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Exploring Web3: Understanding the Next Generation of the Internet

Ashlyn Wrigley

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March 12, 2024

DeFi, DAOs, NFTs, dApps—these buzzwords are increasingly prevalent in conversations about the future of the internet. But what do they actually mean, and where are they taking us? Enter Web3, the next frontier of the internet.

The History of the Internet (So Far)

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So first things first; Where does the name Web3 come from? What happened to Web1 and Web2?

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Within the technical ecosystem, Web1 is generally referred to as the first generation of the internet. Some of us may remember the early days of internet usage, where users predominantly consumed static content but did not actively participate in its sharing or creation.

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As an example, allow me to take you back in time to the 1990’s, sites such as SpaceJam and NetScape are two classic examples of early Web1 featuring basic HTML pages, simple graphics and limited interactivity. If you are curious about what early Web1 sites looked like, an archived site of SpaceJam can still be found here. For those who may be interested in a bit more of a throwback, here are some snapshots of the most popular Web1 sites of the 90’s, including the earliest versions of Google, Apple, and even Amazon.

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Driven by a combination of tech advancements and changing user expectations, the internet started to evolve, causing a shift towards a more interactive and user-centric web experience.This in turn launched us into the second generation of the internet and introduced Web2, the dynamic web as we know it today. Not only does Web 2 encompass user-generated content, but it also enables user collaboration, which has been paramount to the rise of social media. A great example of this was Flickr (2004), a photo-sharing website that embodied the principles of Web2. It allowed users to upload, organize, and share photos with others, fostering a community around photography and visual storytelling. Of course the more well known Web2 counterparts, Facebook(2004), and YouTube (2005), also played a huge role in the internet landscape at that time.

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The progressive transformation of the internet has brought about many new possibilities and opportunities. Now, we stand at the forefront of another evolution with the emergence of Web3, which promises to reshape the internet as we know it once again.

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Key Features of Web3

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So what exactly is Web3? Characterized by decentralized and peer-to-peer networks that enable new ways of interacting and transacting online, Web3 represents a fundamental shift in how we perceive and interact with the online world. At its core Web3 is built on blockchain technology, which ensures the transparency, security, and immutability of data. This decentralized architecture eliminates the need for traditional intermediaries, otherwise known as the ‘middlemen’, empowering users to have greater control over their digital lives. Let’s dive into some of the key features of Web3:

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Decentralization

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Web3 platforms are decentralized, meaning they are not controlled by any single entity. With the use of blockchain technology, decisions and operations are distributed among many participants, or nodes, rather than being controlled by a central or governing authority. This not only enhances security, but also reduces the risk of censorship and encourages a more open and inclusive internet.

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Decentralization removes the need for the ‘middleman’ and puts the control back into the hands of users. Imagine a future where our society has full autonomy over their data, identities, and online interactions. They can choose how their data is shared and monetized, leading to more personalized and secure online experiences. This level of empowerment has the potential to lead to a more equitable and all-encompassing internet, where everyone has a voice and can participate in the digital economy.

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Cryptocurrencies and Tokens

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Web3 utilizes cryptocurrencies and tokens for transactions and incentivization within the network. These digital assets enable new economic models, such as decentralized finance (DeFi) and non-fungible tokens (NFTs). DeFi operates without traditional financial institutions such as banks or brokerages, and NFTs are digital assets that represent ownership or authenticity of a specific item or piece of content. NFTs are unique in value and cannot be traded or substituted with another asset.

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Interoperability

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This refers to the ability of different systems, devices, or applications to communicate, exchange data, and ultimately use the information that has been exchanged. Web3 aims to create a more interconnected internet where different platforms and applications can interact and share data seamlessly. Interoperability is crucial for building a vibrant and diverse ecosystem of decentralized applications (dApps).

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Implications of Web3

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The rise of Web3 has profound implications on various industries and aspects of society:

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Finance

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DeFi is revolutionizing traditional finance by providing access to financial services without the need for brokers. This opens up new opportunities for financial inclusion and innovation. Two current examples of DeFi are platforms like Uniswap and Aave, which are pioneering decentralized financial services.

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Uniswap is a decentralized exchange for trading cryptocurrencies directly from your digital wallet that uses automated market-making to facilitate trades and liquidity provision.

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Aave is a decentralized lending platform where users can borrow and lend cryptocurrencies through smart contracts. Aave also allows users to earn interest on deposits and borrow assets using deposited assets as collateral.

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Imagine a world somewhere in the near future where traditional banking services are effortlessly integrated into Web3. Platforms like Uniswap and Aave could evolve to become comprehensive financial hubs, allowing individuals to access loans, investments, and insurance directly from dApps.These systems would be accessible to anyone with an internet connection and a digital wallet, offering a more inclusive and accessible way for people to manage their finances as well as access financial services.

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Art and Culture

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NFTs are transforming the way we perceive and trade digital assets, including art, music, and collectibles. Artists and creators can now tokenize their work, creating new revenue streams and ownership models.

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Currently, NFTs are revolutionizing the art and collectibles market with platforms like OpenSea leading the way.

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In the future, NFTs could extend beyond art and collectibles. NFTs have the potential to tokenize a wide range of assets, including real estate, intellectual property, and digital goods. For example, you could own a fraction of a famous landmark enabling a group of people to collectively own and manage iconic properties. Music collections could be tokenized by creating NFTs for each song or album, which could then be traded or sold, providing new opportunities for artists to monetize their work and for fans to own a piece of their favorite music.

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This expansion of NFTs into different asset classes and industries opens up new and exciting possibilities of ownership and monetization, changing how we perceive and interact with assets in the digital world.

