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Web 3.0 explained: A decentralized internet is on the horizon

2021.09.15 OKEx

An introduction to the decentralized Web 3.0, its history, use cases and future

While the term "Web 3.0" has been used in conjunction with many technologies — such as linked data, artificial intelligence, blockchains, etc. — what it represents is much larger. Web 3.0 aims to bring a paradigm shift in how the current internet, or what we call Web 2.0, is structured.

Web 2.0 is inherently centralized and, as a result, its architecture enables data misuse, censorship and intermediaries who profit from user data. In an effort to address these issues, Web 3.0 innovates on the backend of the internet through decentralization, artificial intelligence, and democratization of decisions.

In this article, we will break down what Web 3.0 is, its history and vision, and how blockchain and cryptocurrency play a key role in its implementation.

Let's start by understanding how the internet has evolved over the past few decades.

The history of the internet

Although there is no clear distinction in terms of exact dates, and with some overlap between them during the transitions, we can think of the internet as developing in three phases: Web 1.0, Web 2.0 and Web 3.0. In this section, we'll understand how these phases evolved.

Web 1.0 

Web 1.0 refers to the beginning of the internet in the late 1980s, when there was just a set of static HTML webpages that could be read and browsed but could not be interacted with. The content on these webpages was typically created by a few participants and was consumed by the masses. Thus, it is often referred to as the "read-only web."

Web 2.0 

The early 2000s marked the shift toward the more dynamic Web 2.0 — the "read, write web." In contrast to Web 1.0, during which time the internet was mostly used for broadcasting information, Web 2.0 ushered in a more collaborative environment. 

The emergence of collaborative platforms like social media and service-based apps such as Uber and Netflix helped streamline much of human communication. We could suddenly interact with people living across the world in meaningful ways. 

While Web 2.0 brought us together, the increase in our digital interactions meant an increase in digital data generation. And because centralized platforms facilitate these interactions, corporations like Facebook, Twitter, Google, Amazon, etc. gained access to user data. 

Due to this access, it suddenly became a race to the top for corporations to create a network effect in an advertising economy reliant on user data. In this economy, more data means more power and revenue — which the user sees no part of. 

And that's why the vision of a fairer, more democratic, decentralized internet came into the picture.

The next phase: What is Web 3.0?

With Web 3.0, we visualize the next phase of the internet — the "read, write and trust web." Web 3.0 is a conscious effort to build an internet that works for everyone via peer-to-peer transactions, user-controlled data, relevancy, privacy and monetization. Blockchain, along with advancements in machine learning and the IoT, has an important role in the implementation of this vision. 

Machine learning algorithms are already changing the way we live today by linking data, by understanding relationships between data points, and by making autonomous decisions close to what a human would make. When you combine that with the capabilities of blockchain technology, Web 3.0's goal to make an interconnected, intelligent internet becomes clearer.

In the next section, we'll look at the possible implementations and changes that are expected in Web 3.0 and how they are different from Web 2.0.

The vision behind Web 3.0: Majority-based consensus 

Data democracy

Web 3.0 attempts to democratize data. It proposes an architecture that shifts away from the current centralized computer to decentralized data structures. 

Web 2.0 data structures (left) vs. Web 3.0 data structures (right). Source: BlockchainHub

A decentralized data structure refers to a group of computers connected to each other, with each computer playing a specific role —  whether it be as a node, verifier, developer or simply a participant in the network. All computers in the network have the same access to information, and data is transparent to the network with secure time-stamping and immutability. 

Security and privacy

Since data distribution across many computers can bring up privacy concerns, Web 3.0 solves this problem through cryptography. Data stored on the network is encrypted and, therefore, only the node with the correct key is able to access it.

Secure digital identities — a novelty of Web 3.0 — also promote data privacy. Digital identities will be anonymous, fully encrypted and cross-platform. Advertising will be based on user consent tied to these digital identities, which means that unlike Web 2.0, users might be asked if they want to see ads or not.

Using the blockchain also enhances data security, as there is no single point of failure. Because a copy of the data ledger is present on all the nodes in the network, executing a hack would entail that the hackers have access to a large number of nodes concurrently. While not impossible, it's extremely difficult and expensive to breach that level of security. 

Verifiability and governance

Our current governance system uses legal contracts to guarantee the delivery of goods and services. However, enforcing these contracts is a long, expensive process, with intermediaries at every step of the way. So, even though having a legal agreement does protect you, this system is inefficient and is prone to errors and delays.

Web 3.0 can tackle this issue through a trustless governance system using smart contracts. Smart contracts are open-source pieces of code with conditions that both parties mutually agree on at the time of its commencement. Once the predefined conditions are met, the contract is automatically executed. 

Using smart contracts makes services verifiable and easily enforceable. For example, you can verify if an asset has been moved in a multi-part supply chain by integrating blockchain tech and IoT-enabled sensors. 

Similarly, you can receive services from anywhere in the world, paying for them directly and automatically based on the milestones set by the contract. If implemented correctly, this would radically cut the monitoring cost of agreements and transaction auditing. 

Economic models

Web 3.0 aims to build a new global economy that is not only sustainable but also scalable by removing the divide between users and service providers. The use of blockchain will allow users to manage and settle transactions in real time, without intermediaries. Moreover, economic incentives, as well as penalties, ensure that all computers in the network behave correctly and remain honest.

To understand how this works in the real world, let's take the example of decentralized finance. DeFi enables a lending, borrowing and staking ecosystem that mirrors traditional financial instruments available through banks.

The key advantage is that DeFi eliminates the need to be in a certain geographical location or to have access to traditional banking services. Network actors like miners and stakers verify the transactions and are incentivized to keep the network running.

Similarly, we now have nonfungible tokens, or NFTs, that help protect intellectual property and, at the same time, allow anybody to participate in auctions — which was previously possible only through private sales or contacts.

