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Web1, Web2, Web3: What’s the Difference?

February 25, 2022 - 9 min read

The next stage in the Internet’s evolution is notable for its speed, security and transparency in conserving fiscal value on digital mediums.

Web1 web2 web3 what is the difference for blockchains

The term Web 3.0 was first coined by Dr. Gavin Wood in a blog post describing some of the breakthroughs that a decentralized internet were to bring about. Given a backdrop of governments and tech giants consistently overstepping the boundaries of privacy and trust which had been given to them, developers sought to replicate the cloud-based, centralized models with fewer privacy risks and more robust resilience against DDoS network attacks. 

Web3 is a collection of protocols which provide the building blocks for decentralized application makers. These building blocks replace traditional web incumbents like HTTP and MySQL, and present new ways of creating web applications. Web3 provides users secure and verifiable guarantees about the information they receive, what information they give away, and personal sovereignty over their economic transactions. By empowering users to act with more autonomy online, single points of failure (SPoF), censorship, and breaches of trust with regards to data can be minimized. 

Readers may be asking what previous versions of the web might be defined as, so a brief history is in order. Web1 was the first generation of the Internet as we know it today, essentially a collection of static HTML pages without much to brag about in terms of user experience. 

Furthermore, payments on Web1 did not take place — since the infrastructure had not yet been developed. In fact, speaking with an operator and reading out one’s credit card information over the phone was common for some time. This first era of the Internet arguably ended in the mid 2000s with the rise of mobile phones and applications.

Thus, social media, search engines, financial transactions, music and video sharing, and mobile applications all serve as representatives of Web2. Fundamentally, Web2 was all about interactivity, file sharing, and financial connections. Moreover, hardware and software improvements continued to get faster and smaller, with user experiences becoming cleaner and more intuitive over time. 

Nevertheless, these experiences are all filtered through Internet Service Providers, funneling users into third-party platforms which collect and store personal data of their users, often selling the data without knowledge or permission from the users themselves until afterwards. The lack of privacy, centralization of data, risk of curation or outright censorship, and missing digital ownership infrastructure therefore inspired developers to work on answers to these problems, leading to the birth of Web3 with the release of Bitcoin’s white paper.

web1 vs web2 vs web3 in blockchain
Web3 is distinct in that users interact with dApps through digital wallets, which function as their unique identifiers and access to digital assets on blockchain networks.

Instead of relying on trusted third parties to secure our personal data and financial assets, Web3 is distinguished by its conservation of financial scarcity via cryptography, personal sovereignty over one’s data, and the elimination of single points of failure through decentralized and distributed networks. 

Since digital scarcity can now be preserved and verified on blockchains, robust and complex financial interactions now take place online, increasing global liquidity and opening up possibilities for new forms of economic activity and cooperation. Ultimately, Web3 makes the Internet more similar to the real world in that users are not funneled into data siloes or at risk of censorship from gatekeeping behavior. 

Web3 Stack: Blockchains, Crypto Assets, dApps, & Oracles

First, blockchains are secure, decentralized networks with shared financial ledgers which allow people to store and exchange value without the need for third party hosts. Blockchain networks are the foundations of the Web3 stack as they provide secure settlement layers for crypto assets, and decentralized applications (dApps).

Cryptocurrencies serve as the economic incentive systems which govern blockchains and provide accountability amongst their stakeholders. These assets and their ownership rights are cryptographically secure and verifiable on transparent ledgers shared by network participants, providing tamper-proof mediums of exchange and digital value preservation. Other crypto assets can be programmable and may even have utility in using a protocol’s functions (like indexing on The Graph, for instance). 

Stablecoins are also quite useful as crypto assets, since they allow users to swap in and out of more volatile crypto assets without leaving Web3 ecosystems. Non-fungible tokens (NFTs) are fantastic inventions of Web3 as well. Since blockchains, digital assets, and smart contracts are immutable and transparent, they safeguard digital property in such a way that the Internet can arguably protect and transmit value better than anything we have experienced before. 

Decentralized applications differ from mobile and desktop applications (apps) that most are already familiar with. Single entities no longer maintain data as a lone task, but are supported by a decentralized infrastructure of network participants, each holding their own copies of their blockchain ledgers and the accompanying histories of activity. 

Though seemingly innocuous, Web3’s trend towards decentralization is fostering the proliferation of automated P2P financial services like decentralized exchanges, NFTs, smart contracts, blockchain gaming, the metaverse, tokenization and financialization of assets, and more.

Despite its optimistic future, there are still challenges to be overcome in harnessing Web3’s full potential. For widespread adoption to occur, blockchains and their dApps need accurate data from external sources of blockchain networks so that blockchains do not remain limited to data stored within their own ledger’s history. Therefore, oracles are needed to connect blockchains to external data, making their security of paramount importance in establishing robust, interoperable Web3 networks.

Web3 Intralayer- digital ownership interoperability
Decentralized oracles remain at the crux of Web3 interoperability and the security of digital assets on, off, and across blockchain networks.

So, oracles fetch and validate financial data for blockchains and DeFi applications, but they can also provide secure off-chain computations like verifiable randomness to enable dynamic NFTs and automated dApps or DAOs. Moreover, SupraOracles is inherently interoperable, meaning our oracle networks will help ensure the compatibility of various blockchains and layer-2 scaling solutions to securely transact, increasing the network effects of them all through their synergies. 

