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What Is Web3? The Ultimate Guide


Rob Behnke

March 9th, 2022

One of the hottest concepts in the crypto space over the last year has been Web3 (or Web 3.0) but there is little consensus on what it actually refers to. In this in-depth guide, we’ll walk you through the origin of Web3, the difference between Web 2.0 and Web 3.0, and the problems with Web 2.0 that Web 3.0 promises to resolve.

The Origin of Web 3.0

Web 3.0 was first coined by Ethereum co-founder Gavin Wood while talking about the future of the Internet in a blog post published in 2014. Wood envisioned encryption technology being used to build safe online spaces where privacy principles were upheld. He came up with the thesis after whistleblower Edward Snowden raised government surveillance concerns.

According to Wood, Web 3.0 would allow public information to be accessed by everyone while keeping personal information private. The privacy processes would preferably be carried out via an automated consensus engine.

That said, there were no immediate follow-ups on the Web 3.0 concept that he talked about and it was only last year, in 2021, that blockchain enterprises began to reconsider the proposition. Blockchain companies redefined Web 3.0 and described it as a decentralized Internet network underpinned by blockchain technology and controlled by users. Web 3.0 protocols also utilize a token-based economic model.

Ok, Then What Is Web 2.0?

Web 2.0 is the current version of the Internet and it relies on centralized websites and applications to power many of the networks that we know today. They range from search engines to innovative social media platforms.

Web 2.0 is based on a technological and business revolution that occurred in the early 2000s that changed the system from a network of basic static pages (Web 1.0) to a dynamic environment where user-generated content such as texts, messages, and videos could be accessed.

Web 2.0 is buttressed by myriad rich web applications that make these experiences possible. They include search engines such as Google, Yahoo, and Bing, which serve as website directories. Web 2.0 also includes social media platforms such as Facebook, Reddit, YouTube, and Twitter which encourage human interactions.

The main difference between Web 2.0 and the earlier version of the Internet (Web 1.0) is that users can generate content, share it, and communicate with others directly, albeit through intermediaries.

However, Web 2.0 faces many challenges, hence the need for a paradigm-shifting upgrade. Web 3.0 is expected to change the way the Internet works by fostering direct user interactions and transactions.

Main Web 3.0 Features

Web 3.0 is expected to surpass Web 2.0 on various fronts. The following is a breakdown of some of Web3’s main properties. 

1.    The Blockchain Factor in Web 3.0

Blockchain technology will be at the heart of Web3 networks and this is mainly because of its capacity to uphold the principles of transparency, democracy, and online privacy. Blockchain technology also enables content creators to monetize their works using tried and tested token models, which are currently in use in the art, music, and GameFi industries.

Among the biggest benefits is that blockchain technology can be used to devolve information control away from centralized private firms that currently act as the gatekeepers of the Internet. Companies such as Google and Facebook wield significant power over online properties and have a near-monopoly over online content.

Web 3.0 is expected to change the centralization landscape by allowing user-controlled systems to power the Internet via a distributed node setup. The design will enable all Internet devices to share processing power and bypass centralized server systems.

Some Web 3.0 blockchain firms are already looking into decentralized file storage technologies. Decentralized peer-to-peer file systems are among the most promising solutions.

They allow users to store file fragments on interconnected computers. Some innovative Web 3.0 projects are also leveraging deduplication techniques to optimize decentralized file-sharing systems.

2.    Artificial Intelligence in Web 3.0

Artificial Intelligence (AI) and Machine Learning (ML) will also play a key role in Web3. AI and ML technologies will be instrumental in providing accurate information relay systems.

AI and ML will also be pivotal in reducing manipulative online practices and ensuring data privacy. The best thing about using blockchain is that the technologies can be embedded on networks to enhance on-chain processes.

Today, artificial intelligence is used by centralized Internet companies for data analytics. Advanced artificial intelligence and machine learning applications allow them to recreate holistic images of their customers’ online activities for ad targeting and retargeting purposes. The AI systems can do this by piecing together hundreds of data points that include users’ device IDs, their IP addresses, location, and the types of sites they regularly visit.

In Web3, blockchain networks will have the capacity to implement identity protection layers on their decentralized systems. The use of AI will also allow non-identifiable dataset collection while preserving personal data privacy.

Artificial intelligence and machine learning will also be used to detect and thwart cyberattacks by identifying weaknesses on the blockchain. This capability increases trust in truly innovative decentralized Web3 blockchain architectures.

3.    Tokenization and NFTs

Web 3.0 will enable content creators to monetize their works through tokenization. This model is already being utilized in the finance and entertainment industries through non-fungible tokens (NFTs). NFTs allow fans and investors to buy digital representations of physical assets.

They range from rare artworks to music albums. Some real estate companies are also dabbling in NFTs to make asset trades more convenient for investors in the crypto arena. One of the main benefits of NFT technology is that it can be used to make fractional buys for collective ownership.

Today, NFTs are used extensively in the metaverse gaming finance (GameFi) industry. The GameFi sector is at the center of the NFT shift and has grown significantly in recent years as a result. Subsequently, GameFi received an estimated $4 billion in funding from private venture firms in 2021.

Capital injection is expected to grow multifold in 2022. In January 2022, the GameFi industry received capital inflows valued at approximately $1 billion.

This affirms growing confidence in asset tokenization models among both investors and users, an important aspect for increased Web 3.0 adoption.

