Nine sentences to understand Web3 from scratch
Just like the philosophical question "Who am I?", the question "What is Web3?" has different answers for everyone.Original Title: "What is Web3? Here Are Some Ways To Explain It To A Friend"
Original Author: James Beck
Original Translation: Rhythm Research Institute
The fresh term Web3 was born in 2014, initially used to describe new protocols for achieving decentralized consensus. Today, it has become a general term for public chain ecosystems, applications, and even design philosophies. Much like the philosophical question "Who am I?", many people have provided their own answers to the question "What is Web3?", and it seems that everyone's answer is different.
However, for some, this new term can feel unfamiliar, which is why we have written this article to explain the nine key points about Web3 that people need to understand, hoping to help them grasp what Web3 is.
TL;DR
Web3 is a trendy nickname for decentralized networks.
Web1 is read-only information, Web2 is read-write information, and Web3 is read, write, and own information.
Web3 is the monetary layer of the internet.
Web3 is the identity layer of the internet.
Web3 is a counterattack against social networks that do not protect our data security and profit from selling user data.
Web3 is a way for artists and creators to not only own what they create on platforms but also own the platforms themselves.
Web3 is a new incentive model for the internet.
Web3 simplifies the establishment of collaborative ownership and governance structures.
Web3 is still not fully decentralized.
Web3 is a trendy nickname for decentralized networks
Since 2015, Joseph Lubin, the founder and CEO of ConsenSys, has been giving lectures and writing articles to support teams building Web3 and decentralized networks. The philosophy of Web3 has been the "touchstone" guiding all of ConsenSys's early investments and projects.
MetaMask is now the primary way for people to join and use the Ethereum blockchain, and it is also compatible with more networks. It is a secure way to generate public keys on your phone or computer, embodying a new principle of user interaction with the network—only you can access your account and data, and you choose what to share and what to hide. Some also refer to MetaMask as a Crypto version of a consent manager.
When we talk about decentralized networks, we also mention other stacks beyond decentralized currency and identity. Other aspects of decentralized networks, such as decentralized storage, have just become fundamental infrastructure for persistent storage (like IPFS and Arweave), decentralized storage (Golem, W3BCloud, and others), and decentralized data indexing (Graph Protocol).
Now, Web3 is the track that a16z and other large venture capital firms are most focused on, and it is filled with lengthy discussions on Twitter, with many who do not understand Web3 mocking and ridiculing it. It is foreseeable that in the future, as Web3 gains more prominence in public internet discussions, those who mocked Web3 will turn back to learn what Web3 is.
Web1 is read-only information, Web2 is read-write information, Web3 is read, write, and own information
When I asked a Web3 developer friend how he would explain Web3, he said, "Web1 is read-only, Web2 is read-write, Web3 is read-write-own."
The original web was built on open-source protocols like TCP, IP, SMTP, and of course, HTTP. A protocol is a standard way for multiple computers to agree to communicate with each other. These foundational protocols manage the information and information flow on the internet, and if you want to build an application or service using their rules, you don't have to pay for access.
Web2 is an iterative product built using free open-source protocols on the internet. Compared to the static, read-only Web1, the significant shift brought by Web2 is that individual users can start publishing content to the internet. It began with liking comments on Digg, then evolved into microblogging, and now there are over 2 billion individual users on Facebook.
At the same time, another subtle shift was quietly occurring. People began to feel that rather than maintaining their own servers to keep their websites running, it was easier to hand this troublesome task over to Web2 companies. On the other side of the transaction, Web2 companies created an island of user data and behavior, which is very valuable to advertisers. In the Web2 era, individual users are the product.
The ownership in Web3 means that the builders, operators, and users of the platform genuinely own a part of what they use. Bitcoin and Ethereum are early examples: ETH and BTC are essentially rewards for honestly maintaining the ledger and for other contributors, whose actions secure the network.
Token-based networks built on Ethereum and blockchain even introduce new ownership models that may not necessarily align with cooperative or shareholder equity models. For example, ownership can take the form of tokens that you earn after providing a service, such as providing liquidity for trades or voting on governance for the network's future development.
