What is Web 3.0, and Why Is It Important?

The global web is a relatively young but highly impactful technology that, in all senses, has transformed the way we interact today. When Tim Berners-Lee designed the primary concept for his new development, he described the internet as a “collaborative medium, a place where we could all meet and read and write.”

The earliest generation of the internet is now referred to as Web 1.0. In 1989, the web was a relatively niche place few people knew about, and was primarily used for consuming content formatted in HTML. 

But things evolved quickly, and after the launch of the first search engines in 1994, the landscape and the entire model of the web began to change. By the early 2000s, the new era of Web 2.0 began, which is the current form of the Internet ecosystem that we all use. Rapidly, the internet became a platform, which through the years turned into an enormous marketplace.

How did that happen? With the introduction of the cloud, social networks, and mobile, a significant shift has occurred: users are now just as active in producing content as they are in consuming it. User-created content and subsequent profile information have become valuable data assets of particular interest to third-party companies, who have started monetizing this acquired information. 

While it may not seem evident to the average user, version 2 of the global web has had many issues and challenges that require improvement. The primary issue of Web 2.0 is that this giant marketplace is mostly dominated by companies like Facebook, Amazon, and Google. 

This business model involves data centralization, where users have little control over their own information assets, whether it’s their personal data, intellectual property, finances, or other types of data. A natural step in the evolution of the Internet is Web 3.0, which aims to decentralize data possessions and make them globally accessible. 

What is Web 3.0?

Web 3.0 is the newest internet generation, also referred to as the ‘Semantic Web.’ The concept of it is not entirely new and was a part of Tim Berners-Lee’s initial plan of making the internet a ‘global brain,’ where all data would be processed and interpreted correctly using AI and algorithms. The original concept also included free, decentralized access to sharing data that would not be supervised by a third-party authority. 

Currently, the Web 3.0 paradigm shift relies on switching to open, trustless, and permissionless networks. Let’s explore the meaning of each description.

Open networks are developed and executed through open-source software by a certain community of developers, enabling transparency and network decentralization. 

Trustless means that users can share data publicly or privately, but most importantly — securely — without the participation of third parties. 

Permissionless, finally, means that information producers and consumers can participate in the data exchange process without the required permission of the governing body. 

While Web 3.0 has not hit the mainstream yet, the technology that enables it is already there. The completely new landscape of Web 3.0 is primarily built with the help of blockchain technology. 

How Web 3.0 will solve issues of data privacy

Ultimately, the core purpose of Web 3.0 is to decentralize control over data, give more access, and enable data privacy by giving users control over their own information. While the current generation of the internet mostly relies on the cloud and mobile, the new generation is dependent on decentralized data networks, AI, and blockchain

How exactly will Web 3.0 prevent data exploitation from happening and finally resolve the issue of data privacy? In decentralized networks, producers of information or network developers (whether it is your personal, business, enterprise, healthcare, or other types of data) can trade and exchange data without losing ownership. Retaining possession of one’s information means that it is protected and tied to its owner without reliance on third parties. 

Decentralized protocols are enabled by blockchain technology, where every data unit created is secured, meaning web 3.0 enables a user-centric, privacy-protecting environment that will be completely different from the global web’s current landscape.

How does Web 3.0 relate to DeFi and NFTs?

Blockchain enables the infrastructure for secure and independent data exchange. To help validate and distribute some types of data through blockchain, tokens are used. Of course, tokens also have a wide role in the distribution of transaction fees, allocation of governance rights, and incentives for miners and validators 

Tokens that are used to enable data exchange have gained significant attention due to the explosion of DeFi (decentralized finance). So how exactly are DeFi, NFTs, and Web 3.0 intertwined? 

