Why Is Web3 Important?

A brief exploration into the benefits of building on top of Blockchains.

TLDR

Because it is Decentralized, Permissionless, and has Internet Native Payments.

What is Web3... and Web1 & Web2?

Web1 was read-only

Data was stored on centralized databases that can only be accessed from a single source "permissioned" webpage.

Web2 was read & write

This is an upgrade from Web1, but data is still stored on centralized databases that can only be read from a single source "permissioned" website, such as Youtube.com or Facebook.com

Web3 is Read, Write & Own.

Blockchains are transparent and can be read by anyone with access to the internet, this means the verifiable history of ownership over tokens and smart contracts can be maintained at all times.

This allows everyone to build applications using the same "database", opening up a world of new possibilities for app developers to build products using the same decentralized database as a source of information.

Here are the 3 main reasons why we are so excited about integrating blockchains into applications.

Decentralization

A Blockchain is nothing more than a decentralized database that is run by many thousands of independent node operators all over the world.

To become a node operator one must "Stake" network native tokens on the network, this allows there to be financial consequences to adding falsified data (Transactions) to the database that goes against the network consensus.

Node Operators earn the gas fees paid when making transactions in return for their computing power.

Permissionless (Censorship Resistance)

Major Blockchains such as Ethereum or Polygon are entirely Permissionless to use, this means any user in the world can read and write data on the Blockchain using wallets and smart contracts.

This differs from a "permissioned" system, for example, AWS. You need to sign up and receive credentials that allow you to use AWS products.

Blockchain data is resistant to censorship as mined blocks of transactions (data successfully added to the Blockchain) are immutable and can never be changed. An exception to this is if consensus changes, meaning 51% of the network agrees that data in a mined block is false.

There is no governing entity that needs to grant you access to use the Blockchain.

Internet Native Payments

Because Blockchains are open and transparent, they are perfect for building secure payment systems. This is usually done using cryptocurrencies, most commonly ERC-20 tokens, such as USDC or DAI.

Cryptocurrencies are smart contracts (code) that run on the Blockchain, these programs record the wallet addresses that own tokens minted from this contract.

Token balances can be read by anyone with access to the internet.

When a wallet sends a token it owns to another wallet, it submits a transaction to the blockchain, to change the balance of the tokens the sender owns to the wallet they are transferring to.

These payment rails are entirely Permissionless, there are no credit card providers like Visa or Mastercard, or payment processors such as Stripe or PayPal.

Another major benefit to Blockchain payments is instant finality payments, once the transaction is successful (usually around 13 seconds for EVM chains) the recipient owns the tokens and can transfer them as they wish.

Credit card transactions can to up to 2 weeks to reach true finality.