Cutting Out the Middleman: Web3's Potential to Revolutionize the Web

Welcome to the dawn of a new era of the internet, where WEB3 technology is set to revolutionize how we interact and transact online by decentralizing the web and giving users more control of their data and digital footprint.

To understand what is happening in WEB3 you first need to know what the basics are of WEB2. Built on HTML, CSS, and JavaScript, WEB2 enabled the creation of dynamic websites that are interactive and responsive to user input. It also allowed the creation of web applications and services such as social media platforms, e-commerce sites, and online marketplaces.

WEB2 is also characterized by its reliance on centralized servers, which store and manage user data and interactions and are controlled by a few powerful actors. This has led to data privacy and security concerns and created a demand for more user control over their own data and online interactions.

WEB3 – the Internet of Value

WEB3 is the third generation of the internet built on decentralized technology. It is powered by blockchain technology and smart contracts, which allow for the creation of decentralized applications (dApps) and the ability to transfer value without intermediaries. In other words, in WEB3, users have more control over their own digital identity and assets, enabling new possibilities for digital ownership, self-sovereignty, and control over personal data.

This article will dive deeper into the components that make up WEB3, including decentralized networks, smart contracts, metaverses, decentralized web hosting, and dApps. So, forget about buying virtual cats; WEB3 is about creating a new decentralized internet that will change how we interact and transact online. A more inclusive and accessible internet, with a greater emphasis on privacy and security and less dependence on centralized institutions.

What Makes Up WEB3?

A variety of components make up WEB3 that all work together to create a more decentralized and user-centric internet. Here are some of the key building blocks that are driving the evolution of the web:

Blockchain Technology

Blockchain technology is a decentralized and distributed ledger system that securely and immutably records and stores data. It enables the creation of decentralized networks, which can be utilized to build dApps and smart contracts. These networks are maintained by a network of computers rather than a single server, ensuring they are resistant to censorship and fraud. This results in a trustless environment where individuals can securely transfer value without intermediaries.

The decentralized nature of blockchain technology also enables the creation of digital assets and tokens that can represent ownership, value, and identity within the WEB3 ecosystem. This opens up new possibilities and uses that were not possible with WEB2, such as tokenized ownership, digital identity, decentralized finance, and more.

In Code We Trust

With blockchain technology, trust is not required in the traditional sense, as the code, rather than the person you’re transacting with, is what you put your trust in. It’s like trusting a robot to do your taxes instead of a CPA – sure, you may not have a personal relationship with the robot, but you trust that its calculations will be accurate. The same goes for blockchain – you may not trust the person on the other end of the transaction, but you can trust the code to ensure a secure and transparent transfer of value. This is why blockchain is referred to as a trustless network.

Decentralized Applications (dApps)

DApps, or decentralized apps, are built on decentralized networks such as blockchain technology instead of a single server. DApps use smart contracts – self-executing contracts with the terms of the agreement directly written into code, to govern their operation.

In contrast, traditional or centralized apps are built on centralized servers and controlled by a single entity. They are more vulnerable to censorship and can be shut down or modified by their controlling entity.

Some examples of popular dApps include:

• Uniswap: A decentralized exchange for trading cryptocurrencies

• CryptoKitties: A game where players can buy, sell, and breed virtual cats

• MakerDAO: A decentralized lending platform that allows users to borrow and lend cryptocurrency

• Compound: A decentralized lending and borrowing platform for Ethereum-based assets

• Aave: A decentralized lending and borrowing platform with flash loans and credit delegation features

• Ethereum Name Service (ENS): A decentralized domain name system for the Ethereum blockchain

• Augur: A decentralized prediction market platform

• Aragon: A decentralized platform for creating and managing decentralized autonomous organizations (DAOs)

  
  

Each of these dApps utilizes the benefits of decentralization to build new and innovative use cases for digital assets and online interactions.

Decentralized File Storage

Decentralized storage refers to the distribution of data across a network of computers rather than relying on a central server or location to store the data. This allows for increased security and resilience, as there is no single point of failure, and data can be stored across multiple locations. Additionally, decentralized storage systems often use blockchain technology to ensure the integrity and immutability of the stored data. Examples of decentralized storage platforms include IPFS, Sia, and Storj.

Decentralized Finance (DeFi)

Decentralized Finance (DeFi) refers to a growing ecosystem of financial applications and services that are built on blockchain technology. These services are decentralized, meaning that any single entity does not control them, and they allow for trustless, peer-to-peer transactions. Some examples of popular DeFi products include:

• Decentralized exchanges (DEXs) such as Uniswap, SushiSwap, and Curve, which allow for the trading of cryptocurrencies and other digital assets without the need for a centralized intermediary.
• Lending and borrowing platforms such as Aave, and Compound which allow users to lend and borrow digital assets in a decentralized manner.
• Stablecoins, such as DAI, USDC, and USDT, that are pegged to the value of a fiat currency, making them less volatile than other cryptocurrencies.
• Yield farming platforms such as Yearn Finance allow users to earn interest on their digital assets by lending them to liquidity providers.
• Insurance protocols such as Nexus Mutual, which offer smart contract-based coverage against smart contract risks.
• SaaS-based DeFi infrastructure providers like FLUIDEFI, that produce analytics and risk ratings for institutional customers, for portfolio management, tax purposes, and audits.

