How the Web3 Stack Extends the Web to the Blockchain

Web3 consists of frameworks and components that integrate the current “web” (i.e. world wide web) to the blockchain. This is not a replacement for the current web (called Web2), but is an extension. This enables what are called Decentralized Applications or dApps. A dApp runs on top of the Web3 stack which in turn can be built on top of Web2. This allows support for standard web protocols (e.g. HTTP) as the underlying layer for Web3 dApps.

In general, Web3 is connecting users to the blockchain via their web browser or app. To support the existing web, it extends the feature with a Web3 stack. Developers can use the libraries that contain API modules to add Web3 integration with their own Web2 applications or dApps. The stack provides an abstraction to simplify the process, rather than have developers build their own frameworks from the ground up. Users can then use the web to connect to blockchains to access their digital assets like cryptocurrency.

The Web3 Stack

The Web3 stack consists of the building blocks for creating dApps that connect users to their digital assets on a blockchain (e.g. Ethereum, BInance Smart Chain, Solana). There are different categories that range from file storage, indexing, querying, off-chain (Layer 2 or L2) protocols, development frameworks, identity (i.e. wallets) and oracles to name some. These can be implemented as APIs that developers can use to call routines and methods to access a blockchain.

What makes Web3 different from the traditional web (i.e. Web2) is the feature of decentralization. Web3 operates on an open source system in a distributed and decentralized network. The dApps do not require a central server to run the code. In a decentralized system, the code runs on multiple nodes on the network without the need for a trusted central party. This means it has the characteristics to be censorship resistant, tamper proof and less prone to influence from Big Tech since it is not highly centralized.

From Web2 the frontend application can be created. It can then include libraries from Web3 to connect to the blockchain. Developers can use existing programming languages (e.g. Javascript, C++) to build their applications. Frameworks (e.g. Truffle, Hardhat) support existing languages for Web3, so that developers do not have to spend more time learning to code in a new language.

Access Layer

The main component developers add to give their web application Web3 compatibility is a wallet interface. The wallet creates an address for a user account, in order to access cryptocurrency assets. This is like a username/password that is used in Web2, but with Web3, it makes use of a long hexadecimal address with a private key. This appears complicated at first, but the concept is based on public key cryptography.

When opening the wallet, a user can still use a username/password combination. That is just part of the basic security to access a wallet, but there is another layer that defines who owns the wallet. Each wallet contains a private key, which is granted custody to the wallet owner. This authorizes the wallet account’s transactions, like when trading cryptocurrency.

In crypto, a wallet is not exactly like how a traditional wallet works. It does not store cryptocurrency like a wallet holds cash. A wallet stores the private key, which is a cryptographic code that generates a digital signature that is unique to the user’s wallet. Whenever a user spends their cryptocurrency, like in trading or sending to another user, their private key is used to properly authorize the transaction.

Each wallet contains a public address (i.e. wallet address), which functions as the identification of the user account on the blockchain network. It is generated from the private key, and is unique for every user. In order to receive or trade cryptocurrency, a user must have a wallet address. It is like an e-mail or postal address, used for routing to the correct user.

The digital signature is what proves the address does indeed belong to the owner of the wallet. When connecting a wallet to a Web3 site, a user is often asked to verify their identity. The user will sign a message request from the site, with the digital signature. If the digital signature is validated, the wallet is allowed to connect.

Browsers like Brave come with built-in wallet for Web3 support. For other browsers (e.g. Chrome) installing an extension is required (e.g. Metamask, Trust). The good thing about Web3 wallet extensions on browsers is that they can be used on many devices, from desktop computers to smartphones. This allows users different ways to access their digital assets on a blockchain.

NFTs, Game Tokens, Cryptocurrency

One of the most talked about platforms on Web3 is the metaverse. There is no standard definition to it, because there is the Big Tech interpretation and the crypto definition. While it portrays the integration of various technologies (e.g. AR, VR, 3D Avatars), Big Tech’s version is a virtual world that enhances user experiences for gaming and entertainment. For crypto, the metaverse is about ownership of digital assets that can be tracked across various blockchains. These digital assets can be used in games, traded in marketplaces or purchased as a collectible for storing value. The blockchain helps to verify digital assets, like in-game purchases to validate ownership.

