What is Web3? An interpretation of the new era of decentralized internet

Recently, from tech giants to blockchain entrepreneurs, everyone is discussing a topic: Web3. But for most people, this concept remains vague. What exactly is Web3? How does it fundamentally differ from the internet we use today? Why is this concept so important? To answer these questions, we need to start with the story of the internet’s evolution itself.

Why discuss Web3 now? Looking at the three stages of internet evolution

The internet is not static. Since 1994, it has gone through three distinctly different development phases, each solving different problems and bringing new challenges. To understand Web3, we must first understand how its two predecessors operated and what flaws they had.

The concept of “Web3” actually has an interesting history. During the dot-com bubble, Tim Berners-Lee, the inventor of the HTTP protocol, initially proposed the idea of “Web 3.0,” referring to an integrated communication framework that enables internet data to cross different applications and systems, making it machine-readable. At that time, it was called the “Semantic Web.” However, this concept was completely redefined in 2014.

Ethereum co-founder Gavin Wood published an article titled “DApp: What is Web3.0,” using this old concept to refer to a completely new thing— a decentralized internet based on blockchain technology. Gavin Wood emphasized that the focus was not on crypto assets themselves, but on foundational protocols like consensus engines and cryptography. He summarized Web3 with a classic statement: “Less trust, more facts.” This idea has become the core value proposition of Web3.

The first stage of the internet: Web1.0’s static network

The Web1.0 era began in 1994 and lasted until 2004. During this period, the internet was mainly static HTML pages, and genuine interaction between users was difficult.

In fact, the origins of the internet can be traced back even earlier. As early as 1968, the U.S. government launched a project called “ARPANET” (Advanced Research Projects Agency Network). This network was operated by small teams of military contractors and university professors, exchanging data among themselves. This was the initial prototype of the internet.

By 1994, the internet was truly open to ordinary users. At that time, web pages were just static HTML files, lacking interactivity. Portal sites like AOL (America Online), private chat rooms, and BBS forums appeared, but overall, the internet’s interactive and payment functions were very limited.

Pizza Hut was one of the most innovative companies of the Web1.0 era. In 1995, they developed an online ordering page where consumers could place orders on the website and pay in cash upon delivery. Although simple, it was a bold innovation at the time. Why couldn’t online payments be implemented? Because there was no secure online payment infrastructure back then. Transfer technology couldn’t guarantee data security and encryption, which became the biggest constraint of Web1.0.

The second stage of the internet: Web2.0’s centralized prosperity

Around 2004, the internet underwent a huge transformation. Network speeds increased, fiber optic infrastructure was laid out, and search engines became more powerful. More importantly, the demand for social interaction, media sharing, and online payments exploded. These needs drove the birth of Web2.0.

During this period, the internet giants we know today emerged. Facebook, MySpace, and Twitter provided social functions; Napster and similar software satisfied users’ demand for music and videos; Google solved the problem of finding vast amounts of information. These platforms shared a common feature: interactivity. Users were no longer passive consumers of static content but could publish, share, comment, and like. The internet became lively and engaging.

At the same time, financial institutions like Bank of America introduced new encryption standards (such as 256-bit AES encryption), making online payments possible. This truly propelled e-commerce. By October 2021, the combined visits to Google, YouTube, Facebook, and Amazon reached 23.56 billion, demonstrating the success of Web2.0.

However, behind this prosperity lies a significant problem: to use these new features, users had to give their data to centralized platforms. Facebook knows your friends, interests, and shopping habits; Google knows every keyword you search. These tech giants hold users’ personal data and have absolute control over content. This model has persisted to today, turning users into monitored and exploited objects rather than true owners of the network.

The rise of Web3: Blockchain reshaping trust

The year 2008 marked a turning point. Satoshi Nakamoto published the Bitcoin white paper, proposing a radical idea: using cryptography and consensus mechanisms to achieve secure digital transactions without relying on trusted intermediaries. In the white paper, Nakamoto wrote: “We need a system based on cryptographic proof, not trust, to establish electronic payments.” This sparked a revolution in the internet.

But what truly brought Web3 into the public eye was the invention of smart contracts. Smart contracts are self-executing code on the blockchain. They can implement logic like “if condition x is met, then automatically execute operation y.” This means that transaction parties no longer need to trust each other or rely on third-party platforms—they only need to trust the code.

Imagine this scenario: in Web2.0, if you want to borrow money, you must go to a bank, where an employee reviews your credit and decides whether to lend. In Web3, a lending smart contract can automatically handle all this, evaluating risk based on your on-chain assets, executing the lending agreement, and even automatically liquidating if necessary. The entire process is transparent and verifiable, with no subjective judgment involved.

In short, Web3 is a decentralized internet. It replicates the infrastructure of Web1.0 (users can control their data and assets) while integrating the rich interactive experience of Web2.0 (social, payments, gaming, etc.). Users can truly own their data, interact directly with others without intermediaries, and all transactions are protected by cryptography. This is a completely different form of the internet.

The technological foundation of Web3: blockchain, smart contracts, and oracles

Web3’s decentralization relies on several core technologies. Understanding these technologies helps explain why Web3 is so powerful.

Blockchain: Decentralized ledger

Blockchain is the foundation of Web3. Imagine a ledger maintained collectively by thousands of computers worldwide—no single company or government can control it. All transaction records are transparent and tamper-proof. On this ledger, various digital assets can be created, issued, and traded, and programmable smart contracts can be deployed. Blockchain is the settlement layer of Web3, ensuring the security and transparency of all transactions.

