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What is Web3?

Web3 refers to a movement to access blockchain-based web platforms using crypto wallet addresses as online identities.


The concept returns ownership of online identities to users, creating a fair-access, censorship-resistant web ranging from financial services to social media.

Techopedia Explains the Web3 Meaning

It’s often said that web3 combines the best parts of previous Internet generations: the community-governed spirit of Web 1.0 and the interactive, high-engagement nature of Web 2.0.

  • Web 1.0 = read
  • Web 2.0 = read/write
  • Web 3.0 = read/write/own

A key difference found in Web3 is ownership. As platforms evolve, users will be able to control their data because they own the data as well as their identity. This contrasts with Web2, in which corporations own user data and control account access, ceded through agreements to terms of service.

Techopedia Explains the Web3 Meaning

How Does Web3 Work?

Web3 uses crypto wallet addresses as identities rather than real names or usernames that can be deleted or banned by site administrators.

On Aave, for example, anyone can interact with the platform to lend or borrow cryptocurrencies by connecting their crypto wallet address (their pseudonymous identity).

Importantly, no centralized authority governs your Web3 identity.

How Does Web3 Work?

Web3 platforms use blockchain networks that host smart contracts, which are computer programs that run on the network. Early iterations of Web3 platforms centered on decentralized finance (DeFi) alongside metaverse projects and games.

Eventually, Web3 may include social media platforms and more complex applications that offer granular control over user data.

For example, you could choose to sell the metadata your smart TV collects and earn monthly micropayments issued in cryptocurrency.

Proponents of Web3 believe that traditional business models on the Internet will change significantly as data controls become decentralized and distributed data marketplaces gain popularity. Other predictions about Web3 include the following:

  • Organizations of all types will use smart contracts to automate administrative tasks, manage supply chain risk, and verify that contracts are being executed according to their terms.
  • Web publishers will request payment when AI researchers web scrape their content.
  • Banks will either use blockchain to improve security or become obsolete.
  • The metaverse will become pervasive in all aspects of everyday life as headsets, smart glasses, and controllers improve.
  • Potential attack surfaces will be significantly smaller and difficult to identify.

Web3 vs. Web 3.0

The terms Web3 and Web 3.0 are often used as synonyms, but they do not always share a common meaning. Web3 (a term coined by Ethereum co-founder Gavin Wood) is used to describe a decentralized ecosystem built on blockchain technology.

In contrast, Web 3.0 is used to describe all the technologies and trends that are expected to shape the future of the Internet.

These include:

Web3 Wallet

A Web3 wallet is a crypto wallet used to sign in to Web3 services and interact with smart contracts using the wallet’s private keys. Private keys prove ownership of the Web3 identity (wallet address).

The wallet must support the blockchain network for a given Web3 application. For instance, you might use the MetaMask wallet to interact with the Decentraland metaverse using the Polygon network.

Web3 Gaming

Web3 gaming refers to blockchain-based games, many of which feature in-game economies and utilize NFTs to manage in-game assets, such as property, equipment, or avatars. For example, Axie Infinity centers on digital pet NFTs called Axies.

Artificial Intelligence (AI) and Web3

Current AI models depend on centralized databases and use permissioned access. Current models also provide generalized information. Web3-based AI may change the way we interact with AI, with individual AI models based on user content and ownership transitioning from corporations to users.

Web3 may also pave the way for payments to creators in exchange for data collected by generalized AI platforms.

Key Features of Web3

Key Features of Web3

Web3 centers on several key characteristics that separate it from current Web2 platforms.

  • Open: Content platforms will be built on open-source software.
  • Distributed: Web3’s blockchain technology ensures a decentralized network stored on computers worldwide.
  • Trustless: Zero Trust architectures will extend security to all Internet of Things (IoT) edge devices.
  • Data Owned by Users: Users own their data rather than corporations.
  • Censorship Resistance: Devices, users, and services will be able to interact without authorization from a central authority.