Digital assets that are being used on the blockchain include NFTs (Non-Fungible Tokens), gaming tokens (e.g. Mana, Gala, SAND) and cryptocurrency (e.g. ETH, SOL, BNB). Web3-enabled sites allow users to bring their digital assets into the metaverse. It can be to access a digital exchange, online game or e-commerce portal. This is done by simply connecting a wallet to grant user access via their account address. NFT marketplaces (e.g. OpenSea, Rarible) are good examples of Web3-enabled sites.

The Web3 metaverse can be the same as the Big Tech metaverse, as an extension layer. Imagine being able to bring digital assets to a virtual world where users can interact and trade. An example is a virtual marketplace where users can trade or sell NFTs. Without Web3, a metaverse does not provide access to digital assets, so there is less utility in terms of value. Web3 brings the “Internet Of Value” to the metaverse.

Gateway To DeFi

Another important feature of Web3 is to provide users on the web a gateway to DeFi (Decentralized Finance). This opens up alternative financial services, that users may not normally have access to. This includes crypto-collateralized lending, which allows users to borrow against the value of their cryptocurrency assets. Users can also stake tokens to earn more tokens by holding over a period of time. For users who want to earn even more, yield farming earns with interest on a variety of DeFi instruments.

Web3-enabled sites in DeFi (e.g. Compound, Oasis App, AAVE) connect user’s wallets to smart contracts. These are programs that execute code on the blockchain for DeFi services like staking, liquidity provision and swapping tokens. Web3 simplifies the process for users, via a web interface. Without these sites, users would have to know how to access blockchain nodes and program some code. That is much more complicated for the average user, and can discourage using DeFi.

DeFi has been hyped up but perhaps for the wrong reason. While it opens up new opportunities that has more inclusivity for users, it can also be risky. There have been users who have experienced rug pulls and other types of scams. Other times, users just made a poor investment decision in projects that were too centralized and therefore bound to fail. That is why it is important for users to do their own research for due diligence in order to understand the different types of DeFi services and not lose a lot of money.

GameFi Ready

Another exciting platform on Web3 are GameFi systems. This combines the concept of gaming with DeFi. It introduces cryptocurrency monetized gaming, through a blockchain-based network. This means more fairness and verification of data, through a decentralized backend. The problem with a centralized gaming backend, which is controlled by the game developer, is that there are no guarantees of randomness or ownership of gaming assets. GameFi aims to solve those problems, and at the same time provide an incentive system that rewards gamers through monetization.

There are GameFi platforms like Decentraland and The Sandbox. Users can play games on these platforms from their browsers by connecting their wallets. Other GameFi apps require downloading the app in order to play (e.g. Axie Infinity). The appeal of these games is the rewards that gamers can earn from playing. This uses a Play-To-Earn (P2E) model, but it does require some upfront costs like purchasing tokens or NFTs in order to participate in a game.

With the blockchain, gaming can be more transparent and fair. Proofs can be verified on-chain to prove the ownership of gaming assets and credibility of data (e.g. scores, rewards, points). This helps when validating rewards earned in P2E games. Randomness can also be verified for fairness to assure gamers that there is no manipulation by the platform or game developers.

Synopsis

Web3 brings an extension of the Internet or the web to the blockchain. Developers can use a development kit provided by blockchain companies or crypto projects to connect their applications to the blockchain. This is through the use of frameworks (i.e. development environments) and APIs for interoperability.

Users get to experience the Internet Of Value from Web3-based applications or dApps. It allows the transfer and exchange of digital assets like cryptocurrency tokens and NFTs through a simple web interface. Web3 makes blockchain-based apps more user-friendly as well, thus allowing more users to participate and gain more value from the network.