Web3 is a rebranding effort for crypto that aims to rid the industry of all the baggage it has accumulated and convince the general public that blockchains are the next phase in computing. However, it has been likened to the dystopian vision of a pay-to-play internet, where every social interaction and activity is transformed into a form of digital currency. It also comes with the usual cocktail of hype, marketing, and the fear of missing out on the next big thing.
One of the problems with Web3 is the high cost of transactions. This is especially true in developing countries where the cost of transactions can be prohibitive. Ethereum and its wallet providers are currently working to overcome this issue, but there is a long way to go until it becomes widely adopted. Nonetheless, Web3 has the potential to disrupt the current Web 2.0 stack and make it more decentralized in a few areas.
The Web3 protocol supports a variety of decentralized and open systems. Unlike traditional financial institutions, Web3 allows its users to participate in the network without the need to get permission from a centralized entity. A decentralized network of nodes provides access to network infrastructure and crypto wallets. Web3 also includes a decentralized storage network, Filecoin, where people can rent out their hard drive space. This is the Web3 equivalent of Google Drive and Amazon Web Services.
Web3 also facilitates the creation of decentralized virtual worlds that allow users to socialize, play games, attend meetings, and do various other activities. In fact, Mark Zuckerberg, creator of Facebook, recently revealed his vision of a metaverse when he rebranded the company as “Facebook.” As a key component of this metaverse, some crypto proponents believe that web3 is essential in creating these virtual worlds. With the help of blockchain technology, the technology has the potential to enable such a system with no central company or set of rules.
Web3 applications can be developed by anyone – from small startups to large enterprises. Some projects are entirely volunteer, while others are funded by venture capital firms. These projects often raise funds through Initial Coin Offerings (ITOs) in which users can purchase crypto tokens. Some projects also airdrop free tokens to encourage public interest.
One of the simplest ways to invest in Web3 technologies is through the purchase of Web3 project tokens. These tokens are distributed and can be traded on exchanges. Some can also be used for voting on proposals and accessing application services. Some even have the potential to generate passive income through staking. Almost all Web3 projects offer white papers detailing their tokens and how they work.
Web3 projects include a number of DAOs. These communities use smart contracts to automate decentralized decision-making over a pool of resources. Token holders vote on how resources are allocated, and code then automatically executes the results of that voting. A number of Web3 communities are defined as DAOs, with varying degrees of decentralization and automation by code.