Web3 refers to the latest generation of the World Wide Web. Web3 follows the prior generations, Web 2.0 (2000-2021) and Web 1.0 (1990-2000). 

The term Web3 rose to popularity in 2021 as the business and information technology communities at large have come to realize and highlight several transformative changes that differentiate this stage of the Internet’s evolution from its predecessors.

To understand and appreciate Web3’s properties, benefits and challenges, it’s important to review the history of the web. 

What Is Web3 Used For?

In an ideal world, Web3 provides users with more control over their online experience, more power over their own data and increased security through blockchain technology. 

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History of the Web

Web 1.0 (1990-2000) Explained

The web as an information system accessible by individual users first came to be in the 1990s when the first websites and (few) web developers started uploading static pages.

The system was invented in 1989 and pioneered as a working implementation in 1990 by Tim Berners-Lee. The web in this nascent form was conceived as a collection of documents that could be accessed over an interconnected network of computers (the internet) exchanging information among each other.

Berners-Lee also pioneered these other fundamental building blocks of the modern web:

  • HTML (Hyper Text Markup Language): The markup language used by web browsers (applications that let users access the Web) to display and render web pages.
  • URI/URLs (Unique Resource Identifier/Locator): The unique character sequences and addresses that point to the location of a given HTML web page.
  • HTTP (HyperText Transfer Protocol): The framework that computers use to request and send information to each other.

In other words, HTML is a collection of houses, URIs/URLs are home addresses and HTTP represents the road that connects them in the neighborhood. 

This all came to be in 1990, but it took the entire decade for the World Wide Web to really take off in popularity since this architecture was not originally conceived for consumers to use.

At the beginning of the 1990s, there were less than 100 pages online. By the turn of the twenty-first century, the Web grew in adoption among the wider population after many companies developed and launched their own web browsers and search engines, thereby signaling a massive technological and economic shift in less than 10 years.


Key Features of Web 1.0

  • Most internet users consumed, rather than created, web pages. This was especially true at the beginning of the 1990s but as time went by and innovation in the space increased, new applications started to allow the user to play a more active role in the Web, first by buying goods online and later trading on the public markets. Wells Fargo bank is a pioneer in the online banking space with online accounts available since 1995. The end of the decade also saw a rise of many electronic trading platforms available to the consumer. 
  • Most web pages displayed static content and did not dynamically respond to user input. In practice, this meant that web pages were simply hosting content that did not respond to user clicks nor did they allow users to take any action, such as searching or submitting a form online. 
  • Databases were not yet in use and web developers were providing content to web pages using the operating systems’ file systems.
  • Web pages were the main source of content instead of social media platforms.
  • Page performance was not yet optimal and traffic spikes in visitors could lead to websites slowing down or even crashing. This happened when the servers hosting the web pages received more page access requests than their limited memory could handle.
  • With the new availability of search engines, web browsers and HTML pages, the first e-commerce transactions were made possible. For instance, Jeff Bezos founded Amazon.com and sold the company’s first books online in 1995.
  • Communication online flowed primarily through email and some web pages displayed online guestbooks, a dedicated section on a web page where users could leave signatures or comments in short-form.
1994: Today Show, What is Internet, Anyway? | Video: Chrissy Miklacic


Web 2.0 (2000-2021) Explained

This second phase of the web saw the rise of online shopping and user-generated content. The twenty-first century saw the boom of e-commerce and social media giants like Amazon, eBay, Twitter, YouTube and Facebook (now Meta). 

Moreover, individuals without technical experience were able to start developing their own web pages and websites for blogging, vlogging, personal promotion and business. 


Key Features of Web 2.0

  • The user experience became much richer thanks to the development of dynamic content that allows anyone to click, tag, comment and interact with web pages. For example, most websites now display navigation bars that allow users to surf specific sections or web pages. Social media platforms also let users tag other users to notify them of a specific activity such as posts or comments — interactive experiences at the very core of these platforms.
  • The user’s role shifts from the mere consumer of web pages to a creator and active participant in social networking and e-commerce experiences.
  • The number of internet users worldwide soared as the web became available to the general population as opposed to a niche group of technologists. This rise was spearheaded by powerful technological development in computing power and networking technologies that allowed web users to access online content from multiple devices (phones, personal computers, tablets). The iPhone release in 2008 is the premier example of this transformation.
  • Social network and technology giants in search engine and e-commerce rose to prominence and took a major stake in controlling the users’ online market share. Google came to be synonymous with finding information online while Facebook became the de facto place to connect online with your social network. Amazon became the central e-commerce platform for users all over the world. The prominence of these platforms revolutionized most users’ online behaviors.

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Properties of Web3


One of the key tenets of Web3 is the shift from an internet ecosystem where traffic and search are dominated by a small number of companies to a newer one where individual internet users take more control over the online communication flow.

In other words, Web3 allows for a more distributed internet, where the social graph of participants is richer and interactions are not administered or controlled by a few giant corporations, like Google. 

Ownership of data will shift more and more to the user and this third phase of the Web may signal the advent of a new wave of corporations that facilitate decentralized interactions. 

