What Is Web3? The Confusing Term, Explained

Who knew the internet gets sequels? If you read about cryptocurrency, NFTs and the metaverse at all, you'll inevitably come across the nebulous term "Web3." A term coined by ethereum's co-founder, Web3 is what crypto enthusiasts call the next phase of the internet.

There are two ways to define Web3. The quick, easy description is a blockchain-integrated internet or an internet where cryptocurrencies and NFTs are built into the platforms you use. The more complicated but more specific way to think about Web3 is an internet owned by users. That's the dream of crypto boosters, who say the integration of blockchain technology will lead to an egalitarian internet.

Here's the argument: The current internet is owned by just a few companies -- Facebook, Amazon and Google chief among them -- which creates e-feudalism, in which internet users toil on the properties owned by a handful of giant corporations. The fix is Web3, which uses decentralized technology to cut out the middleman.

"Take how we pay for things online," ethereum co-founder Gavin Wood said way back in a 2018 blog post. "You are not empowered to make payments per se. In reality, you must contact your financial institution to do it on your behalf. You are not trusted to do something as innocuous as pay your water bill. You are treated like a child appealing to a parent."

Compare that to Web3 payments via cryptocurrency, where money can be sent from one wallet to another by using an open-source protocol rather than a financial institution.

Some go further, envisioning an internet where platforms are decentralized by ownership spread among users. Take Facebook. A hypothetical Web3 version of the social network wouldn't undergo an initial public offering. Instead, it would create a cryptocurrency token and airdrop it to early adopters. People would be rewarded for going viral. Perhaps tokens would be earned based on engagement. Those coins may even double as governance tokens, which could be used to vote on decisions about content moderation or other policy issues.

Since the value of those tokens would depend on the platform's success, every person who holds them would have an incentive to make Facebook as pleasant a place as possible.

When Web3 proponents talk about "decentralization" -- a word vague enough to make your eyes glaze over -- this is essentially what they're referring to: taking an internet controlled by a few companies and spreading that power among users. Yet critics call it a pipe dream that's technically impossible to achieve.

What are Web1 and Web2?
If there's a Web3, there must necessarily be a Web1 and a Web2. Thankfully, these definitions are much easier to wrap your head around.

Web1 is the first iteration of the internet. It's the internet of the 1990s and early 2000s, sometimes called the "read" internet. It refers to static webpages where people could see and (slowly) download information, but do little else. It's the time when the internet was trying to replicate existing media: computerized versions of magazines, newspapers and newsletters. Crucially, the protocols it ran on were open source.

Web2 is the "read/write" internet that kicked off around 2004. "Read/write" refers to option of people to upload information as well as download it. Think about uploading posts and photos to Facebook and publishing videos on YouTube. The shorthand way to think of Web2 is the social media era when the internet evolved from a computerized form of existing media and transformed into its own thing. But that also gave way to the rise of platforms that increasingly dominated the internet.

"We are now at the beginning of the web3 era, which combines the decentralized, community-governed ethos of web1 with the advanced, modern functionality of web2," Chris Dixon, a partner at famed Silicon Valley venture capital firm Andreessen Horowitz, wrote in fall 2021.

Is Web3 related to the metaverse?
Yes. Just like platforms such as Facebook and YouTube were the products of technological advances that enabled data uploading and cloud storage, many believe the metaverse will be the face of blockchain technology. Facebook turning itself into Meta in October signaled its transition from a Web2 company to one whose primary focus is in Web3.

Web2 is the "read/write" internet that kicked off around 2004. "Read/write" refers to option of people to upload information as well as download it. Think about uploading posts and photos to Facebook and publishing videos on YouTube. The shorthand way to think of Web2 is the social media era when the internet evolved from a computerized form of existing media and transformed into its own thing. But that also gave way to the rise of platforms that increasingly dominated the internet.

"We are now at the beginning of the web3 era, which combines the decentralized, community-governed ethos of web1 with the advanced, modern functionality of web2," Chris Dixon, a partner at famed Silicon Valley venture capital firm Andreessen Horowitz, wrote in fall 2021.

Is Web3 related to the metaverse?
Yes. Just like platforms such as Facebook and YouTube were the products of technological advances that enabled data uploading and cloud storage, many believe the metaverse will be the face of blockchain technology. Facebook turning itself into Meta in October signaled its transition from a Web2 company to one whose primary focus is in Web3.