Smart contracts and decentralized applications (dApps)

Smart contracts are pieces of code that run automatically on the blockchain. Once conditions are met, they execute themselves. Based on smart contracts, developers can create decentralized applications, or dApps. Unlike traditional web apps, dApps are not run by a single company but by the blockchain network itself. Once deployed on-chain, no one can shut them down, delete them, or modify them (unless the smart contract itself is designed with such mechanisms).

Though they appear simple, dApps can build complex automated systems—such as peer-to-peer financial protocols, data-driven insurance products, and play-to-earn games. All of this can be achieved without trusting any intermediary.

Oracles: Connecting blockchain with the real world

Here’s a problem: blockchains are closed systems, and smart contracts cannot directly access off-chain information. For example, an agricultural insurance contract needs to know if the rainfall this season is less than 20 inches, but that data exists outside the blockchain. Oracles are the solution.

Oracles are middleware that collect information from real-world data sources (sensors, APIs, databases, etc.) and securely transmit this data to smart contracts on the blockchain. Chainlink is the most well-known oracle network, providing financial market data for DeFi applications, generating verifiable random numbers for NFTs, and enabling off-chain computation for automation. Oracles extend the capabilities of smart contracts, allowing Web3 to interact with the real world.

Crypto assets and the Web3 economic ecosystem

In Web3, economic activities are conducted through crypto assets. These are digital tokens that leverage blockchain’s decentralization to ensure secure transactions.

Before blockchain, “tokens” usually referred to tickets or certificates—like amusement park tickets or game coins. Holders could use them to access services. In Web3, tokens are fundamentally the same but are entirely different in form. They are digital, programmable, and far more functional than simple value exchanges.

Tokens can represent investments in a project or protocol; they can be used to pay for services; more importantly, holding tokens can give users governance rights. For example, a governance token of a DeFi protocol allows holders to vote on fee structures, new features, and upgrades. This approach makes users true owners of the project, not just consumers.

The changing world of Web3: DeFi, NFTs, and insurance

Web3 is not just a technical concept; it has already begun to be applied in the real world.

Decentralized Finance (DeFi): breaking financial monopoly

DeFi is the most mature application of Web3. Through DeFi protocols, individuals can borrow, lend, trade, and save directly—without banks or intermediaries.

Take lending as an example. Traditional banking involves complex processes: slow approval, high thresholds, and numerous fees. Aave is a decentralized lending protocol that, integrated with Chainlink oracles, safeguards over $12 billion in assets. Users can deposit crypto assets to earn interest or collateralize assets to borrow stablecoins. The entire process is automated, transparent, and trustless.

DeFi’s biggest innovation is “composability.” Developers can combine different protocols to create more complex financial instruments. For example, combining over-collateralized lending protocols with stablecoin protocols to create new financial products. This modular design accelerates innovation significantly.

NFTs and digital art: Verifying digital ownership

NFTs (Non-Fungible Tokens) provide verifiable proof of ownership for digital assets. Two identical digital artworks, if their NFTs differ, are distinct items. It’s like two copies of the same book—each with its own markings and wear—making them distinguishable.

Bored Ape Yacht Club (BAYC) is a star project in the NFT space. Through NFTs, digital artworks gain scarcity and verifiability, leading to soaring prices. More importantly, artists can set royalty terms via smart contracts, earning a percentage of each resale. This changes the business model of digital art.

Meanwhile, blockchain games like Axie Infinity are disrupting traditional gaming. Players own in-game assets, can trade and sell them, and even earn real income through gameplay. Players are no longer just consumers but participants and owners.

Parametric insurance: Automated claims process

Blockchain-based insurance is another exciting application. Projects like Arbol and Etherisc use smart contracts and oracles to offer innovative insurance products.

For example, agricultural insurance. Suppose a region needs over 20 inches of rainfall for a good harvest. Farmers worry about drought and want insurance. In traditional processes, they must submit extensive documents and wait long for approval, with complex verification during claims.

In Web3, Arbol’s on-chain insurance automates this. Premiums and payouts are automatically calculated based on predefined parameters, and claims are paid out automatically if, for example, rainfall data from Chainlink indicates less than 20 inches. The entire process is transparent, fast, and requires no manual intervention.

The future of Web3: From edge to mainstream

Web3 is still in its early stages. But industry insiders are optimistic about its future. Chainlink co-founder Sergey Nazarov recently stated that Web3 applications already cover areas like DeFi, NFTs, and tokenization of ownership, and “this is just the beginning. We are still in the early days of crypto development, and this technology will eventually permeate all aspects of daily life and every industry.”

As more people realize Web3’s value, they will start abandoning unreliable centralized services and turn to trust-minimized Web3 solutions. Companies are also exploring how to leverage Web3 to optimize operations, reduce costs, and increase transparency.

So, what exactly is Web3? In one sentence: Web3 is a new internet ecosystem based on decentralized technologies, where users own their data and assets, transactions are executed automatically via smart contracts, and the entire system is secured through cryptography and consensus mechanisms. It is redefining finance, art, gaming, insurance, and more.

Although Web3 is still in its early phase, it offers what Web2.0 can never provide: complete transparency, verifiability, and cryptographic security. Sergey Nazarov once said, “Web3 will gradually catch up with Web2.0 in speed, efficiency, and cost, but Web3 also has an advantage Web2.0 completely lacks—trust-minimized cryptographic guarantees.” This is where Web3’s true revolution lies.

Some say that the original design intention of the internet was decentralization. Decades later, Web3 is restoring the internet to that initial vision. In this process, users shift from passive consumers to active owners. Perhaps this is the future of the internet.