What are the components of Web3?
The third generation of the Web is here. The last few years have made it clear that the current Web is en route to a ground-up transition. So what are the components of Web3 that set it apart, and why is it so important?
A stateless Internet
The modern-day Internet we use is characterized as “stateless.” It lacks a native mechanism to transfer what computer science refers to as “state” – information, or the status of identity, ownership, and permission in a network.
A stateless Internet is unable to transfer value without the presence of centralized institutions acting as intermediaries.
A stateless protocol like the current Web can only manage data transfer and cannot regulate how the data is stored. This is where centralized internet providers such as social media platforms stepped in, normalizing centralized data storage and management.
The invention of session cookies played a significant role in pushing this centralized standard, a workaround to the stateless Web. Session cookies enabled web platforms to preserve states on users’ local devices: browsing history, favorites, auto-complete, etc. While they improved the user experience, their providers controlled these session cookies, such as Google, Facebook, Amazon, or even your bank.
They were essential to the monetization of free platforms/services these tech giants provided, utilizing targeted advertisements for users by collecting their data. All of this resulted in making users “pay” for their services with their private data.
Blockchain – the Backbone of all Web3 Components
The main driving force behind the next era of Web3 is the utilization of blockchain networks.
A blockchain network reinvents how data is stored and managed over the Internet. It provides a unique set of data – a universal state layer – collectively managed by all nodes (participants) in the network.
Ultimately, the blockchain presents a native value settlement layer on the Internet that is not dependent on intermediaries, enabling true P2P interaction.
Bitcoin is the first correct implementation of a blockchain network. Although the tech industry has kept differentiating the term “Blockchain” from “Bitcoin,” the Bitcoin network itself is a blockchain network, which is:
- managed globally by participants that do not know or require to know each other;
- enabled by the consensus protocol that compensates all network contributors with the native token that is Bitcoin.
This public infrastructure, maintained by all participants, represents the foundation of the next generation of the Internet – Web3.
Three crucial elements of a blockchain that empower the new Web:
- Decentralized data: Data is stored on a decentralized network of computers rather than in a central location. This makes it highly resistant to censorship and manipulation.
- Secure communications: A blockchain uses cryptography to secure communications between nodes on the network. This helps to protect user privacy and prevent fraud.
- Incentivized participation: Users are rewarded for participating in the network, which helps to keep it running smoothly.
These elements work together to create a more secure, private, and resilient Internet powered by its users.
While the Bitcoin network was a marvel, Ethereum is the next key player that expanded the possibilities of the new Web.
Ethereum’s infrastructure provided a cheap and easy way to create tokens with few lines of code. This eliminates the need to build a blockchain network from scratch. Followed by these innovations, Web3 cements the emergence of the Token Economy.
Tokenization – Representing Web3 Components
The website was the novelty of Web1, and what Web3 now brings forth is the token.
“State” is the essential property for managing and transferring values. In Web3, these values are represented by cryptographically secured tokens.
The concept of tokens is not new; they have existed long before the emergence of blockchain networks, primarily used in computing, where they represent a right to access or perform certain operations. Examples of traditional computer tokens include tracking codes for shipping packages and QR codes that grant access to planes.
Cryptographic tokens can affect the financial world in a way that compares to how the Internet affected the postal system. They can represent anything from a value store to permissions, such as voting, access, or property rights.
Tokens facilitate collaboration across markets and allow for a more transparent, efficient, and fair interaction between market participants at low costs. Furthermore, they can be used as an incentive for an autonomous group of participants to contribute individually to a specific collective goal.
Web3 is still in its early stages of development, but it has the potential to revolutionize the way we interact with each other online. Thanks to its decentralized nature, Web3 could provide a more secure and efficient way of conducting transactions and sharing data. It could also help reduce our reliance on central authorities, like banks and governments, which can often be slow and cumbersome. Thanks to these components of Web3, we would have more control over our data and how we use it. Ultimately, Web3 could lead to a more open and connected world.