DeFi has the potential to disrupt the traditional financial system by providing more accessible, open, and transparent financial services and by giving individuals more control over their assets.

Decentralized Identity

WEB3 allows for the creation of decentralized identity systems, such as Self-sovereign Identity (SSI), that enable individuals to create a digital identity that is verifiable, portable, and interoperable and allows users to have control over their data and identity.

A centralized authority does not control a decentralized digital identity, it is stored and controlled by the individual through the use of blockchain technology, which allows for more privacy and allows individuals to share only the necessary personal information with others.

In a decentralized identity system, the user creates a digital identity, usually in the form of a digital wallet, which is then stored on a blockchain. This digital identity can be used to access various services and applications that require personal information, such as signing in to a website or proving age for age-restricted products.

Self-Custodial Wallets

“Not your keys, not your crypto” is a phrase that emphasizes the importance of self-custody when it comes to managing and owning digital assets, such as cryptocurrency. When you deposit money into a centralized exchange, you entrust the exchange with the custody of your funds. The exchange holds and controls the private keys to your funds, which means they can move your funds around or even freeze them. This means that you don’t truly have ownership of your funds as you don’t have full control over them. On the other hand, if you hold your funds in a self-custodial wallet, you have full control over your private keys, giving you complete ownership and control over your assets.

Self-custodial wallets are an essential aspect of WEB3 because they allow individuals to hold and manage their private keys, which are used to access and control their digital assets on the blockchain. This ensures that individuals have full control over their digital assets and can make transactions and manage them without the need for a centralized intermediary that can be vulnerable to centralized attacks, data breaches, and greed.

Tokenization

Tokenization is converting real-world assets or ownership rights into digital assets represented by tokens on a blockchain. This can include real estate, artwork, or commodities like gold. Tokenization allows for the creation of new use cases, such as fractional ownership of assets, and enables the transfer of ownership and value of these assets in a trustless and secure manner. Additionally, tokenization can also include the creation of non-fungible tokens (NFTs), which are unique digital assets that represent ownership of a specific item or piece of content, such as a digital artwork or collectible. NFTs are unique and cannot be replicated or replaced, unlike fungible tokens.

For content creators, tokenization can be a powerful tool for monetizing their work and building a community of fans and supporters. For example, a musician could tokenize their album and sell tokens to fans, giving them access to exclusive content or experiences. Or an artist could tokenize their digital artwork and sell NFTs to collectors, creating a new revenue stream for their work. Tokenization can also make it easier for creators to connect with fans and supporters, build community, and gain visibility for their work. Additionally, tokenization can help creators maintain control over their intellectual property and make it more difficult for others to profit from their work without permission.

The Metaverse

The Metaverse or metaverses refers to virtual worlds that exist on the internet. It is a concept that imagines a shared, virtual space where people can interact with each other and digital entities in a seamless and immersive way and can include virtual environments, games, social networks, and other digital experiences.

The potential of the metaverse for content creators and entrepreneurs is significant. The metaverse offers new opportunities for them to create and monetize immersive and interactive digital content, such as virtual experiences, games, and digital assets. Additionally, the metaverse can offer new opportunities for businesses to engage with customers in a virtual space and provide new services, such as virtual marketplaces and virtual events.

Governance Layers – DAOs

Governance layers, also known as Decentralized Autonomous Organizations (DAOs), are blockchain-based organizations that operate through a set of rules encoded in smart contracts. These rules govern the organization’s decision-making process, allowing for decentralized decision-making and the ability to operate without a central authority.

A DAO typically operates through a token-based system, where holders of the organization’s tokens can vote on proposals and make decisions about the organization’s direction. A DAO’s rules and decision-making process are transparent and recorded on the blockchain, providing a level of trust and accountability that is not present in traditional centralized organizations.

DAOs can be used for various purposes, such as DeFi platforms, virtual marketplaces, and social networks. They also enable new business models and revenue streams, such as community-driven development and token-based funding.

One example of a DAO is the MakerDAO, a decentralized platform on the Ethereum blockchain that supports the stability of the DAI token, which is pegged to the value of the U.S. dollar.

We’ve come a long way from the days of AOL and dial-up modems. But just when you thought the internet couldn’t get any more exciting, along comes WEB3 to blow our minds. Forget CryptoKitties and digital cats, WEB3 is set to revolutionize the way we interact and transact online. Get ready to say goodbye to centralized intermediaries and hello to a world of decentralized possibilities. With the integration of decentralized technologies, such as blockchain and smart contracts, WEB3 brings a level of trust and security to the internet that was not previously possible. This opens up new possibilities for digital assets and tokenization, enabling the creation of new use cases and business models that were impossible with WEB2. Whether you’re a content creator, gamer, entrepreneur, or shopper, the coming WEB3 revolution will bring new opportunities and possibilities for all.

Audrey Nesbitt