Oracles will serve as both Web2 and Web3 composability backends, serving as the interoperability layers and guardians of data security as it flows back and forth from blockchains and their dApps. In essence, oracles are able to extend cryptographic guarantees to financial arrangements which are not limited to blockchains, dApps, and crypto assets, exponentially increasing the composability and therefore economic potential of Web3.

Web3 Banking, Crypto Exchanges, & Money Markets

With Web3’s model of decentralization and permissionless P2P infrastructure, advocates aim to create a fairer and more transparent Internet. Fundamentally, the technology enables individuals to participate in complex global financial arrangements with unprecedented security, transparency, and equitable access. Web3 dApps which leverage the aforementioned tech stack are already unlocking disruptive use cases in finance, gaming, real estate, insurance, education, healthcare, and much more.

Contrary to the centralized, trusted entities which characterize traditional finance, Web3-powered DeFi protocols leverage distributed networks and data sovereignty to disrupt banking and asset exchanges via trustless, decentralized algorithms. Applications like Metamask and Uniswap allow users to hold crypto assets and swap them in a pure P2P marketplace. Going further, firms like Celsius essentially provide high-interest savings accounts and lending services for crypto assets, offering more attractive rates than even the most generous fiat financial institutions. 

In addition to DeFi exchanges and wallets, lending markets like Aave enable users to access non-custodial lending products. Users deposit crypto-collateral and borrow other crypto assets, like fiat stablecoins, at various interest rates based on the loan-to-value ratio of the borrowers’ collateral. Rather than banks holding only a fraction of the capital being lent out, Web3 lending products typically require users to be overcollateralized before taking out loans.  

Crypto loans might not seem like technology ‘for the people,’ but healthy, collateralized money markets encourage investment and proper allocation of resources as the money must be repaid in order to avoid crushing losses compared with taking a hit to one’s credit rating. P2P money markets like Aave incentivize dormant assets to be made liquid, and offer more equitable access to capital, particularly for those outside of traditional loan underwriting guidelines.

Web3 Gaming & Non-Fungible Tokens

While Fintech products and services are the most obvious use cases, Web3 extends beyond DeFi and lending protocols. From gaming to privacy-Internet browsers to the minting and trading of NFTs, Web3 is finding its way into nearly every aspect of online experiences and interactions. 

First of all, play-to-earn games like Axie Infinity are leading a massive change in the way crypto assets are viewed by the gaming community. Players mint their own characters as NFTs and ‘train’ them to increase their abilities throughout the game.

These NFT characters can then be sold on secondary markets to new players wishing to experience the game at advanced levels without putting in the time to train their own in-game character. Thus, an entire economy was born within a gaming community, with some players making enough income from the game to support themselves financially, particularly in lower cost-of-living areas.  

NFTs are essentially unique items which can be verified on blockchains. They could be as simple as digital art with a unique identifier, like Bored Ape Yacht Club NFTs, but may also grant their owners interesting privileges like access to live events. Their immutability and ownership rights on blockchains allow them to have provable rarity, perhaps even more robust than that found in the physical world.

BAYC bored ape yacht club NFTs
The Bored Ape Yacht Club collection is a favorite among the rich and famous, costing quite a lot of Ethereum to join the crew.

By minting unique tokens on the blockchain, one crypto asset can be differentiated from another the same way an authentic Apple iPhone can be distinguished from a cheap counterfeit by manufacturers. With NFTs, this verification can be conducted, recorded, and maintained easily, even if ownership is transferred thousands of times. The applications for such authentication purposes should be obvious for brands which are commonly counterfeited. 

The implications for artists and creative types could not be greater. In fact, the innovation of non-fungible tokens may kindle a sort of renaissance as they can now effectively monetize their content so well. Major players in the video game industry are likewise making plans to embrace crypto assets like NFTs. Microsoft announced plans to acquire gaming giant Activision Blizzard, no doubt betting that NFTs and the metaverse will trend upwards for the foreseeable future.

Is it Web3 FOMO Time?

Web3 is already transforming how users interact online, from how we invest and exchange value to the games we play, to our artistic and creative expressions on social media or whatever comes next. We are witnessing the implementation of cryptographic guarantees into mainstream consciousness and industrial operations which provides an accountability layer to the Internet.  

Increasingly more users and institutions across the world are seeking the power of Web3’s trustless, immutable, and verifiable financial agreements; yet, most people still don’t know what a blockchain is. This should be inspiring to know how early on the Web3 timeline we still remain, but on the other hand, most people don’t need to fully comprehend it nor will we. 

Just as with the underlying technologies at the foundations of Web1 and Web2, the next generation of the digital realm will increasingly hide most of the complexities beneath stunning and intuitive interfaces. Though Web3 is still in its infancy, history might just look back upon this time period as that when humanity reached an important globalization threshold, and discovered fair and transparent financial markets for the first time.


  1. Fries, T. (2022, 19 Jan.). Microsoft takes $68B step into metaverse as gamers are against NFTs: Why? The Tokenist. 
  2. O’Reilly, T. (2021, 13 Dec.). Why it’s too early to get excited about Web3. O’Reilly Media. 
  3. Wood, G. (2018, 12 Sep.). Why we need Web 3.0. Medium: Gavin Wood. 
  4. Woodbury, R. (2022, 5 Jan.). Most people won’t know Web3 exists. Substack: Digital Native.

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