It’s early days and therefore hard to know exactly how this will look, but the main point to key in on here is that the share of attention and data ownership embedded in a few technological superpowers will diminish if more and more applications rely on decentralized principles.

Decentralization is a key conceptual backbone of Web3, enabled at a technical level by blockchain technology.


Blockchain Technologies

Blockchain is a transaction ledger that stores online transaction data securely by encrypting key information about senders, receivers and details of the transaction. 

Blockchain establishes peer-to-peer trust precisely because of the way it’s architected and is thus poised to remove the need for a major intermediary (e.g a bank) to secure and process that transaction. 

This architecture relies on a series of blocks (a chain of blocks, hence the blockchain) that provide a series of transaction logs or records.

Transactions are stored in a secure way thanks to secure data encryption by a cryptographic validation process that is enforced by network participants themselves. This process removes the need for a bank, or similar intermediary, to validate transactions on the chain.

For this reason, blockchain technology is at the heart of the shift to Web3 since it enables decentralization to take place and internet participants to execute secure information exchanges.

This flow of blockchain transactions additionally allows for the implementation of token-based economics.

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Token-Based Economics

Tokens are digital assets managed across blockchain architectures and their applications. 

For example, Ethereum is a type of blockchain with Ether as its default cryptocurrency. This is a token native to the Ethereum blockchain. Ethereum’s main application is the execution of smart contracts, which are computer programs that regulate the execution of contractual agreements based on certain conditions.

Smart contracts can additionally execute and mediate the exchange of other (non-Ether) tokens. These tokens can still be used as currency, just like Ether, with the difference being that their behavior is solely determined by smart contracts, and not built into the underlying blockchain, like Ether.

Tokens on the blockchain represent the de-facto currency of the Web3 distributed network of computers. For example, transactions on the Ethereum blockchain (the network) happen via the transfer of Ether (the network’s currency)

Therefore, transactions occur as access rights to value are transferred in the form of tokens across a decentralized ledger of computers (the blockchain), thereby enabling:

  • a network of computers that regulates its users and the actions they take in the network.
  • the rise of an economy where the transfer of value can be represented and executed through tokens without the need for any major financial intermediary.
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Benefits of Web3 

Data Ownership

In the Web3 ecosystem, personal data ownership shifts from giant technology platforms to the generators of that data: end users. 

Web 2.0 tech giants have ownership of user data built into their terms and conditions. 

Web 3.0 applications are built precisely to allow users to own and retain their data securely.

Users owning their own data empowers them to transfer, manage and secure their data because they’re the ultimate owners of this asset. This signals a power shift from corporations that harvest user data for profit. 

In practice, this means tech companies may have to completely rethink their business models and how to make money in a Web 3.0 world. For instance, Meta won’t be able to sell user data if they don’t own it anymore and may have to tinker around other forms of monetization, such as subscription models that paywall access to its application.


Fewer Intermediaries

Given the decentralization that Web3 brings, there are fewer intermediaries to deal with in the Web3 world. Therefore, disintermediation brings lower transaction fees for users when they trade value using tokens through a blockchain as the network transforms into a peer-to-peer system.

For example, in Web 2.0 you transact via your online banking app or third-party company like Venmo or PayPal. In Web3, you transact directly with another user on a blockchain, exchanging value peer-to-peer and without relying on a bank.



With fewer intermediaries and secure peer-to-peer transactions, there is more transparency of information and thus less information asymmetry.

Everyone can transact freely in Web3 and reliance on blockchain technologies ensures data transparency without sacrificing data security. These principles are embedded in the very architecture of blockchain networks that are constantly validating the legitimacy of their transactions while retaining the privacy of its actors.

Within this context, transparency and privacy can co-exist because: 

  • everyone can see who has transacted on the blockchain by accessing its public ledger record. 
  • users who have transacted can still remain anonymous by using digitally created addresses instead of real names. 
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Criticisms of Web3

Regulatory Challenges

The lack of a legal and regulatory framework for Web3 technologies leaves room for potential fraudulent behavior, anti-competitive market dynamics and potential financial loss for end users exposed to fraudulent platforms. The Sam Bankman-Fried and FTX cases are great examples in this regard.


Environmental Impacts

Blockchain technology has been criticized for the massive computing and processing power required to run the blockchain and validate transactions. As a result, Web3 is exposed to climate change impacts that need to be addressed to ensure public confidence that Web3 development does not come at the planet’s expense. 

The questionable sustainability of Web3 comes about due to the computing power required by some blockchain architectures to preserve and validate the transaction ledger. Some mitigation mechanisms are possible, for example by changing the blockchain validation mechanism itself.

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The Actual Degree of Decentralization

The decentralization property explained above may not actually fully be applied in practice since the blockchain industry has undergone consolidation.

This may lead to an industry where the main blockchain networks and related applications are controlled by a small number of corporations, thus failing to provide a true distribution of ownership stakes in the market.

If this trend continues, especially if unregulated, the industry may come to resemble a sector where a few players control most of the market share and power that comes with it — not unlike Web 2.0.

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