What is Web3? A beginner’s guide

The internet has changed significantly since its early days. It began as a place where people mainly read information. It later became interactive, allowing users to post content, connect with others, shop online, and use digital services.

Web3 is often described as the next stage of this evolution. It aims to create an internet where users have greater control over their digital identity, data, and online assets.

The term is closely linked to blockchain technology, cryptocurrencies, smart contracts, and decentralised applications. However, Web3 is broader than crypto trading. It represents a different way of building and using online services.

How is Web3 different from the current internet?

To understand Web3, it helps to look at how the internet has developed.

Web1: The read-only internet

Web1 refers to the early internet of the 1990s and early 2000s. Most websites were simple and static. Users could read information but had limited ways to interact with it.

The website owner controlled the content, while visitors mainly consumed it.

Web2: The interactive internet

Web2 introduced social media, streaming platforms, online marketplaces, and mobile applications. Users could create content, communicate, and participate in online communities.

However, most Web2 platforms are controlled by centralised companies. These companies manage user accounts, store personal data, set platform rules, and decide how content is distributed.

Users can create value on these platforms, but they usually do not own the platform or the data behind their account.

Web3: The ownership internet

Web3 aims to give users more ownership and control.

Instead of relying entirely on a company to manage accounts and transactions, Web3 applications can use blockchain networks. Users may connect through a crypto wallet, hold digital assets directly, and interact with smart contracts.

This model is often described as ‘read, write, and own.’

How does Web3 work?

Web3 applications are generally built using blockchains and smart contracts.

A blockchain is a shared digital record maintained by a network of computers. Smart contracts are programs stored on a blockchain that automatically execute instructions when specific conditions are met.

Users typically access Web3 services through a cryptocurrency wallet. The wallet can act as a login method and also hold cryptocurrencies, tokens, and digital collectibles.
For example, a user may connect a wallet to a decentralised exchange and trade tokens directly through a smart contract. The transaction is recorded on the blockchain rather than managed entirely by a central company.

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Common uses of Web3

Web3 is being used across several areas.

Decentralised finance, or DeFi, allows users to trade, lend, borrow, and earn rewards through blockchain-based platforms.

NFTs can represent ownership of digital art, gaming items, event tickets, memberships, and other assets.

Blockchain games allow players to hold and transfer in-game items outside the game’s central system.

Decentralised autonomous organisations, commonly called DAOs, allow token holders to vote on certain decisions related to a project or community.

Web3 is also being explored for digital identity, social media, payments, supply-chain tracking, and tokenised real-world assets.

What are the benefits of Web3?

One of the main advantages of Web3 is user ownership. Digital assets stored in a personal wallet may be transferred between compatible platforms without requiring permission from a central operator.

Web3 can also improve transparency because blockchain transactions and smart contract activity are often publicly visible.

Another benefit is open access. Many Web3 applications can be used by anyone with an internet connection and a compatible wallet, although local laws and platform restrictions may still apply.

Developers can also build applications that connect with existing blockchain protocols instead of creating every feature from the beginning.

What are the risks of Web3?

Web3 is still developing and carries several risks.

Crypto wallets require users to manage private keys or recovery phrases. Losing them can result in permanent loss of access.

Smart contracts may contain coding errors or security weaknesses. Fraudulent projects, fake websites, and phishing links are also common.

Transaction fees may become expensive when a blockchain is congested. Some Web3 platforms can also be difficult for beginners to use.

Decentralisation varies between projects. A service may call itself Web3 while still giving a small group significant control over its technology or funds.

Conclusion

Web3 is an attempt to build a more open and user-controlled internet using blockchain technology.

It allows users to interact with applications through digital wallets, hold online assets directly, and use services powered by smart contracts. Its applications include finance, gaming, digital identity, communities, and online ownership.

However, Web3 is not automatically safer or better than traditional internet services. Users must understand wallet security, smart contract risks, and the project they are using.

For beginners, the key idea is simple: Web3 seeks to move some control from centralised platforms to users and blockchain-based networks.

Disclaimer: Crypto products and NFTs are unregulated and can be highly risky. There may be no regulatory recourse for any loss from such transactions. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.