There’s a movement toward a decentralized Internet. It’s called Web3. But there are still lots of questions about what Web3 actually is—how it’s different, and what you’ll find once you log on.
At first, the decentralization at the core of Web3 was a niche topic—for crypto traders, cryptographers, and Web developers. Now, decentralization is everywhere. It’s a full-fledged movement toward a more open, secure Web. A movement that, whether you know it or not, is affecting nearly everything you do online.
Web3 is home to innovations like the metaverse. It’s also absorbing traditional Web 2.0 platforms (like social media, online gaming, and even financial tools) and churning out new, decentralized versions of them.
But before we dive into what lives on Web3, we need to cover how it’s made possible. And that means an intro to Web3-native platforms, referred to as decentralized apps (or DApps).
In this article: An intro to DApps, the core of what’s being built on Web3.
Not yet clear on the basics of Web3? Check out our Web3 primer first.
What are DApps?
DApps are the applications (and websites, or “Web apps”) that make up the decentralized Web. Most Web3 DApps look and feel just like regular websites and apps. On the front-end (the part you see and interact with) you most likely won’t be able to tell the difference between Web 2.0 websites and apps and Web3 DApps. But behind the scenes (on the “back-end”), DApps work in a fundamentally different way.
Web 2.0 sites and apps are hosted on servers that are usually controlled by corporations. (A server is just the computer where a Web 2.0 site’s or app’s code “lives.” You’re accessing this server when you “visit” a site.) We call this model “centralized” because the providers of the app or owners of the hardware have authority over the servers, and thus the service.
To illustrate this, think of a Web 2.0 app like Uber. Uber owns and operates its own servers (or rents them from a Big Tech company like Google or Amazon). This means Uber controls every aspect of their app. They choose which regions to support, which drivers to add, what requirements drivers must meet, what fees should be charged, and more. Uber can even choose to turn its service on or off, or be compelled by a powerful authority—like a national government—to do so.
DApps, for the most part, aren’t hosted on centralized servers, which means there’s no single owner. Their core programs (and potentially even more of their components) live on the blockchain—that is, on a network of independently operated servers. There’s no central authority, and no universal off switch. In Web3, we call these decentralized servers “nodes.” Nodes are the independent servers that make blockchain networks (and all of Web3) possible.
Note that the Web is still in the throes of fully shifting to Web3 technology. While it makes this shift, we live in a hybrid world where some Web3 DApps run partly on Web 2.0 infrastructure, but interact with a program that runs on blockchain and are therefore still considered Web3.
For more info on how blockchain technology and nodes make Web3 possible, check out our intro to blockchain and the technology that’s powering Web3.
Why use DApps?
Once a DApp is launched on a blockchain network, its hosting becomes the shared responsibility of every node in the network. This comes with a few unique advantages.
First, DApps are “permissionless.” Instead of a username and password, your crypto wallet is your passport to access all the DApps on Web3. With Web3 DApps you no longer have to remember individual login credentials (like you do with Web 2.0).
Second, DApps are “resilient.” In the world of computing, resiliency means that there are many backups of something, a safety net in case one version is lost or destroyed. Once a DApp is deployed on a blockchain network, it becomes co-hosted by every node that stores a copy of the blockchain ledger. As long as at least one node is online, that DApp should be accessible. By distributing hosting among a globally decentralized network of nodes, DApps are much more resilient, or reliable, than their centralized (Web 2.0) versions. And much more resilient against single-point-of-failure problems like power outages or network issues.
Third, DApps are resistant to censorship. If a government wanted to restrict the usage of Uber, for example, it could target and cut off Uber’s servers in a specific region. But because DApps are supported by globally distributed nodes, there’s no service provider or central authority that can disable access to the DApp. Once the code for a DApp is deployed to a blockchain network, it can’t be taken offline.
In short, DApps are:
- Easy to access, because crypto wallets are universal to all of Web3
- Secure, because of their resiliency and geo-distribution
- Much harder to restrict, because they have no centralized authority or centralized set of servers
With these advantages in mind, many developers have already begun building their projects as DApps on Web3.
What DApps are being built today?
There are all kinds of DApps. The very first ones were created on the Ethereum network when it launched in 2017, and dealt primarily with decentralized finance (DeFi). These early DApps facilitated the permissionless, censorship-resistant trading of crypto assets in the fledgling crypto market.
Today’s DApps do so much more, serving as a bridge between Web 2.0 and Web3. Below are just a few of the more common uses.
Decentralized finance (DeFi)
DeFi brings the same online financial services you’ve come to expect to the world of Web3. This includes services like banking, trading, investing, borrowing, lending, and more.
The crucial difference between DeFi DApps and traditional, Web 2.0 finance apps is that the Web3 model removes the intermediaries—the entities that usually take a cut from the financial services they provide. By doing so, DeFi aims to reduce overhead costs and make financial services more efficient, accessible, and affordable for users.
