What is Web 3?

February 10, 2025

Web3 is like the next-gen internet, where you control your data, no middleman. Think of it as a decentralized version of the web. More secure, transparent, and user-driven. Cool, right?

Web3, also referred to as Web 3.0, is the next generation in web evolution. The internet so far has been characterized by centralized platform corporations, which is the current form of the internet, known as Web2. Web3 is supposed to be decentralized, open, transparent, and user-controlled. This will change the way businesses interact with technology and how they manage data to support their service delivery. The changes will be focused on blockchain, tokenization, and decentralization.

Table of Contents

Important Features of Web3

We believe you have definitely heard terms like blockchain, dApps and smart contracts floating around. But what’s the deal with them? Well, these are the key things that make Web3 super cool.

Let’s break it down!

1. Blockchain Technology

Web3 is based on blockchain technology. Blockchain technology refers to a distributed and decentralized form of a ledger where transactions are made through the computer network.

This has its backing through the secure and trustless eradication of intermediaries, such as banks or corporations. In Web3, the base from which dApps and digital assets are constructed is the blockchain.

2. Decentralized Applications (dApps)

Traditionally, applications are hosted on central servers controlled by a single entity. This can be social media platforms or even e-commerce sites. dApps, on the other hand, operate on decentralized blockchain networks and no central authority controls them.

They provide enhanced security, transparency, and censorship resistance. In any business where dApps have been implemented, this is an enhancement for consumer trust and ensures that such risks associated with centralized data storage do not exist.

3. Smart Contracts

Perhaps the most ambitious application is smart contracts. The smart contract is a self-executing contract with the terms of the agreement directly written into lines of code. Preset conditions being met, the smart contract automatically executes and enforces the terms, thus eliminating the need for middlemen and decreasing transaction costs as well.

The potential industries that can avail smart contracts, from finance to property management, the supply chain sector, among other fields, create a number of degrees of efficiencies and trust along the way.

Cryptocurrencies and Web3

Bitcoin as well as Ethereum, represent one part of cryptocurrencies and form another part of Web3. There is quite a lot of usage for cryptocurrency, as the core utility aspect is that the value can be exchanged in a decentralized manner without the services of any bank or other form of financial intermediary.

Bitcoin was the first to launch the idea of a digital decentralized currency way back in 2009. dApps and smart contracts on the blockchain were developed and founded by Ethereum, which was first launched in 2015. Cryptocurrencies within Web3 help facilitate transactions, incentivize decentralized network participation, and govern decentralized applications and protocols. The impacts of tokenization extend way beyond digital money: tokenization becomes a critical element of the decentralized economy.

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NFTs and Impact on Web3

The second significant sector within Web3 is non-fungible tokens. NFTs are not exactly cryptocurrencies since they are fungible or exchangeable units like any other, whereas an NFT holds the unique ownership of a given thing, which can be in the form of art, music, virtual land, or assets within a video game.

By 2032, the market for NFTs will skyrocket to an estimated $264 billion, making digital ownership and scarcity a very appealing commodity in the Web3 universe.

NFTs introduce a new form through which artists, creators, and businesses will begin to gain streams of revenue since they provide digital means of verifying ownership and fractional models of ownership. Businesses in entertainment and gaming spaces, even as real estate players, are currently testing the waters of how NFTs change the world when it comes to ownership and streams of revenue models.

DeFi (Decentralized Finance)

Probably, one of the biggest applications to emerge through Web3 is DeFi, which refers to a decentralized finance blockchain network-based sector aimed at duplicating services similar to those that are currently associated with lending, borrowing, and trading, minus intermediaries.

DeFi allows people to do financial transactions and invest without a centralized bank or a financial institution. The premise is that it uses smart contracts, automates, and secures transactions involving money. As such, this offers an open and inclusive system where anyone in the world who has access to the internet can easily join in. It gives new opportunities for new products and services to businesses related to finance, easier cross-border transactions, and increased financial access.

DAOs (Decentralized Autonomous Organizations)

Other innovations of Web3 include Decentralized Autonomous Organizations, which are organizations that operate based on the decisions made by their members through a smart contract. Without leadership but through all-inclusive decisions, DAOs operate effectively.