The Problems with Web 2.0 (and How Web 3.0 Aims to Solve Them)

Web 2.0 is plagued by numerous problems which Web 3.0 intends to solve. We’ve outlined four of the biggest challenges facing Web 2.0 today and how Web 3.0 can address them. 

1.    The Lack of Data Privacy

Web 2.0 has many glaring data privacy issues. Many of the communication devices today are, for example, tied to blue-chip tech firms that monitor users’ online activities. They are also able to pinpoint a user’s location. Consequently, big data analytics firms have implemented elaborate technologies that are incredibly invasive.

In some cases, the tracked information is recorded and sold to third-party information bidders.

Lawmakers have attempted to rein in such practices, but the efforts have borne little fruit. Vulnerabilities in internet of things (IoT) devices such as IP cameras and smart speakers are also causing privacy concerns because of their susceptibility to hacks and data leaks.

Web3 will strive to counter such pitfalls by making information sharing protocols transparent and personal data private. This will mostly be implemented using Decentralized Identity, Zero-Knowledge Proofs, and related technologies.

Decentralized Identity for Data Privacy in Web 3.0

Decentralized identity is a new blockchain concept that involves the use of a universal wallet to verify online user identities. Verification certifications are usually provided by regulated institutions and government agencies. Web 3.0 platforms are expected to utilize Decentralized Identity technologies to enhance data privacy.

The primary purpose of the concept is to overcome identity issues when dealing with third-party services on the blockchain.

Users over the age of 18 could, for example, get a hashed verification code that would overcome the need to reveal sensitive data such as their date of birth. However, decentralized Identity metadata would be visible on the blockchain.

Decentralized Identity technology is already in use in some countries such as China. The most notable decentralized identity network in the nation is comprised of leading Chinese payment firms such as Baidu, WeBank, JD.com, and Tencent.

Using Zero-Knowledge Proofs for Data Privacy in Web 3.0

Zero-knowledge proofs is another novel data privacy concept that is set to be used in Web3. The technology has been developed to keep online activities private when accessing crucial services on the blockchain.

Zero-knowledge proofs use cryptographic algorithms to prove knowledge of some secret without revealing the secret itself.  For example, a user could prove that they know a password without disclosing it or demonstrate that a set of transactions is valid without revealing the exact transactions themselves.

The concept is likely to be implemented on privacy-focused Web 3.0 networks.

2.   Security Risks

A significant number of Web 2.0 properties are vulnerable to cyberattacks which typically result in data loss, and many of the conventional mitigation measures are failing.

Consequently, the number of cyberattacks and data breaches has increased in recent years. In 2021, the number of reported cyber intrusion incidences increased by approximately 68 percent compared to the previous year. Web 3.0 is expected to be a game-changer when it comes to countering cyberattacks because of its reliance on AI and ML as well as advanced encryption technologies.

When it comes to messaging, Web3 will make it possible for messages to be kept private through cryptography. Cryptographic messaging systems are able to encrypt readable texts by converting them into ciphertext, which is unreadable. The encryption processes are typically handled by encryption algorithms. They ensure that only the intended recipients can decode the obfuscated messages.

Most cryptographic systems today utilize symmetric and asymmetric encryption techniques. In symmetric encryption, a shared key is used to encrypt and decrypt data, whereas, in asymmetric systems, the encryption key is public. However, only users with a corresponding private decryption key can access the messages. 

This and other technologies will help to keep Web 3.0 environments safe.

3.    Monopolistic, Centralized Intermediaries

Among the primary goals of Web 3.0 is to undercut centralized intermediaries that presently control the Internet.

Today, there are over 1.6 billion websites on the Internet, but only a few thousand receive a significant chunk of Internet traffic. For perspective, there are over 4 billion Internet users, and many of them are obliged to use the top five most popular websites, which are Google, YouTube, Facebook, Wikipedia and Amazon.

This monopoly has inadvertently led to information centralization. The situation allows the big tech giants to influence the masses by pushing content that closely aligns with their agenda while censoring messages that do not.

The centralization of user information in top online platforms also makes them prime targets for hackers due to the sheer amount of cached data that they keep. In August 2013, hackers gained access to a data trove comprising of information related to over 3 billion Yahoo user accounts. The data included passwords and security questions. The incident highlighted Web 2.0’s security risks, a notable downside of centralization.

More recently, in 2019, hackers targeted Facebook and gained information on approximately 500 million users.

Web 3.0 will strive to decentralize and anonymize users on the Internet, making it harder for hackers to access merged data. It will also allow users to interact directly without having to use third-party communication intermediaries. This will help to resolve current data privacy concerns. 

4.    Lack of Transparency in Data Handling Practices

It is almost impossible to avoid the collection of your personal data on Web 2.0 because of its highly centralized nature.

Web 3.0 will be able to reveal the inner workings of data collection systems thanks to the implementation of transparent blockchain technology. Privacy-centric systems will also enable users to identify web applications that have collected their data and allow blocking of data collection applications. Sweeping personalized data control features will also help to counter centralized data control entities.

While blockchain technology is typically not structured to enhance privacy, a wide range of privacy-focused cryptographic layers can be added to Web 3.0 blockchain systems to safeguard personal data.

Final Thoughts

Web 3.0 has been hailed as the future of the Internet, with decentralized blockchain technology being at the center of its evolution. While many of the Web3 projects are still in beta, it will be interesting to see whether the projects will be robust enough to make the shift worthy. Subscribe to the Halborn newsletter and follow us on Twitter to stay on top of Web3 security news.