A bank is a prime example of a centralized service. When you deposit cash, it’s up to the bank’s internal systems of accounting to update your balance. If there’s an error, there’s only one central authority (the bank) to go to. Then if you were to send the money you deposited from your account to a friend’s account, you’d likely incur a transfer fee, which is set and imposed by the bank. And these services often only work during normal business hours (if you made the payment on a weekend, it likely wouldn’t process until the next business day).
By contrast, the DeFi ecosystem is designed to open financial services markets to the benefits of Web3. With the decentralized security model of blockchain, there’s no need for central authorities.
Here are some examples of things you can do with DeFi DApps that you can’t do with Web 2.0 services:
- Access or trade your assets 24/7, not just during normal market hours
- Transfer funds to anyone with an internet connection and crypto wallet
- Borrow against your crypto assets, or lend them to others to earn interest in the form of crypto rewards
Gaming is another beneficiary of decentralization. Until recently, the video game industry had a straightforward market design: Users buy a game system (or “console”), a game, and then maybe subscriptions or in-game content. Big Tech companies make tons of money by owning all of these value-generating assets, selling them to users over and over again.
Gaming DApps on Web3, however, disrupt this model—they enable users to actually own the content they purchase, and use it however they want. Web3 gaming DApps are typically free and permissionless, just like most everything else on Web3. All you need to do to play is connect your crypto wallet for access.
Once you’ve signed on, you’ll have the opportunity to earn new characters, items, abilities, and more (depending on the game). These in-game assets are “tokenized”—meaning they exist on the blockchain as a crypto token—and can be added directly to your crypto wallet.
Imagine you’ve acquired a powerful sword in a gaming DApp. Since that sword is represented as a token and stored directly in your crypto wallet, you actually own it. It stays with you for every gaming DApp you connect to with that same wallet. As a tokenized asset, you’re also able to list that sword for sale on a decentralized marketplace for crypto assets, opening up a whole new gaming economy that’s been dubbed “play-to-earn (P2E).”
Decentralized gaming DApps enable you to create your own content, own it, and transfer the value between platforms you use. So whether you create your own in-game assets, buy them from someone else, or earn them from gameplay, you own the value and can easily sell it to other users. In this way, P2E gaming presents an opportunity for users to earn crypto rewards for playing decentralized video games. Many people can actually earn a living from P2E gaming on Web3.
Decentralized social media
Most of today’s biggest social media platforms are free: they don’t charge users to sign up and participate. Yet these are also some of the most valuable companies in the world. So where does that money come from? Advertising! Social media companies make money by collecting, storing, and selling our data.
While Web3 social DApps help people connect online with friends and family (just like Web 2.0 social platforms), there’s a major difference: they reverse the flow of value. Web3 DApps reward you with crypto for participating in the network and creating content, rather than taking and monetizing your data.
Social media DApps give users a way to connect with each other that doesn’t require a central authority. They’re permissionless and more resistant to censorship. And they’re usually ad-free—users often support the service by making extremely small crypto payments (known as “microtransactions”) in order to post content. Conversely, users can also earn (via these same microtransactions) when other users interact with their content. (Note that not all social media DApps have this exact money model).
Social media DApps also create new ways for content creators to keep more of the value they create (consider, for example, that YouTube takes 45% of all ad revenue generated by the content creators on its platform). On social media DApps, there’s much less overhead cost and far fewer intermediaries. There’s also a flourishing micro-economy of “tipping,” where users can tip their favorite content creators and thus replace the earnings that before could only come from ads.
Social media DApps mirror the wide variety of Web 2.0 social media apps. Steemit is like a decentralized Reddit, LBRY is like a decentralized YouTube, Entre is like a decentralized LinkedIn, Audius is like a decentralized Soundcloud, and Twetch is like a decentralized Facebook. However, the challenge for all these apps (Web 2.0 or Web3) is the same: participation. The platform only survives if people use it, share, and connect.
Facebook had to dethrone MySpace, and Instagram nearly overthrew Facebook (before it was acquired instead). Now, TikTok is the fastest growing social media platform in history. If Web3 social media DApps are to succeed, they’ll need a lot more users. But if history is any indication, it’s a matter of when, not if.
Decentralizing the Web
Reading about these Web3 DApps, you might have noticed a trend: they’re all inspired by an existing industry that’s dominated by centralization (in this case finance, gaming, and social media). These industries offer a great opportunity for Web3 developers to create decentralized alternatives to their already successful models—and, in doing so, give more value to users rather than to owners.
As Web3 continues to grow and attract more users, an ever-increasing number of DApps will continue to crop up—not unlike the wide variety of apps and websites that occupy Web 2.0 today.