With the above characteristics, DAOs can be sold to businesses as alternatives to the age-old, hierarchical, opaque, non-decentralized organizational structure. In such an organization, practically every member normally holds governance tokens.

They can vote on some fundamental issues or proposals. A DAO can also help in forming community-driven initiatives, aggregation of resources, and decision-making by a collective effort. DAOs have already begun their foray into finance, entertainment, and even nongovernmental organizations.

Challenges of Web3

The scope of Web3 is really vast, yet there remain several challenges to be dealt with before Web3 can be accepted worldwide. Major ones include scalability. Blockchain networks, especially those based on proof of work, are highly limited when it comes to transaction throughput, and thus, they might prove less efficient for large-scale applications.

To address these problems, people are creating innovations – such as Layer 2 scaling-off-chain solutions that allow scaling blockchains and sharding-splitting the blockchain into smaller pieces.

Regulatory uncertainty is another significant challenge. The governments and their regulatory bodies are still trying to figure out how to regulate decentralized networks and digital assets. This varies from country to country as well. Therefore, it becomes even more complex for businesses that target the Web3 space in industries like finance and healthcare to operate under such conditions.

All such challenges notwithstanding, the Web3 movement just continues to build momentum. Decentralized finance grows exponentially; so does NFT, and higher usage of blockchain across industries reflects businesses’ interest in the exploration of Web3 technology to stay ahead in the digital economy.

Web3’s Impact on Financial Inclusion

Web3 technologies, especially through DeFi, are positioned to bridge the financial inclusion gap. Many individuals around the world remain without access to basic financial services due to geographic or economic barriers. Web3 can allow access to financial services and digital assets for those who have not been reached before. According to the World Bank, about 1.7 billion people globally are still unbanked.

DeFi will give access to financial services to these people without a bank account, enabling more equitable participation in the digital economy. This capability could redefine access to finance for millions globally, providing not only a more inclusive system but one that encourages economic participation at scale.

The Business Case for Web3 Adoption

With the maturity of Web3 technologies, business firms would have to decide how they would want to integrate these into their operations. With the early embracement of Web3 technologies by businesses, several benefits can be obtained, such as enhanced data privacy, transparency, and lower operational costs.

Web3 brings forward new business models and revenue streams for industries such as gaming, finance, and content creation primarily because of tokenization and NFTs as unique monetization opportunities.

In addition, in Web3, businesses will open up more channels directly and transparently to customers. Businesses use decentralized platforms to create relationships with the community that give the user more control over their data and experiences.

Industry Impacted by Web3

Web3 is a multifaceted change phenomenon and a technological shift revolutionizing the world across different sectors. Among them will be the health sector, where blockchain can safely store a patient’s data in a decentralized way, enhancing interoperability and, consequently, care for patients.

In supply chain management, blockchain will be aided by transparency, traceability, and accountability in combating fraud and product authenticity. Gaming is another sector where Web3 changes ownership and trading of digital assets for its users via NFTs and tokenization.

High interest in these Web3 start-ups has been observed among investors and technological companies. Thanks to progressive innovation and further development, the investments into start-ups are estimated to be billions of dollars.
Technology superpowers like IBM and Microsoft are also finding other new technologies they discover through Web3, and they start introducing them into other related products that they come up with. This would immensely affect government services, education, and real estate. It could be a form of new governance, education, and digital citizenship due to the increased accountability of people over their digital identity, supported by Artificial Intelligence to ensure enhanced security and privacy.

Future of Web3

Web3 will revolutionize the internet that exists today. Businesses, consumers, and developers are embracing decentralized technologies, which are going to open up, be transparent, and be more equitable in terms of the digital economy. It will bridge the digital divide.

With the basic choice in front of organizations, embracing Web3 technologies would mean carefully maneuvering decentralization, scalability, and regulatory complexities.

The upside is obvious: Web3 will change the game for industries, open new business possibilities, and put the power back in people’s hands regarding their digital lives. The future of Web3 holds the promise of reshaping the internet as we know it, offering a more equitable and sustainable digital economy for all.