What is Web3?

An explanation of Web3 and why it’s such a significant technological development for the world.

Token Takeaways

Web3 refers to a decentralised version of the Internet where token-based applications run free from the control of any central party.

How DeFi, NFTs, the Metaverse, and token technology form part of Web3.

How Web3 could change the way we use the Internet forever.

Since Bitcoin launched in 2009, the token revolution has given rise to many memes and buzzwords. In some cases, these phrases have captured the imaginations of the community and helped attract new users. One of the most popular terms to catch on in the token space in recent years has been “Web3.” Referring to an open, decentralised version of the Internet, Web3 is arguably the token ecosystem’s greatest promise. In this guide, we introduce the concept and explain how we’re bringing it to life through our Welcome to Web3 Collection.  

Web3 explained 🧠

To understand “Web3,” it’s worth defining Web1 and Web2.

The Web3 concept is based on the idea that the world is entering the third generation of the Internet era. 

The early Internet started to gain adoption in the 90s with the launch of the world wide web, e-mail, and e-commerce. Some of the most notable names of this era, otherwise known as Web1, include Microsoft, Apple, Amazon, and eBay. 

The eBay homepage in 1999 (Source: Web Design Museum)

As the Internet evolved, it hit mass adoption with billions of daily users around the world. After the rise of e-commerce, social media networks exploded as people found new ways to connect with each other over the Internet. Technological advancements helped with the rise of video streaming, which became core to social media products. Successful companies of this era, known to crypto enthusiasts as Web2, include Meta (formerly Facebook), Twitter, and Netflix. 

Meta’s Silicon Valley headquarters (Source: The Verge)

Web3 is the next phase of the Internet’s lifespan. It refers to an alternative version of the Internet in which applications will run on decentralised blockchains. This will in turn give rise to an entire economy powered by tokens. 

If Web3 proves to be a success, it could provide many benefits over Web2. The Internet of today is dominated by a handful of powerful companies like Google and Facebook, Big Tech titans that have huge influence over the Internet—and therefore its users—because of the data it has at its disposal. 

Web3 is currently underpinned by the Ethereum blockchain and its associated DeFi and NFT ecosystems, plus a handful of other smart contract blockchain networks. However, the possibilities of what it could enable are much greater than we can conceive today. When the Internet started to gain popularity, few foresaw that it would usher in world-changing innovations like social media. It’s likely that Web3 will bring many similar surprises. And as Web3 creates a new economy, tokens will be at its core. 

How the future of Web3 could look 🔮

While it’s difficult to predict how the future of Web3 will pan out, the current landscape gives an early hint of how it could evolve. 

Today, “Web3” is typically used to refer to a host of decentralised applications catering to the decentralised finance and NFT subsects of the token ecosystem. At the centre of this ecosystem is Ethereum, which serves as the main hub for DeFi and NFTs, but several other networks have also gained adoption by embracing Web3. There are already hundreds of decentralised applications running on Ethereum and other similar smart contract networks, it’s likely that there will be thousands in the future. 

If DeFi succeeds in its mission, it’s likely that the space will remain a core part of Web3 in the future, potentially disrupting the traditional finance system. The DeFi ecosystem currently holds $45 billion in total value locked, while the global equities market capitalisation is over $100 trillion. That leaves room for potential growth. 

Bored Ape #9592 (Source: Bored Ape Yacht Club)

In 2021, the explosion of mainstream interest in NFTs proved that token collectors have an appetite for fun in the form of digital collectibles. While the first NFT boom was characterised by the rise of digital art collections and “avatar” sets like Bored Ape Yacht Club, NFTs could take the form of digital fashion accessories, in-game items, and other assets in the future. As much as DeFi remains the biggest crypto niche, it’s become clear that NFTs will be ubiquitous in Web3 in the future. 

Web3 and NFTs are often discussed interchangeably with “the Metaverse” as they enable ways to trade tokens and own scarce digital assets within virtual worlds. Though the Metaverse is still only loosely defined today, its close relationship with tokens means that it should become a key part of Web3. Some have suggested that the Metaverse will reinvent the Internet itself, with global investment banks like JPMorgan and Citi predicting that the Metaverse economy could grow to trillions of dollars in value over the next decade. 

Beyond existing trends like DeFi, NFTs, the Metaverse, and tokenized digital ownership, the future of Web3 is still up in the air. But the rapid developments seen in the space over recent years prove that Web3 could usher in a paradigm shift over the years ahead. 

The Welcome to Web3 Collection 💫

Welcome to Web3 introduces the most important niches in the space today via tokens for the key projects. 

Often described as the base layer to Web3, Ethereum is the nexus of the ecosystem today. Additionally, other networks like Polygon and Solana have flourished by hosting their own DeFi, NFT and gaming ecosystems. All three blockchains feature in our Collection. 

We believe that decentralised finance will continue to play a key role in the growth of Web3, and as such, we gave a nod to DeFi’s most essential projects in our Collection. Uniswap and Aave, two DeFi projects that launched early into Ethereum’s lifetime and have since become ecosystem mainstays, both feature in Welcome to Web3. 

NFTs, gaming, and the Metaverse should also become central to Web3’s development, helping the token economy hit mass adoption by leveraging fun. Welcome to Web3 features some of the key projects in the NFT and Metaverse space, including the play-to-earn NFT gaming hit Axie Infinity. It also features ApeCoin, the token powering Bored Ape Yacht Club’s Otherside Metaverse, and the immersive virtual world Decentraland. 

Other exciting projects featured in Welcome to Web3 include the token ecosystem’s Spotify competitor Audius, and the domain naming service Ethereum Name Service. 

Discover more 👀

While Web3 is still in its infancy and our Collection will evolve as the ecosystem does, there are already a huge number of promising projects to explore. Head to token.com to discover the tokens in our Collection and learn about Web3 for yourself now. 

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Please note: Investing in cryptoassets is risky. Due to the volatile nature of the cryptocurrency market, investors run the risk of losing their funds when they make an investment. Returns from cryptoasset investing are not guaranteed, therefore users should always be aware of the risks.