Web3 is the newest buzzword to see an uptick in curiosity in latest months — What does it really imply?

Across the Block from Coinbase Ventures sheds gentle on key tendencies in crypto. Written by Connor Dempsey, Angie Wang & Justin Mart.
Plenty of definitions have been thrown round, however at Coinbase, we typically consider Web3 as a trustless, permissionless, and decentralized web that leverages blockchain expertise.
Web3’s defining characteristic is possession. Whereas the primary iteration of the business web (Web1) was read-only for many customers, and Web2 allowed customers to each learn & write on centralized platforms (Twitter, Fb, YouTube, and many others), Web3 provides customers full possession over their content material, information, and belongings by way of blockchains. It empowers customers to read-write-own.
The place a 3rd celebration like Fb owns your id and information in Web2, your id in Web3 can transfer fluidly between platforms with out your information being captured and monetized by service suppliers. Whereas Web2 apps are centrally managed, tokens in Web3 grant customers the best to assist govern the companies they use, representing a type of possession within the platforms themselves.
With that framing in thoughts, what does the Web3 stack seem like?
The Web3 stack continues to be nascent and fragmented, however with a lot innovation over time, it’s starting to return into focus. What follows shouldn’t be a mutually unique nor utterly exhaustive lay of the land. Relatively, it’s a framework for eager about this panorama because it continues to evolve.
Let’s begin from the underside up.
Protocol Layer
On the backside of the stack, we have now the protocol layer. That is made up of the underlying blockchain structure on prime of which every little thing else will get constructed.
Bitcoin is the granddaddy of all of them, and whereas it doesn’t play a significant position in Web3 in the present day, it pioneered the power for somebody to personal a scarce digital asset via using public-private key cryptography. Following Bitcoin, got here a spread of layer 1 good contract platforms like Ethereum, Solana, Avalanche, Cosmos, and many others, that function the inspiration for lots of the Web3 functions presently in manufacturing.
Bitcoin and Ethereum every have further protocols constructed on prime of them. Bitcoin has networks just like the Lightning Community (for quick and low cost funds) and Stacks (for good contracts), amongst others. To alleviate its capability limitations, a number of layer 2 scaling protocols have been constructed on prime of Ethereum.
With the rise of many layer 1 and layer 2 networks got here the necessity to bridge worth between them. Enter cross-chain bridges that function highways that allow customers transfer worth from one chain to a different (helpful cross-chain dashboards may be discovered right here and right here).
Infrastructure / Class Primitives
The infrastructure layer sits on prime of the protocol layer and consists of interoperable constructing blocks (what we’re calling “class primitives”) which can be extremely dependable at doing a particular activity.
It is a dense and various layer, with initiatives constructing every little thing from good contract auditing software program, information storage, communication protocols, information analytics platforms, DAO governance tooling, id options, monetary primitives, and extra.
For instance, Uniswap allows the swapping of 1 asset for an additional. Arweave allows information to be saved in a decentralized method. ENS domains can function a person’s id on this planet of Web3. A person can’t do a lot with every standalone utility. Nonetheless, when mixed, these class primitives act like lego bricks {that a} Web3 developer can use to assemble an app.
Use Case Layer
Atop the protocol and infrastructure layers sit the use case layer, the place all of it comes collectively.
Take a blockchain primarily based recreation like Axie Infinity, which makes use of Ethereum tokens and NFTs that may be bridged to a low-cost/excessive throughput sidechain referred to as Ronin. Gamers typically use Uniswap to swap ETH for the tokens wanted to play the sport. Equally, decentralized running a blog platform Mirror makes use of the storage protocol Arweave to retailer information. In the meantime, it leverages Ethereum to let publishers receives a commission in crypto, typically by directing tokens to their ENS handle.
You’ll discover that Uniswap seems each in our infrastructure and use case sections. It’s because, whereas at its core Uniswap is just a sequence of good contracts, it additionally gives a frontend that customers can work together with immediately. Put in another way, it concurrently serves as a standalone user-facing app in addition to infrastructure for different Web3 apps like Axie Infinity.
Entry Layer
On the tippy prime of the stack sits the entry layer — functions that function the entry level for all method of Web3 actions.
Need to play Axie Infinity or receives a commission to your content material on Mirror? Very first thing you’ll want is a pockets, which serves as the principle level of entry for many Web3 functions. Fiat onramps like Moonpay, Wyre, or exchanges like Coinbase assist customers commerce their fiat cash for crypto with the intention to get began.
With some crypto in a pockets, customers can head to an aggregator like DappRadar to flick through and hook up with all types of Web3 functions in a single place. Different initiatives like Rabbithole assist customers uncover and learn to use numerous Web3 functions. There are additionally aggregators like Zapper, Zerion, and Debank that assist customers observe all of their actions and belongings throughout numerous apps.
Lastly, we’re near a future through which Web2 platforms the place cryptonative communities already collect, like Reddit and Twitter, function an entry level for Web3. Reddit’s long-awaited crypto initiative will let sure communities tokenize, rewarding customers with tokens and sure NFTs for lively participation. Twitter already boasts an integration with Bitcoin’s Lightning Community to let customers tip others in BTC.
The ever-evolving stack
The protocols, infrastructure, person functions, and entry factors named above make up the nascent, but evolving world of Web3: an web owned by its customers. Past possession, the ability of Web3 lies in its modularity and interoperability. Primarily, because of this there are limitless ways in which the above stack may be mixed to create new and fascinating use instances — a characteristic that we count on will result in a Cambrian explosion of latest, world-changing functions.
Whereas the framework and layers we highlighted will possible keep unchanged, we count on the initiatives and alternatives inside them to evolve dramatically within the coming years.