Web 3.0 — The Decentralized Web and DApps
The next revolution of the internet
1989 — the year in which the first iteration of the World Wide Web (WWW) was developed, Web 1.0.
2004 — the year in which the second iteration of the World Wide Web (WWW) was developed, Web 2.0.
With each iteration came a new innovation, a new redefinition of our understanding of the internet, a new era.
Web 3.0 — A new era emerges…
After the introduction of the blockchain in the early 2000s, new possibilities emerged for the introduction of a new era of the web, hence web 3.0. Before delving into what the future of the internet looks like, let’s explore the evolution of the internet.
Note: don’t know what the blockchain is? Don’t sweat it. Read this article!
Web 1.0 — The Introduction of the Internet
The first generation of the WWW is known as web 1.0. This iteration of the web is also referred to as the ‘read-only web’ Think of web 1.0 as a highly consumer-oriented system, something that differs greatly from our current systems.
This initial version of the internet was targeted towards companies as opposed to specific individuals in regards to content creation. The idea of somebody like me, an individual posting an article on a website made for that wasn’t nearly as widespread as it is now. The number of content consumers far surpassed the number of content viewers.
Web 1.0 was incredibly complicated in the early stages and required professionals to utilize tools for webpage creation. Most pages were made through basic HTML (HyperText Markup Language) skeletons and very little styling.
Web 2.0 – Pivot to Social Media
Web 2.0 completely transformed the way the internet functioned on a fundamental level. This version of the web is often referred to as the ‘read-and-write-only web’ This is the stage that our internet is currently in, a stage in which the average user isn’t just a consumer, but also a creator with a heavy focus on sites with user-generated content. The biggest example of this would be social media platforms that allow for this (just like medium).
This includes creating articles like the one you’re reading now, filming and uploading YouTube videos, and making tik toks 💪. However, posts on social media like Instagram and Facebook or comments on YouTube videos are all ways in which we’re actually modifying the web and are an aspect of the ‘write’ aspect of this iteration. Web 2.0 websites aren’t only made with HTML and have aspects that far surpass basic front-end development through back-end dev, databases, etc.
The Dark Side of Web 2.0
Web 2.0 is intriguing because it’s built upon this idea of content creation — we have the power, right? WRONG
Turns out that web 2.0 is foundationally built in a centralized manner. That means that all of our posts, likes, comments, etc. are regulated by various centralized platforms like Facebook, Medium, Instagram, and YouTube.
These major corporations hold our personal information and data and are the center of this network. This induces various privacy concerns as I’m sure you’ve heard of (especially with Facebook, eek). As we can see, this is a major problem that needs to be solved. However, that’s easier said than done given how much we rely on the current state of the web.
Web 3.0 — Reclaiming Power from Centralized Networks
Web 3.0 completely changes this. It allows for users to reclaim this power from these centralized networks and essentially democratize the web.
The power being held by these large corporations is essentially distributed to everybody on the network. Web 3.0 runs on the blockchain, which means it's decentralized.
This diagram illustrates what it really means to have a decentralized network. Within centralized networks and platforms, we have to hold trust for a single platform or entity, the one in the middle.
Decentralized networks:
- Are trustless: rather than trusting individual centralized ‘middle men’ we’re trusting the blockchain technology itself (an incredibly secure technology)
- Don’t have a single form of failure: centralized networks have a single point of failure in which the entire network is dependent on that single point
An example of a major difference between centralized and decentralized systems to consolidate this idea is current financial services. For example, right now, we rely on banks to store our money. This means that we have to have complete trust in banks to manage our money. However, we can replace a bank with our private key to a cryptocurrency wallet — if you don’t know what that is, check out my article on cryptocurrencies here.
For online money transfers, we use certain services such as Paypal, E-transfer, and Apple Pay. That being said, a decentralized network may work with cryptocurrencies instead. In this situation, we’re not trusting these individual services or ‘middle men’ like we normally would need to do. Instead, we’re sending money directly and placing our trust in the blockchain instead.
The Current Web 3.0 — DApps and DeFi
Currently, web 3.0 is in the early stages. Unfortunately, it hasn’t been implemented in its entirety yet. However, a major search engine known as Brave represents the state of web 3.0 currently.
Decentralized Applications, also referred to as dApps are applications that are built ENTIRELY on the blockchain. They aid in bridging the gaps between web 2.0 and web 3.0. These applications run on a blockchain network, allowing to bring certain aspects of functionality to the current state of web 2.0
Decentralized Finance, also referred to as DeFi is essentially a system of decentralized financial instruments. This includes cryptocurrencies on the blockchain, the ability to trade and lend them, etc. that use smart contracts on the blockchain as opposed to centralized finance, using banks.
The Role of Brave
Brave connects all of these aspects together. Web 3.0 runs on the use of decentralized applications (dApps) and decentralized finance (DeFi).
Brave allows for the built-in functionality of decentralized finance, containing a cryptocurrency wallet that uses the BAT coin. This coin is run on the Ethereum network and follows the ERC-20 fungible token standard. If you don’t know what that is, check out my article on that here.
