What’s the Relationship Between Blockchain and Web3?

Introduction

The emerging Web3 internet promises to address some of the major issues in today's online landscape, such as the concentration of power among a few centralized social media platforms and the misuse of user personal data. Digital assets will be a core component of Web3, with the decentralized and permissionless nature of blockchain technology helping to redistribute communication power rather than centralizing it in the hands of a single authority.

Digital assets not only introduce native digital payment capabilities to Web3 but can also be programmed as tokens to play a wide range of roles in the digital economy. With the help of decentralized autonomous organizations (DAOs), blockchain and cryptocurrencies will make Web3 even more community-oriented.

How Does Web3 Differ from Web2?

The evolution of the internet is typically divided into three phases: Web1, Web2, and Web3. In the Web1 era, users could not modify online data or upload their own content; the internet was primarily composed of static HTML pages, providing a simple one-way information browsing experience, such as accessing information forums.

Web1 allowed users to consume content and engage in basic interactions, while Web2 evolved into a more interactive internet where users could actively participate in content creation. This shift was largely driven by social media, and Web2 witnessed the rise of many centralized tech giants.

Over time, the shortcomings of Web2 have become increasingly apparent, leading to a new transformation within its ecosystem. Users have grown more concerned about data tracking, ownership issues, and censorship.

Many centralized companies have begun to restrict specific users and organizations from creating their own platforms, making the centralization phenomenon more pronounced. These Web2 companies also leverage user data to retain users and serve targeted ads that cater to third-party interests. Influenced by such economic incentives, the actions of these companies do not always align with the best interests of users.

The vision for Web3 is to move toward a better internet, with core promises of decentralization, trustlessness, and permissionlessness for online platforms. Web3 could enable digital ownership, native digital payments, and censorship resistance, setting new standards for online products and services.

Blockchain and cryptocurrencies inherently possess decentralized characteristics, allowing everyone to record on-chain information, tokenize assets, and create digital identities. Thus, they have the potential to become key technologies for Web3.

How Do Blockchain and Cryptocurrencies Fit into the Concept of Web3?

Decentralization

As mentioned, one of the primary issues with Web2 is the concentration of power and data in the hands of a few participants. Blockchain and cryptocurrencies can facilitate the broad distribution of information and power, enabling decentralization in Web3. A blockchain-driven public distributed ledger can enhance transparency and decentralization.

Permissionlessness

Blockchain-based projects utilize open-source code rather than proprietary systems used by traditional companies. Applications built on blockchain have a permissionless nature, allowing users worldwide to access and interact freely.

Trustlessness

Blockchain and cryptocurrencies eliminate the need to trust banks or other intermediary third parties. Web3 users do not need to trust any other entity; they only need to trust the network itself to conduct transactions.

Payment Channels

Cryptocurrencies can serve as the native digital payment infrastructure for Web3. These digital assets facilitate borderless payments without the need for intermediaries, potentially improving the cumbersome and costly payment systems found in Web2.

Ownership

Cryptocurrencies provide users with tools such as self-custodial wallets, allowing them to store funds without intermediaries. Furthermore, users can connect their wallets to decentralized applications to use funds or showcase personal digital items in various ways. The ownership of these funds and items can be verified through a transparent public ledger.

Censorship Resistance

Blockchain technology is censorship-resistant, meaning that no party can unilaterally alter transaction records. Once a record is added to the blockchain, it is nearly impossible to delete. This characteristic helps protect various forms of expression from government and corporate censorship.

Are Blockchain and Cryptocurrencies Essential for Web3?

The future development of Web3 may rely on technologies that are not directly related to blockchain or cryptocurrencies. Technologies such as augmented reality (AR), virtual reality (VR), the Internet of Things (IoT), and the metaverse will become significant components of the new era of the internet. While blockchain will play a critical role in the infrastructure of Web3, these technologies will enhance the immersive nature of the internet and create tighter connections with the real world.

The IoT connects various devices through the internet, augmented reality integrates digital visual elements into the physical world, and virtual reality creates computer-generated environments where digital assets play a vital role. Ultimately, these technologies will expand and integrate with one another, making Web3 a cohesive and authentic metaverse.

Cryptocurrencies provide native digital payment channels for Web3, while utility tokens unlock a range of important applications. Additionally, non-fungible tokens (NFTs) effectively verify identity and ownership in the digital realm without compromising user control over personal data.

What Will Web3 With Cryptocurrencies and Blockchain Look Like?

Blockchain technology will become a cornerstone of Web3, though users may not be aware of it. As long as blockchain-based applications are intuitive and user-friendly, people are unlikely to focus on the underlying architecture, just as we rarely consider how data servers and internet protocols support our daily social media platforms.

Users can showcase NFT digital collectibles and use NFTs to create and maintain unique digital identities. Furthermore, NFTs can serve additional practical functions in online gaming, becoming fundamental to key processes.

Through decentralized autonomous organizations (DAOs), blockchain and cryptocurrencies will transform how Web3 users coordinate and execute collective actions. DAOs operate without a central decision-making body, enabling people to organize around shared interests. Token holders can vote on the best collective action plans, with all activities and votes recorded on the blockchain. Thus, DAOs can enhance the decentralization, transparency, and community orientation of Web3.

Conclusion

Web3 is poised to address significant issues facing today’s internet while curbing the power of tech giants. However, this remains a grand vision that cannot be achieved overnight. Nonetheless, the core technologies for the next iteration of the web are already in development.

Blockchain and cryptocurrencies aim to promote decentralized, permissionless, and trustless interactions, which is why they are often seen as key technologies driving the transformation of Web3. Moreover, blockchain technology and digital assets do not compete with critical internet components like augmented reality, virtual reality, and the IoT; rather, they will become the most promising solutions through their powerful synergy.

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