Web3 - what is it and why all the fuss?
A lot of definitions have been thrown around but essentially Web3 is a new iteration of the World Wide Web based around blockchain technology that will look to function in a trustless, permissionless, and decentralized manner. Web3 can be quite an involved subject so in this article I will explain as succinctly as possible what it is and why there is so much fuss about it right now.
The key feature
To start with the key feature of Web3 is that of ownership. When the internet (Web1) first found its way into the lives of millions of people around the world it was effectively "read-only" for most users. With its evolution the internet transformed into allowing users to both read and write on centralised platforms. Here think Twitter, Facebook, YouTube, etc. This effectively became Web2.
Web3 moves the needle further forward in that it aims to give users full ownership over their content, data, and assets via blockchains and the technology that underpins it. It is envisioned that users will be empowered to not only read and write, but to also own.
As it stands, in the world of Web2 companies such as Facebook effectively see their users as the product. They own their users identities as well as their data. In the context of Web3 users identities are not held rigidly in place on one platform, in fact they can move without restriction between different platforms and the key feature is that it will not be possible for a users data to be captured and monetised by tech mega corps.
As it stands all apps and platforms operating in Web2 are controlled by a central entity. In contrast with Web3 operating in a tokenised blockchain eco-system users will be afforded the ability to have a say in the way in which services they use are governed which in essence grants a form of ownership in the platforms themselves.
So what does the Web3 stack look like?
The Web3 stack is still in its early stages of development, however a significant amount of innovation and development has occurred over the years and consequently many of the pieces are starting to fall into place. What follows is not a completed puzzle, rather it’s something to consider as being an overview of the framework as the landscape continues to evolve.
At the bottom of the Web3 stack there is what is known as the protocol layer. This comprises of the underlying blockchain protocols on top of which everything else gets built.
Without question Bitcoin is the god coin of the entire crypto space. Although it doesn’t play a significant role in Web3 today, through the innovation of Satoshi Nakamoto it has enabled anyone to own a scarce digital asset by utilising a system of public and private key cryptography. Following the success of Bitcoin, there have been a wide range of layer 1 smart contract platforms such as Ethereum, Solana, Avalanche, Cosmos, etc, These platforms now serve as the foundational layer for many of the Web3 applications that are currently being built.
Both Bitcoin and Ethereum have further protocols that are built on top of them. For example Bitcoin has the Lightning Network (which aims to offer faster and cheaper transactions). Regarding Ethereum as a consequence of the network congestion and capacity limitations a variety of layer 2 scaling protocols have also been built on top of Ethereum.
With the growth of different layer 1 and layer 2 networks arose the requirement to be able to transfer or bridge value between them. Bridges have been built that cross between blockchains and they act as the means by which users are able to move value in the form of coins or tokens from one blockchain to another.
The infrastructure layer effectively sits above the protocol layer and it is comprised of interoperable building blocks that are extremely reliable at doing a certain or specific task.
This layer is extremely diverse and include projects that are building everything from software that will audit smart contracts, data storage, communication protocols, data analytics platforms and tools, DAO governance tools, identity solutions, financial protocols, and much more.
For example, a decentralised exchange such as Uniswap provides a platform for efficient and automated asset swapping utilising liquidity pools. Filecoin facilitates the decentralised storage of data. The domain names offered by ENS can provide the identity of a user in the Web3 space. Essentially an individual application on its own doesn't provide much value to the users, however, when these different applications and platforms are combined, these composite blocks of what can only be described as Lego fit neatly together then allowing developers to then use them to construct an app.
Use Case Layer
The use case layer, which effectively sits on top of the protocol and infrastructure layers is basically the front end where users get to interact with different services and platforms in order to undertake a variety of tasks or functions.
Lets consider the hugely successful a blockchain based game called Axie Infinity. This role player type game uses Ethereum based tokens along with NFTs that can be bridged across a more cost efficient and faster sidechain called Ronin. Players of the game invariably use the Uniswap Dex to swap ETH for the tokens that are needed to play the game.
I a similar fashion, the decentralised blogging platform Mirror utilises Arweave as its storage protocol for data storage. Furthermore Ethereum is used to enable publishers to be paid in crypto, invariably by sending tokens directly to their unique ENS address.
You will probably have noticed the mention of a Dex, in this instance Uniswap, can be seen to play a part in the infrastructure as well as the use case section. Although a Dex is essentially a series of smart contracts interacting with liquidity pools, it also provides a user interface and as such it acts as an app for users as well as infrastructure for other Web3 apps like the game Axie Infinity.
Sitting at the top of the Web3 stack is the access layer. This incorporates those applications that act as the entry point for all of the different Web3 activities.
So you want to play Axie Infinity or look to be paid for some content you wrote on Mirror? Well, the first thing you would need is a non custodial wallet. This acts as the means of entry for the majority of Web3 applications after fiat currency has been converted into crypto at one of the many exchanges such as Moonpay, Wyre, or centralised exchanges such as Coinbase.
With some crypto in a wallet, users can head to a Dapp (decentralised application) store like DappRadar and get to discover, track and trade everything DeFi, NFT and Gaming all in one place. Other projects such as Rabbithole look to help users learn how to use Web3 applications, platforms and protocols.
If it starts to get complicated and a bit overwhelming aggregators such as Zapper, Zerion, and Debank offer ways to manage your entire Web3 portfolio from DeFi to NFTs and whatever comes next. Invest in the latest opportunities from one convenient place.
So, in the not too distant future current Web2 platforms such as Reddit and Twitter where large crypto communities congregate will also act as gateways for Web3. For example Twitter integrated Bitcoin’s Lightning Network into the platform to allow users to tip others in Bitcoin.
An evolving stack
The protocols, infrastructure, user applications, and access points that I have described above make up an ever changing and evolving landscape of the Web3. Regardless of how this space will change and grow one thing is for certain, it will be a paradigm shift from Web2 as it will become an internet that is owned by its users.
Beyond the incredibly important aspect of ownership, the potential of Web3 lies with the modularity and interoperability which will allow for a never ending scope for the ways in which the components of the stack will be utilised to create exciting and innovative use cases that will change the way in which many aspects of life and business are conducted in the future.
Although its conceivable that the over arching framework and layers of Web3 that I have mentioned will remain largely unchanged, in time just like Web2 evolved from the clunky, awkward system of the 90's to where we are today, the projects and applications that will emerge in Web3 in the coming year will evolve dramatically to a point where users by in large won't even know they are in a blockchain based environment.