Web3 promises to fix many of the problems that arose in Web2 by granting individual users data ownership and control over digital identity, which in today’s world is controlled by centralized ecosystems.
Web3 refers to a blockchain-based decentralized online environment. Rather than depending on a single, centralized server, Web3 is being developed on top of blockchain networks, which are powered by encryption and allow data to be stored among dispersed devices (also known as “nodes”) all around the world.
And such dispersed devices can be anything from computers to laptops to more powerful servers. These devices serve as the framework for blockchain networks, connecting with one another to allow for the storage, distribution, and preservation of data transactions without the requirement for a reliable third-party validator.
Trust and interoperability
Individual users maintain their own self-sovereign identification and data ownership in Web3 using digital wallets such as MetaMask (compatible with the Ethereum blockchain) or Phantom (compatible with Solana blockchain). These digital wallets function similarly to physical wallets. As a result, a digital wallet acts as confirmation of your Web3 identity, securely storing both your cash and your data.
This wallet is interoperable, which means it can be quickly generated on the internet and interact with a variety of goods and systems, giving the user control over which decentralized apps have access to their data and identity. Furthermore, on the blockchain network, all transactions and interactions are permissionless; they do not require approval of a trusted third-party validator to be accomplished.
Indeed, we are already witnessing this with nonfungible tokens (NFTs). Content producers have recently begun experimenting with ways to get the majority of the cash generated by their work. And much of this may be attributed to the function of smart contracts, which, especially with NFTs, enable secondary royalty arrangements, which means that artists are compensated every time their work is traded on the open market. Creators are earning more than ever before as a result of this fundamental shift in the value chain.
Web3 has developed completely new economic entities — DAOs — to go along with this new value chain. These decentralized autonomous groups play an important role in Web3 interaction. Let’s look at why.
Decentralized Autonomous Organization — DAOs
DAOs are an efficient and secure method to collaborate with like-minded people all around the world.
Consider them to be an internet-native business that its members jointly own and govern. They have built-in treasuries that no one can access without the group’s permission. Proposals and voting control decisions to guarantee that everyone in the company has a voice.
There is no CEO who may sanction expenditure based on their own whims, and there is no risk of a shady CFO tampering with the accounts. Everything is out in the open, and the DAO’s spending restrictions are encoded into its code.
Blockchain assures that the DAO stays true to its mission. This is due to the fact that, like NFTs, DAOs employ smart contracts that can initiate an action when certain specified circumstances are satisfied. In the case of a DAO, for example, a smart contract can ensure that ideas that obtain a particular number of affirmative votes are automatically adopted.
Moreover, unlike traditional organizations that work from the top down, DAOs operate with a flat hierarchical structure, allowing all members — not just the principal stockholders — to have a vote in critical decisions that affect the larger community.
While DAOs have major operational benefits (e.g., transparency, tamper-proofing, and the capacity to swiftly collect and deploy assets), DAOs face additional obstacles. Questions have arisen around how a DAO creates a bank account or contracts with service providers.
In practice, one pain point that DAOs face is negotiating with service providers on their behalf. A service provider can communicate, negotiate, and contract with a DAO more simply under a Council DAO. Firms formed under traditional legal frameworks, on the other hand, must think more carefully about how they will engage with DAOs. Corporations could consider adding extra portions to their Terms of Service that are especially enforceable to DAOs, or developing contract templates for services to DAOs that may be presented and voted on by a DAO, or put into a smart contract.
In today’s world, the ordinary user’s journey with Web3 technologies necessitates a significant amount of study and experimenting. The present lack of user-friendly design in Web3 apps degrades the user experience and results in a high learning curve.
In reality, for most people, such variables represent a considerable barrier to admittance. When we evaluate the time necessary for software code research and development, as well as the present emphasis of developers, we see how far from a priority user experience is.
While Web3 platforms might be challenging to use, this is mainly because they are so new that most developers are currently focused on creating the underlying technology.
During the relatively short history of the underlying technology, blockchains have already experienced numerous serious security breaches. The Wormhole bridge, an interoperability technology that allows users and decentralized apps to exchange assets between blockchains, was implicated in one recent incident. A hacker was able to mint 120,000 ETH (roughly $360 million as of this writing) by abusing a bridge to the Solana blockchain due to a weakness in the way a smart contract function was designed.
If investors are needed to bail out Web3 ventures on a regular basis to the tune of hundreds of millions of dollars, they may be ready to sacrifice a shorter development cycle for fewer exploitation. Even yet, there are still obstacles that intermediate protocols like Wormhole must overcome.
Wider acceptability and bulletproof security is a ‘must have’ for all parties of Web3. There are additional scaling considerations. While some argue that decentralization is inherently inapt for universal adoption, given its slow transaction rate. But that’s a scaling challenge and companies like Avalanche are breaking barriers to bring tps speed of the fiat world to the virtual world.
The future is definitely positive, in such a short span, decentralization has changed our life for good. We know we are in early stages, and we must trust the smart individuals who are actively trying to fix the existing issues. Web3 is going to be omnipresent, have no doubts about it.