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  • Writer's pictureOlivia Meak

What is Web3? Explained in Simple Terms.

Updated: Sep 18, 2022

Web3; to many, this term appeared out of nowhere. After a quick google search, the actual meaning of Web3 can often leave you with more questions than answers. So what exactly is Web3?

Logos of different Web 3.0 brands and companies.
Logos of different Web 3.0 brands and companies. (

Before we explain what Web3 is, it’s crucial to understand its predecessor, Web1 and Web2. Throughout Web1, we were the consumers, limited to only passively viewing internet content. Web2 however, promised to decentralize the internet and turn us, the consumers, into creators.

Web2 gave us the power to create content and customize our online presence. From Wikipedia posts to YouTube videos and even Amazon reviews, Web2 has given creators a platform to generate dynamic content. However, with the rise of Web2 also came the rise of big tech companies and social media.

Quickly, Web2, which was originally supposed to give the power back to consumers and decentralize the internet, became dominated by big companies.

3 of the 4 largest social media apps (Facebook, WhatsApp, and Instagram) are all owned by the company Meta, the fourth social media app being YouTube, which is owned by Google. As Web2 grew, so did the overwhelming presence of big tech companies on the internet.

In 2014, English scientist Gavin Wood introduced the new concept of Web3. With the emergence of Web3, developers and startups are essentially making good on the original promise of Web2. What this means is that if Web2 was designed to decentralize the internet, then Web3 will decentralize practically everything.

So, as we have mentioned earlier, the ultimate goal of Web3 is to decentralize the internet. But, this begs the question, how exactly does this decentralization happen? It’s a simple answer; Blockchains.

Blockchain: The Mother Lode of Web3

We know what you are probably asking yourself now, what are blockchains? Blockchains play a crucial role in cryptocurrency and are essentially the key to making Web3 a truly decentralized version of the internet.

Gavin Wood, commonly referred to as the father of Web3, also helped develop Ethereum, the world's second-largest cryptocurrency, behind Bitcoin.

Both Ethereum and Bitcoin use the same Blockchain technology to

  • prevent money laundering

  • eliminate the need for a bank when transferring money

  • While being protected by algorithms to prevent hackers from accessing your personal information

A Real-Life Example

You may be wondering, how exactly do the blockchains within online cryptocurrencies work? Well, let us present a scenario to make it a little simpler.

Let’s say three friends, Sam, Ted, and Jack are all going out to dinner together. After they’ve enjoyed their meal, their waiter comes over to give them the bill. They decide to make paying the bill simpler; Jack will pay for all three meals.

Sam and Ted were about to pay Jack back in cash, but then Jack insists they send him two Bitcoins each for their meals.

So, Sam sends Jack two Bitcoins, and the detail of this transaction is permanently inscribed in a block. These details include how many Bitcoins Sam originally had, how many he sent to Jack, and how many Bitcoins Sam and Jack both have now.

First, Sam sends Jack two Bitcoins with both his and Jack’s unique wallet addresses. This is sent through a hashing algorithm which essentially just authenticates all the data being sent. All of this data is then encrypted with Sam’s private key to digitally sign off on the transaction.

Every Bitcoin user has two keys - a public key, and a private key. Their public key is an address that everyone in the network knows, kind of like an email address. The private key is an address that only the individual owner knows, kind of like a password.

All of this data is then received through Jack’s public key. Jack then will use his private key to unlock his cryptocurrency.

This same process will occur when Ted sends Jack two Bitcoins, and this process occurs nearly 2.58 times every second; that’s how frequently people are using Bitcoin for everyday transactions now.

Both Sam and Ted’s transactions with Jack are now connected to blockchains; these blockchains then turn into public distributed ledgers.

Other Use-Cases of Blockchain

The same blockchain technology that is used in cryptocurrency is the key to making Web3 decentralized. In Web3, data lives on a blockchain instead of a central server. Meaning that, if blockchains in crypto can decentralize money transfers by eliminating the need for banks and protecting these transfers through thoroughly coded algorithms, the same is done in Web3.

The Decentralized Autonomous Organization (DAO) is another Web3 concept where rules are written in code and formalized with a smart contract. DAOs are governed by individuals and are entirely free from a centralized authority, furthering Web3’s goal of decentralizing the web.

All of these concepts come together to form Web3. After knowing the history and basics of Web3, you may be wondering how you can invest in it? Or maybe you’re still kicking yourself for not investing in Bitcoin soon enough, and you see this as your redemption. Either way, there are several ways you can invest in Web3 beginning TODAY.

The Future

Many companies, big and small, are beginning to prepare for this new phase of the internet. Microsoft recently invested in ConsenSys, a company started by one of Ethereum's co-founders. Investing in this stock or even buying stocks from companies working on Web3 is a great first step in beginning your investment in Web3.

Microsoft and startups are not the only ones realizing the fast success of Web3. Many funds are beginning to invest in companies that are developing new technologies for Web3. So, investing in these funds is another way to invest in Web3 while still allowing you to learn more about Web3.

Of course, before investing in Web3, it’s vital to know what it is exactly that you are investing in. It is important to remember that all Web3 startups have unique features that can make them more or less attractive to invest in. By fully understanding the goals of these startups, you can make a better decision about which one you want to be involved with.

Today, we are living through the transition from Web2 to Web3. Web3 allows us to all be connected from different parts of the world while simultaneously working on a decentralized network. In the coming years, we can expect many more developments in the field. Let’s wait and watch!


NFA: Not Financial Advice. IYOPS or the author(s)/editor(s) are not registered investment advisors or brokers/dealers. All investment opinions expressed are from the personal research and experience of the author/editor and are intended as educational material. Despite our best efforts to make the information available as accurate as possible, occasionally, we err, as humans do.

DYOR: Do Your Own Research before making any investment decisions based on your personal circumstances. We recommend taking professional advice before making any investment decision.


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Olivia Meak is a content writer at the International Youths Organization for Peace and Sustainability. She's also a first-year BA, Political Science and Government student at the University of Washington.

Inputs and edits by Aswin Raghav R.


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