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Governance and Democracy

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Web3 enables new forms of decentralized governance, where decision-making is distributed among network participants. Cryptocurrencies and tokens are not only reshaping how we think about value and exchange - opening up new possibilities for decentralized finance and tokenized assets - but also creating new opportunities for innovation and entrepreneurship. This has the potential to promote transparency and accountability in governance, as well as empower communities to participate more actively in shaping their own futures.

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Let’s delve into a current example of governance and voting. Blockchain-based governance models, such as DAOs (Decentralized Autonomous Organizations), enable decentralized decision-making, allowing token holders to vote on proposals and steer the direction of a project or organization. This can lead to more transparent and inclusive decision-making processes, empowering stakeholders who may have been marginalized in traditional governance structures. DAOs like MolochDAO and Aragon have been experimenting with decentralized governance models. Both platforms share the goal of enabling decentralized governance and decision-making, allowing organizations to operate without a central authority and empowering members to participate in the decision-making processes.

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In the future, DAOs could evolve to become the primary mode of governance where decision-making power is distributed among stakeholders, ensuring that everyone has a voice in shaping the future of their organizations, communities, and even their governments.

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Privacy and Security

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Thanks to the improved privacy and security features that Web3 offers, along with its decentralized architecture and use of cryptographic technologies, users can have greater confidence that their data is secure and private, leading to a more trustworthy and resilient internet ecosystem.

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Currently, projects like uPort and Sovrin aim to achieve self-sovereign identity (SSI), which is the concept of individuals having control over their own digital identities without relying on centralized authorities, driving the notion of decentralized identity.

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Both uPort and Sovrin allow users to create and manage their identities in order to provide a secure and privacy-preserving way for individuals to store their identity information securely and share it with others as needed, giving them control over how their personal data is used across different applications and services.

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In the future, decentralized identity solutions could become the standard for online authentication, enabling seamless and secure access to services across the internet. This could eliminate the need for usernames and passwords, replacing them with cryptographic keys that are controlled by the user.

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On the other hand, platforms like Steemit and Mastodon are exploring decentralized social media and aim to provide decentralized alternatives to traditional social media platforms.

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Steemit, for example, is a blogging and social media platform built on the Steem blockchain. It allows users to create and curate content, and earn rewards in the form of the platform's native cryptocurrency, STEEM, for their contributions. Mastodon on the other hand, allows users to create accounts on different servers (called instances) and interact with users on other instances, similar to how email works.

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Overall, platforms like Steemit and Mastodon aim to provide users with more control over their data and content while also promoting and incentivising decentralization, censorship-resistance, and community-driven governance in social media.

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In the future, decentralized social media platforms could become the norm, offering users full control over their data and content as opposed to relying on a central authority to protect their data.

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Additionally, users can be rewarded for their contributions to the platform in the form of tokens. These tokens can be earned by creating high-quality content, engaging with other users or participating in the platform's governance. This creates new economic incentives for participation as users can earn tokens that have real-world value.

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The use of tokens also helps to create a more engaged community, as users are incentivized to contribute to the platform's growth and success. This could lead to a more diverse range of content and perspectives since users are motivated to create and share content that resonates with others.

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Challenges and Considerations

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Although Web3 presents exciting possibilities, it also presents challenges that must be addressed. Below we explore just a few of the issues that need to be carefully navigated to ensure that users utilize this new digital landscape responsibly.

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Scalability

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Scalability is an ongoing issue that affects blockchain networks - which form the basis for Web3 - meaning they can become slow and expensive as more users join. This can hinder the usability of dApps and limit their potential. To overcome this developers are working on solutions such as layer 2 scaling solutions (e.g., Optimistic Rollups and zkRollups) and sharding to increase network capacity and reduce congestion.

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Usability

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Many dApps are complex and challenging for non-technical users to navigate. Improving the user experience of dApps by simplifying interfaces and enhancing usability will be crucial for mainstream adoption. Projects like Metamask and WalletConnect are already making strides in this area by providing more user-friendly interfaces for interacting with dApps.

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Regulatory Concerns

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The decentralized nature of Web3 raises regulatory concerns, especially regarding compliance with existing financial regulations. Governments and regulatory bodies are still grappling with how to regulate cryptocurrencies, ICOs, and DeFi platforms. Collaborative efforts between regulators and industry stakeholders will be necessary to develop clear and effective regulatory frameworks that foster innovation while protecting users.

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Education and Awareness

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Many users are still unfamiliar with the concepts and implications of Web3, including topics like blockchain technology, DeFi, and digital identity. Educating users about the benefits and risks of Web3, as well as providing resources for navigating this new digital landscape responsibly, will be essential for increasing adoption and ensuring a positive user experience.

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If you’re interested in learning more about Web3, head over to Web3 Sanctuary. They have a vast range of lessons and resources perfect for those new to the Web3 space, as well as for those already well versed in all things Web3. As Web3Sanctuary are committed to making education around the Web3 ecosystem more accessible, they have kindly provided a free access promo code for all our readers to delve into their adaptive learning paths, become a part of their community and explore their platform. If you are interested in learning more, use the following promo code on sign up: W3STHANKSYOU2023

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Addressing all of the above challenges by encouraging collaboration between developers, regulators, and users will be crucial to unlock the full potential of Web3, ensuring its widespread adoption and creating a more inclusive and decentralized digital economy for all.

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A More Interconnected World

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Web3 offers more than just decentralization; it also promises integration across various platforms and applications. This could lead to a more interconnected internet where data can flow freely between systems, enabling fluid interactions and collaborations.

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In conclusion; Web3 represents a paradigm shift in how we perceive and interact with the internet. The future of the internet is one of empowerment, innovation and inclusivity, and it is up to us to embrace this new paradigm to ensure a future that is more decentralized, secure, and connected for all. As we look to the future, the possibilities of Web3 are endless, and we have the power to shape a digital world that benefits everyone.