Web3 is the name given to demarcate a new phase of the internet. This phase includes digitally native assets like bitcoin and enables users to be owners of the protocols and applications they use.
Web3 gives users control over their data, assets, and their identity through the use of blockchain technology. Individuals and organizations can own a piece of an internet based protocol, like Bitcoin and Stacks, and benefit from and participate in its operation.
Web3 Explained
To fully understand the significance of Web3 we need to briefly understand the previous phases of the internet, what we now call Web1 and Web2.
Web1
The first phase of the internet was made possible by the efforts of governments, academic institutions, and corporate enterprises. For most users during this era, the internet was email and “surfing the web”, as in consuming the different forms of content on different websites. Deep participation and ownership was out of the question for the vast majority of users.
Web2
The second phase of the internet was created by corporate enterprises and small tech start-ups. They made it much easier for a broader array of users to participate in and use the web for more than basic communication and passive consumption.
It became much easier to set up a website, publish content, buy and sell goods and services, advertise, and socialize. During this phase, users could participate in a much richer way but they generally could not help run the protocols and applications they were using nor could they own a piece of them.
They could own the public stock of corporations involved in web based services but this is a very indirect way of owning the protocols and applications one uses.
Web3
Bitcoin inaugurated the Web3 era. Anyone could participate as deeply as they wanted in the network such as writing code for the core protocol, mine, run a full node, develop an application, and even own a piece of the network in the form of the native asset, BTC. You didn’t need to buy stock in a public corporation to get financial exposure to the network and you didn’t need to go through a company, academic institution, or government to participate in the network.
Broadly speaking, users were owners and owners were users with no single entity mediating these distinctions.
As a result of the success of the Bitcoin network, technologists and entrepreneurs have been busy applying the Bitcoin paradigm of radically open access to participation and ownership to a wide array of internet based services and applications.
Does Web3 Exclude Bitcoin?
The success of Bitcoin showed that broad ownership and participation in internet based services was possible.
As of November 2024, the total market capitalization of non-bitcoin web3 protocols is over 1 trillion dollars. When you include Bitcoin, the total market capitalization of web3 is 3 trillion dollars.
What Exists in Bitcoin Web3?
Bitcoin is the original Web3 protocol but there are also other protocols and applications built on top of Bitcoin that are part of the greater web3 ecosystem.
DeFi
Decentralized finance brings the paradigm of open access and ownership to financial services. The Stacks network has a vibrant DeFi ecosystem that includes decentralized exchanges, lending protocols, stablecoins, derivatives, and much more.
NFTs & Collectibles
Ordinals brought NFT excitement back to Bitcoin. Communities and applications like marketplaces are forming around Bitcoin based NFTs. Bitcoin users are free to participate in and own the production of these assets.
DAOs
Bitcoin and the Stacks network can both be considered decentralized autonomous organizations. Their operations are conducted in code with no central party dictating the operation of the projects. As Bitcoin Web3 grows we should see more DAOs forming.
Asset Tokenization
Protocols like Stacks, Liquid, RSK, and the Lightning Network allow users to mint all types of assets. Stablecoins, utility tokens, NFTs, traditional securities, etc.
Challenges and Limitations of Web3
Open access and lack of mediation is generally a good thing but has its downsides. Since its open to everyone, even unsavory types, users can find themselves in a situation where they are participating in or owning something that is a scam or not well constructed.
This is a risk that users take on when engaging with Web3 protocols and applications. We encourage everyone to do as much research as they can when interacting in Web3.