Supporters of web3 envision decentralized social networks, “play to earn” video games, and a middleman-free digital economy. They believe that web3 will revolutionize the internet and upend traditional gatekeepers. Unlike most other platforms, web3 will allow people to own, share, and trade digital culture.
Web3 uses decentralized blockchains to store data instead of central servers. The goal is to make the internet more democratic by allowing everyone to participate and control content and services. With decentralized governance, users can claim ownership of their content and make it technologically secure. The bottom-up construction of the web makes participation from all participants essential to the success of web3 platforms.
The decentralized nature of Web3 creates challenges, though. Retrieving data from massive networks takes time and limits the usability of Web3 apps. However, a protocol called The Graph is being developed to solve this problem and ensure that user-facing Web3 applications run smoothly. The Graph will also help Web3 maintain user identity.
A majority of Web3 applications are based on blockchain technology. The technology behind blockchains allows for secure verification and has been used to create smart contracts, such as Bitcoin. The technology is already being used to improve the supply chains of Walmart and other companies. It can also be used to create bridge applications that allow transactions between two or more blockchains. This is known as cross-chain swapping.
While blockchain technology is a major driver for web3 applications, the industry also faces regulatory challenges. While cryptocurrencies are widely used, the legal status of crypto tokens is still unclear. In the United States, they are subject to a gray zone in terms of their regulatory status. Gary Gensler, the chief of the Securities and Exchange Commission, has argued that many tokens are unregistered securities and should be regulated like securities.
The DAO structure allows Web3 applications to become decentralized, and many projects are already transitioning into DAO structures. For example, Opolis, a Web3 platform for independent workers, evolved into a DAO. However, it is not entirely decentralized as it would entail significant logistical and operational issues.
Another project that makes use of web3 technology is Aragon. The company offers a decentralized platform for computing assets, and has created a secure platform for its users to conduct transactions. The project has also been featured in mainstream media and features the Ocean protocol, which converts data from traditional crypto currencies to ERC-20 tokens. This greatly improves data privacy and eliminates the risk of corporate data theft.
The Web3 ecosystem is relatively young, and many companies are trying to fill in the infrastructure gaps. This can take time to develop a quality and reliable infrastructure. However, with time, many of the key ideas behind Web3 will come to fruition.