The Difference Between Web 1.0, Web 2.0, Web3

Comparison Web1 Web2 Web3
Web experience Static pages Dynamic content Dynamic content
Centralized or Decentralized Web Hosting Centralized Centralized Decentralized hosting using peer-to-peer file-sharing or similar tech
User Interactivity Read-only Read or write content, interact with other users Read or write content, interact with users, interact with smart contracts
Privacy User IDs owned by site admin and may be linked to real-world identities User IDs owned by site admin and may be linked to real-world identities Pseudonymous wallet addresses act as online identities
Access Read-only Read/Write Read/Write/Own

What Technologies Support Web3?

Under the hood, Web3 depends on several key tools and technologies.

BlockchainSmart ContractsCryptographyCryptocurrencyTokensDecentralized Hosting

Decentralized and immutable record storage forms the framework of Web3.

Conditional computer programs that run on blockchain networks govern Web3 interactions.

Wallets and blockchains use cryptography to authenticate users and store data.

Blockchain networks use cryptocurrencies as “fuel” to power transactions and interactions.

Cryptocurrency tokens can act as governance tokens, giving control of protocols to users. Non-fungible tokens (NFTs) can grant ownership rights or confer usage rights.

Technologies such as the Interplanetary File System (IPFS) use peer-to-peer (P2P) file delivery to promote censorship resistance.

Key Applications of Web3

Web3 promises a new way of interacting, potentially replacing or supplementing many traditional applications.

  • Social media
  • Decentralized finance
  • Insurance
  • Decentralized storage
  • Metaverse worlds
  • Messaging
  • Marketplaces

Real-Life Example of a Web3

The Decentraland metaverse world offers a popular example of Web3 in action. Decentraland is owned by its users and governed through decentralized voting. Users can own property, earn cryptocurrency, and interact with others using a wallet address to power their in-world persona.

Other examples include:

Pros and Cons of Web3


  • User ownership and control of data
  • Transparency in transactions and decision-making processes
  • Pseudonymous wallet addresses provide privacy by default
  • Smart contracts provide permissionless and inclusive access


  • Requires knowledge of crypto wallets and wallet safety
  • No consumer protections
  • Smart contract or blockchain flaws can threaten assets or privacy
  • Limited interoperability between other blockchains, web2, and traditional finance

Web3 Challenges

As Web3 becomes more widely adopted, there is likely to be increased regulatory scrutiny from governments. Laws around data privacy and sovereignty will have to be updated to protect user-owned data.

Ensuring that Web3 technologies and applications comply with existing regulations – while also developing new regulatory frameworks that are appropriate for the decentralized nature of Web3 – is expected to be a significant challenge.

Other challenges include the following:

  • Blockchain technology can be slow when tasked with handling large volumes of transactions, and latency issues could prevent the technology from being scalable at the enterprise level.
  • Companies and internet service providers will have to make huge investments in edge computing to move computing capacity closer to users.
  • Interoperability standards and protocols will need to be developed to enable real-time communication between different blockchain systems.
  • Non-technical users will need to be taught how to use cryptocurrency and other Web3 technologies.


What is Web3 in simple terms?

What is an example of a Web3?

How Does the Metaverse Fit With Web3?

What is the significance of Web3?

How can I ensure privacy in Web 3.0?


  1. $ 113,632,288 (Aave)

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Eric Huffman
Eric Huffman

Eric Huffman has a diverse background ranging from business management to insurance and personal finance. In recent years, Eric's interest in finance topics and in making personal finance accessible led to a focus on cryptocurrency topics. Eric specializes in crypto, blockchain, and finance guides that make these important topics easier to understand. Publications include Milk Road, Benzinga, CryptoNews.com, Motor Trend, CoverWallet, and others. Always learning, Eric holds several certifications related to crypto and finance, including certificates from the Blockchain Council, Duke University, and SUNY. When he's not writing, you might find Eric teaching karate or exploring the woods.