The grander vision is that any participant in a network will be able to "own" a part of the products and services they use every day.
Web3 is the monetary layer of the internet
One of the greatest innovations of the internet is the ability to distribute information globally at a low cost, with high replicability and a variety of forms. However, these labels stand in contrast to "value"; by definition, anything of value, whether money or assets, should be scarce and hard to obtain.
Bitcoin was the first protocol to introduce scarcity to the internet, addressing the "double-spending" problem that plagued early attempts at digital currency. Double spending refers to the ability to use the same digital currency repeatedly, spending it in two or more places. In traditional finance, banks, credit card companies, and payment processors verify transactions to minimize double spending.
In decentralized crypto, the work done by miners or validating nodes is to ensure that accounts do not double spend. This has profound implications because verification no longer relies on a trusted central party. As long as there is an internet connection, anyone can participate in the peer-to-peer network and check the ledger. Social consensus can protect people from malicious actors attempting to roll back or censor transactions.
Another manifestation of scarcity is whether it is fungible, meaning whether individual units can be interchanged. Fungibility means you can replace one unit with another because they have the same value. For example, 1 ETH is worth 1 ETH, while non-fungibility implies uniqueness.
The emergence of NFTs has made some originally unownable items ownable, such as digital art, photos, music, text, game assets, certificates, governance rights, passes, and more. Many people question, "If I can just right-click and save it on my computer, how can it be scarce?" The reason is that the blockchain records the process of ownership transferring from one account to another.
This also gives digital artists or virtual products the concept of "originality," just as the fundamental problem solved by blockchain prevents another person from claiming ownership or "double spending." One reason many are excited about NFTs as a way to prove the provenance of digital assets is that, since they are tokens on Ethereum (and now many NFTs exist on other blockchains), they can interoperate with other parts of the Web3 ecosystem.
They can be divided into smaller parts, allowing many people to own them; they can serve as collateral for other decentralized financial services; they have permanent royalties; and they can even serve as the foundation for internet identities.
Web3 is the identity layer of the internet
One of the biggest omissions in early internet protocols was the lack of a public and open-source identity layer. As Web2 developed, platforms like Facebook and Twitter monopolized this layer as closed-source applications. Web3's stance is that you should own your identity online and only disclose information when you choose to make it public.
In practice, Ethereum's identity system is quite basic. You can think of it as a container that allows other projects to associate with it. For example, when an authority wants to know your birth date and place, it does not need to know other information you do not wish to provide.
Your identity will also include your transaction history, which financial institutions can access without needing you to provide your birthday and birthplace. Moreover, your digital identity developed on one social network can be transferred to other networks.
In today's practical scenarios, the closest thing to a universal identity layer in the Web3 world is the Ethereum Name Service (ENS). Through ENS, you can purchase a unique domain name, which is an NFT using the ERC-721 token standard, and then link it to your Ethereum address.
ENS makes Ethereum addresses readable, and it has been used as a more convenient way to airdrop NFTs, showcase token holdings or NFT collections, and display your choices in governance votes. Demonstrating that you "understand" Web3 to others is quite appealing.
This may be why celebrities like Paris Hilton and Shaquille O'Neal have changed their Twitter usernames to ENS domain names. However, like early internet protocols, ENS has no early investors; the protocol itself is decentralized and provides open standards.
Other services from 3Box Labs, such as IDX and Self.ID, allow you to link your wallet and manage your digital identity. You can connect your Ethereum address, existing social media profiles, and other information you wish to disclose. Like ENS, but more meaningfully, people can automatically choose which information and data to share from their personal identity after registering for new services or platforms.
Currently, the reasons driving people to use blockchain digital identities still come from the Web3 world, such as linking your Ethereum address to your social profile. However, the long-term goal of the Web3 world is to prove real-world identities, such as authoritative identities, on-chain.
Web3 is a response to social networks that do not protect our data security but profit from it
Facebook owns most of the data on your social graph, so even if you close the webpage, that data remains on Meta's servers. Gavin Wood, the inventor of the term Web3, said in 2014: "Web3.0, or what can be called the 'post-Snowden' web, is a rethinking of current network activities, introducing a disruptive model for all participants in the network.
