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What is web3? Meaning explained | Problems | Benefits | Current State

What is web3?

With the increasing popularity of blockchain technology, a new term has been gaining a lot of traction in recent years - "Web3." But what exactly is Web3? In short, Web3 is the next generation of the internet, one that is powered by decentralized technologies. In this blog post, we'll take a closer look at what Web3 is, the problems it is addressing, and the solutions it is offering.

In 2014, Ethereum co-founder Gavin Wood first used the term web3 for a decentralized web that is built on blockchain technologies. Web3 is a term used to describe the ‘third (or next) generation of world wide web i.e. the internet’ with decentralization, privacy, ownership, security, etc. at its core and powering new use cases like the Metaverse, NFTs, token economics and DAOs (Decentralized Autonomous Organizations) to name a few.

‘Web3 is the internet owned by the builders and users, orchestrated with tokens.’ - Packy McCormick

Web3 leverages on the technologies which powered world wide web during web1 (read only web) and web2 in a complimentary way enabling web2 and web3 technologies to coexist for some time in the future before achieving mass adoption and maturity (the state where web2 is currently, as per the product cycle).

web3 meaning explained and web3 evolution

Next Generation of the Internet

Web3 is the next generation of the world wide web, one that is powered by decentralized technologies. Unlike the current version of the internet (Web2), which runs on centralized servers and is controlled by a handful of large corporations, Web3 will run on decentralized infrastructure that is owned and operated by everyone. This new infrastructure will be powered by blockchain technology, which enables secure, trustless transactions between parties without the need for a third-party intermediary.

Here is a short video from Harvard Business Review explaining the evolution of web3, applications, challenges and the future ahead. It says that the internet may become less centralized and more democratic as a result of Web3, but this vision is clouded by a number of questions that are yet to be answered.

What Problems Is Web3 Addressing?

Centralization of power

One of the big problems that Web3 is addressing is the centralization of power on the internet. Currently, a small handful of corporations control most of the world's information and communications. This concentration of power has led to censorship, surveillance, and other abuses of power. With Web3, these companies will no longer have this level of control because the new decentralized infrastructure will be open and accessible to everyone.

Security vulnerabilities and data breaches

In addition, because Web3 will be powered by blockchain technology, it will be much more secure than the current version of the internet. Blockchain-based applications are resistant to hacking and fraud because they are built on a foundation of cryptographic security. This means that your personal data will be much safer on a Web3 platform than it is on a traditional centralized platform like Facebook or Google.

Lack of Ownership

Lastly, another big problem that Web3 is addressing is the lack of ownership that users have over their personal data and user generated content on various social media platforms. On traditional centralized platforms like Facebook, Google and other search engines, users do not own their data; instead, these companies own it and can do whatever they want with it (sell it to advertisers, for example). With Web3, users will finally own their data and have full control over who can access it and how it can be used.

Web3 as Semantic web

Web 3 is sometimes described as the "semantic web" or the "intelligent web". It is a vision of an internet that is more connected and intelligent, where information is better organized and easier to find. One of the main goals of Web 3.0 is to make it easier for computers to understand and process human-generated data.

To do this, Web 3 relies on "triple stores", which are databases that store data in the form of subject-predicate-object triples. For example, one triple might be "John Smith likes tennis". By storing data in this way, it becomes much easier for computers to identify relationships between different pieces of information.

What are the benefits of web3?

Web3 is offering a number of solutions to address the problems mentioned above. First and foremost, by decentralizing power on the internet, it will make censorship and surveillance much more difficult (if not impossible) for governments and corporations to carry out.

Secondly, by building its infrastructure on blockchain technology, Web3 will offer users a much more secure environment for conducting transactions and storing personal data.

Lastly, by giving users ownership over their personal data, Web3 will allow them to control who can access it and how it can be used.

  1. An unparalleled level of ownership over your digital assets can be conferred through Web3. Own the data on even while sharing on your social networks.

  2. In Web3, you can own not just your data but also the platform as a whole through the use of tokens (reference to a DAO), which functions in a manner analogous to that of shares in a corporation.

  3. The issues of identification and privacy are resolved by Web3, which grants you the ability to exercise control over your digital identity via blockchain addressees.

  4. To send money directly within the browser without the need for a trusted third party, Web3 makes use of tokens similar to ETH.

  5. Web 3 will be trustless, which means that participants on the network will be able to communicate with one another directly without having to go through an intermediary that can be trusted.

  6. Web 3.0 will be permissionless, which means that anyone can participate without the need for authorization from a governing body.

  7. Encryption is a crucial component of Web3, and it serves the primary purpose of ensuring that no one other than the intended recipients of data can access it enhancing user security.

  8. The use of AR, VR and MR in Web3 is expected to bring about shift in enriching the online experience like how the personal computers and smartphones did over the last two decades.

What is the current state of web3?

The internet is undergoing a transformation as a result of Web3, which provides people with increased control over their data, content, and most importantly, their cash. And the entire thing is constructed using the blockchain technology. A detailed state of web3 report from Chainalysis can be downloaded from here State of Web3 Report.

A list of all the layers in web3 along with key companies in the space can be seen here at LeewayHertz State of web3. According to a study by Tomasz Tunguz as of Sep 2022, there are 2.5m daily active wallets, about 250 Mil USD flows into L2s each month and developers push around 300k smart contracts to Ethereum every month. The move to Web 3.0 is gaining momentum and is exemplified by Facebook's recent rebranding as Meta.

How to Invest in Web3 Projects?

There are several ways to invest in web3 projects and protocols, including:

  1. Buying cryptocurrency: You can buy cryptocurrencies such as Bitcoin or Ethereum, which are the two most popular and widely-used cryptocurrencies in the web3 ecosystem.

  2. Investing in web3 startups: You can invest in web3 startups that are building decentralized applications (dApps) or other projects on top of blockchain technology.

  3. Participating in Initial Coin Offerings (ICOs) or Initial Exchange Offerings (IEOs): These are crowdfunding campaigns where a new project raises funds by issuing tokens to investors.

  4. Investing in web3 funds or venture capital firms: You can invest in funds or venture capital firms that focus on investing in web3 projects and startups.

  5. Staking: Staking is the process of holding a certain amount of cryptocurrency in a wallet to support the operation of a blockchain network and get rewards in return.

Please note that investing in cryptocurrency and web3 projects can be highly speculative and risky, and it's important to thoroughly research any investment opportunity before putting your money into it.

Limitations of web3

Below listed are some of the limitations of web3 as categorized by Ethereum.Org.

  • Scalability - web3 transactions are slower due to decentralisation. A node must process and broadcast state changes, like as a payment, throughout the network.

  • User Experience - engaging with web3 apps may necessitate additional procedures, software, and training. This may present an obstacle to adoption.

  • Accessibility - Web3 is less accessible to the majority of consumers due to the absence of integration in modern web browsers.

  • Cost - because it's pricey, the majority of successful dapps only publish very modest amounts of their code on the blockchain.


Web3 represents a paradigm shift in how we interact with the internet and a promised future internet. By decentralizing power and giving users ownership over their personal data, it has the potential to create a more open, democratic internet that is free from censorship and surveillance.

If you're interested in learning more about this exciting new development in blockchain technology, be sure to subscribe to Program Strategy HQ and learn the best practices on web3 project and program management.


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1 Comment

Kamal Chodhri
Kamal Chodhri
Oct 22, 2022

Very well explained


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