Web3 Explained: Understanding the Foundation of Decentralised Internet

Quick Take:

• Web3 represents the next evolution of the internet, powered by blockchain technology
• Users gain true ownership and control over their digital assets and data
• Decentralisation eliminates traditional intermediaries and enables direct peer-to-peer interactions
• Real applications already exist in finance, digital art, gaming, and social platforms

The Evolution of the Internet: From Web1 to Web3

To truly understand Web3, let's look at how the Internet has evolved:

Understanding Web3 Fundamentals

At its core, Web3 represents a paradigm shift in how we interact with the digital world. Built on blockchain technology, it promises to address many of the criticisms faced by today's internet – from data privacy concerns to platform monopolies.

Key Differences Between Web2 and Web3

Web3 shifts power from centralised authorities to individual users, enabling true digital ownership and peer-to-peer interactions.

Web2 (Current Internet):

• Platforms own and monetise user data
• Centralised servers vulnerable to outages and attacks
• Companies make unilateral decisions about platforms
• Limited transparency in algorithms and data usage
• Value primarily flows to platform owners

Web3 (Decentralised Internet):

• Users own and control their personal data
• Distributed networks ensure reliability and security
• Communities govern platforms through DAOs (Decentralised Autonomous Organizations)
• Open-source systems provide full transparency
• Value flows directly to contributors and users

How Web3 Works: The Technical Pillars

Imagine the internet as a city. In Web2, a few large companies own most of the buildings, and you need their permission to do anything. In Web3, you own your piece of digital real estate and can interact directly with others without asking for permission.

There are four technical pillars of Web3:

1. Blockchain Technology

• Distributed ledger recording all transactions
• Immutable record-keeping ensures transparency
• Network of computers validates all actions

The Digital Record Keeper

Think of blockchain as a shared digital notebook that everyone can see, but no one can change or erase what's already written. Instead of storing information on one company's computers, blockchain spreads this information across thousands of computers worldwide. This means:

• Your data can't be lost if one computer breaks down
• Everyone can verify whether what's written is true
• Once something is recorded, it can't be changed or deleted
• No single company controls your information

2. Smart Contracts

• Self-executing agreements
• Automated enforcement of rules
• Eliminate the need for intermediaries

The Digital Agreement Makers

You can compare smart contracts to digital vending machines. Just like how a vending machine automatically gives you a snack when you put in money, smart contracts automatically execute agreements when certain conditions are met. For example:

• You could automatically receive concert tickets the moment your payment goes through
• Artists could instantly get paid every time someone uses their music
• Business deals could execute automatically when all parties meet their obligations

3. Cryptocurrencies

• Native digital money for Web3
• Incentivises network participation
• Enables direct value transfer between users

The Digital Economy Engine

Think of cryptocurrencies as the native currency of the Web3 world, like how each country has its own money. But unlike traditional money, Web3 currencies:

• Let you send value instantly to anyone, anywhere
• Reward people who help maintain the network
• Power various Web3 services and applications, such as running smart contracts or storing files
• Give users voting rights on their favourite platforms

4. Decentralised Applications (dApps)

• Applications built on blockchain
• User-owned and community-governed
• Direct peer-to-peer interactions

The Digital Service Revolutionaries

dApps are next-generation applications that users collectively own and control. Take a music streaming dApp for example:

• Artists upload music directly and keep 90%+ of the revenue
• Users who stake tokens in the platform share in its success
• Users vote on features and revenue-sharing rules
• Your playlists and music licenses stay with you, even if one interface shuts down
• Popular playlist curators could earn tokens for their contributions

What's Next in Web3?

We've covered the fundamental building blocks of Web3 – from its evolution beyond Web2 to the core technologies that make it possible. We’ve tackled how blockchain serves as the foundation, smart contracts automate agreements, cryptocurrencies power the economy, and dApps deliver new kinds of services.

But understanding the technology is just the beginning. How are people and businesses actually using Web3 today? What challenges do they face, and how can one start participating in this digital revolution?

In Part Two of our Web3 guide, we'll explore:

• Real-world applications transforming industries today
• Success stories from companies embracing Web3
• Common challenges and how to overcome them
• The emerging trends of Web3 and its integration with other technologies

Stay tuned for "The Future of Web3: From Theory to Revolutionary Applications" where we'll show you how these foundational technologies are creating real value in the world today.

Can’t wait to learn more about implementing Web3 in your business? Contact us to discuss how we can help you navigate the decentralised future!