These coins are then used to power dApps, ultimately allowing for decentralized functionality. It’s true that we haven’t completely achieved web 3.0, and brave still functions like regular browsers and web 2.0 with similar concerns. That being said, it’s a MAJOR step forward into a future based entirely on the decentralized internet.
The Impact of dApps Through Current Applications
AAVE
Decentralized Finance (DeFi) is one of the biggest applications of dApps. By allowing for financial tools to connect cryptocurrencies through systems that closely resemble that of our banks, we’re disrupting this industry through decentralization.
AAVE is a great example of one of these financial tools, bridging the gap between centralized finance, and decentralized finance. Before discussing, let’s discuss current standards for borrowing money.
- Borrowing: borrowing money requires going to the bank, requesting a loan, creating a repayment schedule, providing collateral in case payment isn’t made, etc. — a system based upon trust
- Lending: lending money requires significant trust of repayment from the recipient, or the use of other methods to coerce trust
Think of AAVE as the exact same as this… but with cryptocurrency, and completely trustless. Borrowers can borrow a certain amount of money and pay it back (with interest) if need be, while lenders can make deposits to lend their money in order to accrue interest over time.
Old borrower-lender systems used to be p2p (peer-to-peer) and matched borrowers, to lenders. AAVE works a little bit differently now and is entirely based on smart contracts.
Here’s how it works:
- Lenders deposit their money into a smart contract to accrue and earn interest — smart contracts are incredibly safe since they’re immutable and can’t be changed
- Borrowers deposit their collateral into a separate smart contract that holds onto it, and then they acquire money from a different smart contract (the ones holding lender deposits)
In terms of lending, certain cryptocurrencies can be more profitable. For example, USDT currently has 2.04% interest, a pretty decent amount. ETH however has a 0.02% interest rate… an incredible difference. This is largely due to the stability of USDT and the volatility of ETH.
Borrowers on the other hand have to deal with something known as over-collateralization. Those who want to borrow a certain amount of cryptocurrency have to deposit an asset with a larger value than the borrowed amount to account for growth rates. For example, suppose I deposited $100 in assets as collateral. I might only be able to borrow 80% of that ($80).
- Repayment: Repayment can be done over time and does not have to be done all at once, unlike traditional loans. There’s no defined time period by which loans must be paid off as long as your position is safe. However, interest does accrue.
AAVE creates a system for borrowing and lending that utilizes decentralized features such as the blockchain and smart contracts. This means that borrowers and lenders don’t have to trust an intermediary. Instead, all they have to do is place their trust in this system and the technology behind it, a major innovation within this industry.
Cryptokitties
Cryptokitties utilizes NFTs (Non-Fungible Tokens) to create a decentralized game/marketplace to allow users to make money. The idea of the game is simple: collect and breed digital cats.
All of the assets such as the actual “kitties” built in this game are non-fungible. This means that each individual token has a value that differs from one another. These tokens are built with the ERC-721 technical standard.
The value of the individual NFT is based solely on its demand. Demand can increase due to low supply which in this case refers to high rarity. Other aspects could include a change in the market from new users or other means.
This game incentivizes playing it due to the ability to actually make money from it, and collect rare items.
Cryptokitties as a platform testing this incredible idea of having a digital good be considered “rare”
This game opens the doors to an entire world of collectibles worth large amounts of money. Think of baseball cards or Pokémon cards. They don’t necessarily have material value, but they DO have some sense of monetary value.
This leads to other various crypto marketplaces that utilize this same fundamental concept, such as Rarible.
Rarible
Rarible is an Ethereum-based platform that allows for a user to purchase ownership of digital works/art. This, once again, utilizes NFTs.
This platform itself is a cryptocurrency marketplace. It allows for the buying and selling of various NFTs. The supply of these NFTs can also be monitored to change their value and increase/decrease demand. Digital work/art creators can essentially use this platform to make their OWN collectibles with their OWN incentives to sell.
The marketplace homepage itself opens you up to a bunch of different works of art with a bunch of different digital mediums.
Note: Before any of you skeptics decide to say something about screenshotting NFTs 😔, is owning a fake copy of an incredibly rare baseball card the same as owning the original copy? They’re two incredibly different things and the fake one has no monetary value while they BOTH have no material value. The same concept applies here. Screenshotting NFTs is not the same as actually owning them.
NFTs themselves have incredibly high potential, thus resulting in an incredibly high potential for platforms like rarible, and cryptokitties by extension. The applications of NFTs range from collectables to using them within games as usable items!
Anyways, this isn’t an article about NFTs but to understand the potential of a platform like Rarible, it’s important to at least understand why NFTs could be so big in the future.
The Future…
Web 3.0 and dApps ARE the future. We’ve covered a LOT within this article but the one point I’ve been trying to hone down on is the fact that this is the direction we’re heading in. Be excited about that! Our internet is no longer going to live on these centralized platforms where we no longer have the power.
It’s time to reclaim that power…
Check out my video explaining Decentralized Applications in 2 minutes here:
If you liked this article, please check out my other articles here, or check out my article on the ERC-20 technical standard here.
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