lines of code will replace the oversight of third parties, which can be trusted to act predictably and fairly.


Identity management is not optimized across the web 2.0 internet. You need to create an account with various platforms, remember your username/password, and keep them secure. On top of that, platforms can limit access to your account, thus censoring you.

Whereas Web 3.0 allow the identities to be created using an ENS profile and an Ethereum address. Therefore, logging in to multiple platforms is possible via a single Ethereum address that is anonymous and, therefore, censorship-resistant.

Finally, it must be said that user data won't be under control in Web 3.0 because intermediaries are no longer necessary. This reduces the possibility of corporate or governmental censorship and the potency of denial-of-service (DoS) assaults.

Prior to Web 3.0, it was challenging to locate the most accurate result on search engines. However, over time, they have become better at identifying semantically relevant results based on search context and data on the web pages. Web browsing becomes more practical as a result, making it easier for everyone to find the precise information they need on the web pages.

What Are the Challenges of Web 3.0?

Web 3.0 is wrapped with a few limitations and we will cover them in this section. Overcoming these hurdles is a key to ensuring the successful transformation into web 3.0.

User Experience

Currently, web 3.0 applications don’t provide a good user experience. Firstly, understanding how to use these platforms can be complicated for newcomers. Users must understand the fundamentals of blockchain technology and refer to the technical documentation to get the most out of web 3.0. Compare this to the optimized and fast onboarding process of web 2.0 applications.

Also, the security concern must be understood by users before they can safely trade. For example, decentralized exchanges and cryptocurrencies are unregulated technology. Therefore, scams and cases of theft are frequent, so user protection is not adequate for mainstream applications.


You can take advantage of features like the Ethereum profile without a charge, but current transaction costs (gas fee) are too high. Also, the technologies required for accessing web 3.0 infrastructure are not viable in developing nations where the average income is lower. For example, when the first mainstream metaverse goes live, users will need VR headsets that are expensive. The barriers to entry must be lower across all aspects of web 3.0 for it to be a viable choice over web 2.0 technologies.


Overall, web 3.0 is not difficult to understand, but it is significantly different. Therefore, users will need to do a lot of learning to familiarize themselves with the systems and functions at play. Educational content must also be translated into all languages to ensure users worldwide have equal access.

Final Thoughts on Web 3.0

To summarize, web 3.0 will be a big change in how people do business, learn, communicate, and transfer value. Various technologies need to come together for web 3.0 to take shape, including blockchain, cryptocurrencies, smart contracts, AI, metaverses, NFTs, and more. This will lead to a decentralized, inclusive, and transparent digital world where users are empowered to take control of their assets. However, multiple challenges hold this back that needs to be overcome.

It’s an exciting time in the web 3.0 space as projects with large amounts of financial support push the envelope. Keep an eye on this space, as during the next few years, you can expect massive breakthroughs.

Web 3.0 FAQs

What is Web 3.0?
What Technologies Are Required for Web 3.0?
What are the top characteristics of blockchain technology?
What Are the Challenges of Web 3.0?

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Martynas Pupkevicius

Martynas Pupkevicius

Martynas is a seasoned freelance writer that has written on a broad range of topics over his 10 year career. He enjoys diving into the research and sharing what he's learned with readers.