Web 3.0 is an ecosystem to share, exchange, and safeguard digital assets, whether they are fungible or non-fungible. Fungible tokens are digitized data assets that can be sold or exchanged, whether they are security tokens, assigned values, transaction network processing, or cryptocurrency. Non-fungible tokens are basically information units that hold validation proof of information authenticity; these can include health records, identity documents, or other types of data that are non-transferable. This year, NFTs have risen to prominence as a way to prove ownership of digital art, music, and other pop culture artifacts, exchanged for huge sums by digital collectors and crypto enthusiasts. It must not be forgotten, however, that beneath the hype is a way to securely track the exchange of any asset, which is extremely powerful. 

NFTs and DeFi are intertwined at the heart of Web 3.0. The decentralized structure of Web 3.0 democratizes data possession, and this is no exception in relation to finance. DeFi enables the decentralization of finance infrastructure through blockchain, which provides the necessary architecture to hold and transfer non-fungible tokens.

The DeFi market is rapidly growing, introducing financial innovation products like derivatives and base assets, enabling digital value creation and presenting different value drivers for the new environment. Since January 2021, the total DeFi and dApps market value has increased by 326%, reaching $73.9 billion.

This means that DeFi has become an evolving area with high earning potential. Overall, we can say that as a supportive background layer for fractional networks, the Web 3.0 ecosystem enables the growth of both DeFi and NFTs, and vice versa; however, we also must note that despite the continual improvement, there remain many challenges that are currently obstructing global access to decentralized finance, such as the volatility of cryptocurrencies, lack of regulation, and instances of hacking.

How does DeFi on Web 3.0 create more opportunities for profit?

A business model based on decentralized ownership holds the immense potential of commercializing digital assets and creating a global transactional ecosystem that has never been witnessed before. 

Particularly, increased interest and Web 3.0 network utility mean more opportunities for generating profit with decentralized finance. The problem is, as mentioned above, DeFi and dApps alone are often not yet mature enough to provide the entirely innovative experience they are supposed to.

Just one key challenge that emerged during DeFi’s fascinating growth is that of notifications. Alerts are an essential part of the traders’ workflow; however, due to the high numbers of assets and wallets, bottlenecks in the stream of notifications created multiple issues for traders, posing a risk to entire DeFi networks.

Thanks to the underlying capabilities of Web 3.0, some providers have been able to develop Ethereum-based protocols for pushing necessary notifications to users, unveiling the full potential of DeFi. Getting alerts on time allows traders to capture more earning opportunities and take advantage of the democratized financial environment.

With the help of blockchain, more supporting protocols and tools are going to penetrate the DeFi sector, making it a more promising place for investors and traders to get higher ROIs. Basically, Web 3.0 capabilities can help create a more connected, interoperable infrastructure for DeFi to fully evolve and capture limitless earning potential. 

When will the widespread adoption of Web 3.0 happen?

Ultimately, Web 3.0 is a promising concept that is going to take network control and data ownership from large, consolidated players and enable an open-source, community-based economy model. It is, at least in theory, best placed to resolve the majority of current internet issues, such as data privacy, accessibility, reliability, and transparency.

While there is a lot of potential in Web 3.0 and the blockchain technology that serves as its’ backbone, it still requires a lot of testing before widespread adoption. Many companies and particularly cryptocurrency businesses are becoming increasingly interested in developing the infrastructure; therefore, more improvements are already being made to tackle latency and accessibility issues. 

As adoption and interest in particular networks rises, whether it’s in DeFi or other sectors, more growth will be brought to the global ecosystem, increasing Web 3.0 adoption. The high utility that follows will bring down the current barriers that are holding back decentralized networks from widespread usage. Web 3.0 is still undergoing major upgrades to its layers, but global attention is not so far away. 
In the meantime, the front-runners of the new generation of the internet are likely to benefit from early adoption. It is already possible for those involved in blockchain-driven operations to leverage the potential of these new networks. If you need to enhance your blockchain operations, INC4 has solid expertise in blockchain technology development, whether it’s for dApps, DeFi, wallets, smart contract audits, or any other custom solution.

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