Blockchain also allows us to place value on individual user contributions, which, in turn, incentivizes participation in the network. An example of this is the Brave browser, which we will discuss below.

As we explore this new technology, new business models will emerge that are possible only due to the degree of freedom that blockchain's immutable technology provides. 

Tools to use Web 3.0

We're still in the nascent phases of building an infrastructure that supports the massive shift to Web 3.0. So, although we cannot really use Web 3.0 in the traditional sense, building blocks like browsers and wallets have already been rolled out. In the next section, we'll look at some of them.

Examples of Web 3.0 tools and applications

Web 3.0 browsers

Web 3.0 browsers are privacy- and security-driven, enabling users to fully engage and utilize the power of decentralized applications, along with accessing Web 2.0 websites.

An example of a Web 3.0 browser is Brave — a privacy-first Chrome-like browser for desktop and mobile applications. The key difference with Brave is that it prevents third-party tracking and allows users to choose if they want to see ads or not. 

Users who opt-in to privacy-respecting ads get rewarded in BAT tokens, the browser's native ERC-20 cryptocurrency. Individual users can also tip content creators with BAT, minimizing creators' dependency on advertising revenue.

Another example of a Web 3.0-enabled browser is Opera, which has gained popularity as the first major browser to integrate a native Web 3.0 ETH wallet. 

Web 3.0 wallets

Metamask is a Web 3.0 desktop- and mobile-based cryptocurrency wallet. On desktop, it also serves as a browser extension that acts as a bridge between Web 2.0 applications like Chrome and the decentralized web. It allows users to interact with a variety of Ethereum DApps without having to download and run an Ethereum node.

Because wallets are one of the pillars of Web 3.0, there is active development to streamline their user experience. One example is the integration of OKEx wallets with Unstoppable Domains, which allows users to transact with cryptocurrency via crypto domain names — like don.crypto or max.coin — instead of the typically complicated wallet addresses.

Other Web 3.0 DApps

While browsers and wallets are key components of the Web 3.0 ecosystem, other applications such as file storage, identity management, social media networks and so on, are also equally important. Each application that we currently use on Web 2.0 needs to have a Web 3.0 counterpart to enable a smooth transition without sacrificing user convenience. 

In that respect, projects like Cardano have made strides to match Google Authenticator, but most are still under development. Similarly, social media networks like BitClout had gained some popularity but then faced the challenges associated with scaling such platforms.

Let's look at the challenges that Web 3.0 has to overcome in order to become a reality.

Key Web 3.0 challenges

Scalability

Even though we are at the nascent stages of the Web 3.0 evolution, we are already experiencing some of the effects of the recent popularity of cryptocurrency. 

For instance, whenever the Ethereum blockchain receives a high volume of transactions, the associated gas fees and the time to execute them increase drastically. Ethereum can currently process roughly 15–30 transactions per second and around 1 million transactions per day. This is much lower than its Web 2.0 counterpart, Visa, which claims it can process over 56,000 transaction messages per second.

As the technology gets more popular, the current blockchain architecture needs to pivot to prevent network congestion and scale accordingly. Ethereum aims to achieve that with Layer-2 technology — with which it can reportedly process 100,000 transactions per second using a sharded mini-chain system. We also have blockchains like Solana with over 1,000–2,000 live transactions per second and the ability to process over 60,000 transactions per second.

However, the development and adoption effort is still ongoing and the challenge is to achieve scalability with a high degree of decentralization. 

User adoption

In the Web 2.0 revolution, along with interactivity, corporations focused on user experience. Because corporations profit from people using their applications for a longer time, they designed user interfaces that were intuitive and easy to use. In this regard, Web 3.0 has a lot to catch up on.

Transitioning users to Web 3.0 applications would neither be easy nor quick. There would be a natural resistance to change and friction in adopting the steps necessary for decentralization, such as setting up a wallet.

To encourage user adoption, Web 3.0 applications will have to properly document their user journey and work on accessibility. However, considering the fact that mobile traffic accounts for more than half of the internet's traffic (and is growing), one of the key areas to focus on should be Web 3.0's mobile experience.

Interoperability

Current blockchain projects like Bitcoin and Ethereum are largely standalone. They have technologically and economically diverse chains, which is why they aren't able to talk to each other or transfer data. 

What that means is if you have a transaction on Ethereum, it's not possible for the Bitcoin network to retrieve information about that transaction or move currencies without bridges. This is because our data exists in an isolated state on each blockchain due to different architecture.

Web3 Foundation, however, has been working to solve this problem by focusing on the interoperability of Polkadot and Kusama projects. Polkadot uses a system of relay chains to coordinate communication on the blockchains that exist on its parallel-chain structure. For other blockchains, it uses bridges that connect them to parallel chains.

However, we are still a long way from blockchains being truly interoperable due to the scale at which these parachains have to be built. To make a truly decentralized ecosystem, building blocks such as social media networks, browsers, file storage systems, etc. need to find an efficient way to communicate with each other as Web 2.0 applications do.

The future of the internet

With the advent of DeFi protocols, Web 3.0 wallets, blockchain domains and browsers, the internet as we know it is changing rapidly. Many aspects of Web 3.0 are in their first iteration today, including cloud computing, augmented reality, blockchains and IoT. 

As with the evolution of Web 2.0, however, the fruition of Web 3.0 will probably take decades, not years. The transition between Web 2.0 and Web 3.0 will not be fully realized until all the major building blocks are in place.

That being said, you can begin using and experiencing some of the Web 3.0 tech today and be at the forefront of this paradigm shift. For starters, you can take a look at the recently launched OKEx Web 3.0 wallet extension, which can be used to access various services and marketplaces.


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Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involve significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary.

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