If we determine that some information needs to be public, we will publish it; if we feel that some information needs to be agreed upon to reach a consensus, we will place it on the agenda." The 2018 Cambridge Analytica scandal revealed that a company had collected personal information from 87 million people.
Using this, they created psychological profiles of voters, influencing election outcomes. Although this incident made headlines at the time, data breaches like this have been commonplace, affecting millions of internet users. The reason for all this is simply that we entrusted companies to store our data, and when we later switched to other platform services, those permissions had long been irrevocable.
Remember when we described MetaMask as a Crypto version of a consent manager? The design principle of Web3 applications is that information is "pushed" by individuals to trusted sources.
Rather than being obtained by applications from sources that hold your data. For example, in the Web2 world, when you "log in with Google," an application may obtain your personal identity data without your consent.
The transparency of the data you provide to different applications on the network is one reason social media networks gained dominance—your personal information often has high value, and in most cases, we have already surrendered it the moment we agreed to the platform's terms of service.
Web3 can be seen as a response to the current internet platforms' continuous acquisition of user information. With Web3, users can choose which information to share or hide.
Web3 allows artists and creators to own not only their works on the platform but also the platform itself
In 2021, it seemed like everyone was launching NFTs. According to DappRadar's data, the total trading volume of NFTs reached over $23 billion in 2021. For many digital artists, the emergence of NFTs allowed them to fully dedicate themselves to their artistic work for the first time.
Since NFTs are a universal token format, you can mint NFTs by deploying your own code or using NFT marketplaces. Unlike Web2 social networks, your tokens can be purchased on the service platform and sold on secondary markets or used in other games and applications. In other words, NFTs continue Ethereum's characteristics as a form of portable and interoperable value.
Some early NFT marketplaces quickly realized that their positioning could not just be a marketplace but needed to build more bridges between creators, users, and platforms. In 2021, SuperRare launched the RARE governance token and created the SuperRare DAO to reward early artists and collectors and encourage community participation in its art curation.
SuperRare explained: "We hope Spaces will be the future of community art curation, becoming an active ecosystem where curators, artist collectives, galleries, and community members can hire artists and collaborate on auctions, supported by SuperRare's shared brand and technology."
Other applications on Ethereum are now using tokens to reward people's contributions to network building and decision-making. Even Web2 social networks like Reddit are exploring the use of tokens called "community points" to allow active contributors on subreddits to "own" a part of that social network.
Protocols like Uniswap have built an integration mechanism that incentivizes liquidity providers to provide capital for trading nearly all assets on Ethereum.
The collective staking benefits across multiple service platforms in the network may be the biggest threat to the network effects of Web2 social networks. Scott Belsky once asked, "If every stakeholder in these companies is incentivized to help build, improve, promote, and sponsor these brands, could this become an advantage in competing with large enterprises?"
Web3 is a new sponsorship model for the internet
The term "creator economy" is used to describe the internet space aimed at helping creators monetize in new ways. Platforms like OnlyFans, Twitch, and others promise that platform users can earn directly from their fans without relying on ad and traffic-centric monetization models.
However, unlike Web3 networks, some creators can be randomly removed from the network and cannot own the content they share.
With the emergence of platforms like Substack, Ghost, and Lede over the past year, the motivation for writers and journalists to earn income directly from their readers has been further strengthened. However, these platforms do not allow writers to establish a direct relationship with their fans through ownership.
Mirror is a Web3 blogging network that allows users to sell their work as NFTs and redefine the model of creation and sponsorship through "crowdfunding." The crowdfunding feature allows sponsors to fund an idea by depositing ETH in exchange for a token that proves your sponsorship, which can further be used to join a DAO or receive future returns from publications.
Tokens not only have utility but also prove that you have supported an idea or author, and as more people support the crowdfunding, the value of the tokens will increase. As Kyle Chayka, a contributing writer for The New Yorker, said while funding Dirt.xyz through Mirror: "For many forms of media, subscriptions are certainly a sustainable business model, but they may not suit all forms of content or work; however, collectors and sponsors fit this model very well.
NFTs can support the relationship between collectors and sponsors, and so can the various tokens supported by Mirror, such as ESSAY or Emily Segal's NOVEL. I hope that future creators can earn money through tokens and NFTs, not just from readers or regular payments, and that their article income should be shared between creators and sponsors."
Since fungible or non-fungible tokens can play a role in the relationship between sponsors and artists, artists should also be able to establish direct connections with their early supporters—using Ethereum addresses or ENS name collections that can be used for mailing lists, tickets, and payment systems, artists on any platform can interact with their fans.
Web3 makes collaborative governance and ownership structures easier to build
If you joined any DAO in 2021, you may have joined Telegram or Discord groups with other strangers: participating in DeFi governance proposal votes, making decisions on project funding, obtaining Erykah Badu concert tickets; joining artist and developer residency programs, collectively purchasing the only backup of the Wu-Tang Clan's 2015 album "Once Upon a Time in Shaolin," or even co-investing in a printed copy of the U.S. Constitution.
DAOs, or "decentralized autonomous organizations," are community-led entities that use Ethereum smart contracts to establish foundational rules and execute agreed-upon decisions. Some of the largest and earliest DAOs in Ethereum manage the growing treasury of decentralized financial protocols. Currently, the top 20 DAOs hold nearly $10.5 billion in digital assets.
DAOs serve not only DeFi but also many other fields. Media like Bankless and public funding organizations like Gitcoin are using DAOs to coordinate, govern, and manage their financial activities.
Currently, there are over 1.3 million DAO token holders in Web3. A New York Times reporter once joked that DAOs are "chat rooms with bank accounts." However, one appealing aspect of Web3 is that it can quickly gather unlead online groups of like-minded individuals to pool capital and make decisions together.
Web3 is not fully decentralized at every layer
Any seasoned user of a Web3 ecosystem knows that engineers have been trying to build architectures that maximize decentralization, create user-friendly applications, and develop scalable infrastructure, making various design trade-offs along the way.
Moxie Marlinspike, the founder of Signal, recently wrote in his blog about his exploration of Web3: "The premise of building Web1 was that everyone on the internet would be both a publisher and consumer of content, as well as a publisher and consumer of infrastructure.
We would all have our own web servers, our own websites, our own email servers, and our own email accounts. However, this is not what people truly want—people do not want to run their own servers (I think this point cannot be overemphasized)."
So, when he learned that most applications on Ethereum call data from trusted API sources and that the U.S. runs 40% of the 5,433 Ethereum nodes, he should not have been too surprised.
MetaMask also made similar design decisions in its early years—they did not require every user to run a self-hosted Ethereum node but chose to use Infura to provide data for Ethereum. This way, developers could focus more on building applications rather than the infrastructure for running the network.
Dan Finlay, the founder of MetaMask, wrote: "This approach makes it easier for users to use our platform without consuming too much power to host nodes. At the same time, in terms of platform usage and promotion, it also changes the previous rules, perfectly corroborating what Moxie said earlier: 'People do not want to host their own servers (because it takes up the entire laptop's capacity).'"
However, this does not mean that the Ethereum and Web3 communities are not considering decentralized data centers like W3BCloud or moving lightweight clients to Eth2 through a series of operations to reduce trust at various layers. While MetaMask uses Infura as its default server, they have also always allowed users to choose their own blockchain connections.
Additionally, with Snaps, users can opt for alternatives to connecting their wallets through servers. Dan Finlay explained, "Snaps can help users run lightweight clients, choose alternative runtime systems like zk-STARK chains or new friendly languages, or it can allow users to connect to their preferred centralized service platforms."
Although many teams in the Ethereum community are working to improve centralization, the success of some newer, more centralized crypto networks indicates that users may not care too much about these issues. However, we cannot conclude that the Web3 infrastructure will not achieve further development in the future, as more and more people are experiencing the advantages of fully decentralized networks.
