What is Web3? Understanding user ownership in the era of the value internet

What is Web3? The answer to this question involves a rethinking of the entire internet architecture and power dynamics. Simply put, Web3 represents a new internet experience based on decentralized technologies that shift power from centralized platform companies back to users and participants. This is not just a technological upgrade but a fundamental shift around value creation, ownership, and control.

The Necessity of Web3 in the Context of Internet History

To understand what Web3 is, we need to look back at the evolution of the internet. Each major shift reflects a new understanding of information, power, and value.

Web 1.0: One-Way Information Flow

In the early days of the internet (around 1990), we call this the Web 1.0 era. The internet was a “read-only network”—users mainly received and observed information. Companies created static websites, with content presented in HTML, and individuals rarely produced content. The web was non-interactive; people used it to access information and opportunities but couldn’t communicate or participate directly.

Web 2.0: Participation but Loss of Control

Starting in the early 2000s, the internet entered the Web 2.0 era. The rise of social media, dynamic websites, and self-publishing platforms changed everything. Suddenly, everyone could publish content, interact, and share. Platforms like Facebook, Twitter, YouTube enabled billions to participate online.

It seemed great, but the reality was more complex. While users created content, the platforms owned and controlled it all. Photos uploaded to Facebook, creations on Instagram, followers gained on YouTube—all belonged to the platforms. More critically, your data was collected, analyzed, and monetized. Platforms profited by analyzing your behavior to serve targeted ads, while the actual data value was captured by middlemen.

This is the core issue: in Web 2.0, although users generated value, the power to control the distribution of that value was concentrated in a few tech giants. They could change rules at will, delete content, freeze accounts—users had little recourse.

Web3: Power Returns to Users

What is Web3? It’s a response and redesign of this situation. In Web3, power flows back from platforms to users. Users not only create content but also own their data, assets, and identities. This shift isn’t magic; it’s enabled by blockchain, smart contracts, and decentralized protocols.

The Core of Web3: Decentralized Consensus and User Ownership

Understanding what Web3 is hinges on two core concepts: decentralization and user ownership.

What Does Decentralization Mean?

Traditional internet relies on central nodes—Google’s search servers, Facebook’s databases, Amazon’s cloud services. If these centers fail, the entire system can collapse. More importantly, they hold absolute power—deciding what content is visible, who gets banned, what services are shut down.

Web3 adopts a different architecture. Instead of relying on a single central server, it is composed of many nodes forming a network. Each participant can run a node, verifying transactions and maintaining the ledger. No single entity can arbitrarily change rules or shut down services. This is the power of decentralization.

What Does True User Ownership Mean?

In Web 2.0, a gamer might spend years and thousands of dollars on in-game assets—gear, skins, virtual real estate—but these don’t truly belong to them. The game company can change rules, delete accounts, and all their digital assets can vanish. There have been cases where a platform suddenly changed policies, causing millions of users to lose years of digital assets.

Web3 changes this through NFTs (Non-Fungible Tokens). Every digital asset you buy can be minted as an NFT recorded on the blockchain. This means you truly own it. No company can delete, freeze, or alter its properties. You can even transfer it to another game or platform—cross-platform asset liquidity that’s impossible in Web 2.0.

This isn’t just a technical change; it’s a fundamental shift in ownership relationships.

How Web3 Works: From Tech Stack to Ecosystem

What is Web3? From a technical perspective, it’s a complex system of multiple layers working together.

Underlying Layer: Blockchain and Consensus

Blockchain is the technological foundation of Web3. It’s a shared, immutable ledger maintained by many nodes. But just having a ledger isn’t enough; a consensus mechanism is needed to decide who can add new records.

Bitcoin uses Proof of Work (PoW)—miners compete with computing power to earn the right to record transactions. Ethereum, after its upgrade, uses Proof of Stake (PoS)—participants with more tokens have a higher chance to validate blocks. These mechanisms ensure no single entity can control the network.

Intermediate Layer: Applications and Protocols

Built on blockchain, developers create applications. These are driven by smart contracts—self-executing code that runs automatically without intermediaries. For example, a decentralized exchange (DEX) can match buyers and sellers, execute swaps, and settle trades—all via code, without a company’s intervention.

User Interaction Layer: Wallets and Apps

End users interact with Web3 through wallets. MetaMask, Coinbase Wallet, Trust Wallet are examples. These wallets serve as users’ digital identities and asset managers. Users control their private keys, giving them full financial autonomy—no one can freeze accounts or withhold funds.

Storage and Data Layer

Beyond transactions, Web3 needs to store large amounts of data. IPFS (InterPlanetary File System) offers distributed storage—files aren’t stored on a single server but spread across nodes worldwide. Even if some nodes go offline, data remains accessible. Arweave provides permanent storage, ensuring data uploaded is never lost.

Web3 Ecosystem: From Theory to Real Applications

The best way to understand what Web3 is, is to see how it changes real-world applications.

DeFi: Financial Services Without Banks

Decentralized Finance (DeFi) allows anyone to participate in lending, borrowing, trading, and investing—without banks or intermediaries. For example, someone in Kenya can lend funds to someone in Argentina, with interest and repayment managed automatically. No banks, no remittance fees, no credit checks—just code and market forces.

For the 2 billion unbanked globally, this opens new financial inclusion. For residents in countries with hyperinflation, it offers a new way to protect assets.

NFTs and Creative Economy

NFTs aren’t just digital art. Musicians can sell songs directly as NFTs, keeping 100% of the revenue. Artists can trade works globally without galleries. Designers can create virtual fashion collections, which buyers can use across multiple virtual platforms.

This combination of ownership and liquidity creates new business models. Creators get paid directly. Fans become owners, not just consumers.

GameFi: Play to Earn

In traditional games, you spend time and money on in-game assets that can’t be cashed out—the assets are locked on the game’s servers.

Play-to-Earn blockchain games change this. In games like Axie Infinity, every creature and item is a real NFT that can be traded on open markets. The tokens earned in-game can be converted into real currency. During the pandemic, millions in the Philippines earned their living through playing Axie Infinity.

This is not fantasy; it’s a real example of how Web3 redefines value creation and ownership.

DAOs: Decentralized Autonomous Organizations

DAOs are organizational innovations in Web3. A DAO is governed by code, not people. Decisions are made via voting, with rules encoded in smart contracts that execute automatically.

Imagine a venture capital DAO—token holders vote on funding projects, and smart contracts release funds automatically. No CEO can decide unilaterally. No employees can embezzle assets. Everything is transparent and automated.

Real Challenges Facing Web3

Despite its promising outlook, Web3 also faces significant challenges.

Usability Dilemmas

Current Web3 tools are still complex. Users need to understand private keys, wallets, gas fees, and contract interactions. Transaction costs remain high on some networks, deterring many potential users. For example, in the Philippines, Brazil, or Africa, a single transaction fee can be equivalent to a day’s wages.

Solutions are emerging. Layer 2 scaling solutions (like Ethereum Rollups) significantly reduce costs. Wallet interfaces are becoming more user-friendly. But mass adoption still takes time.

Regulatory Risks

Regulation is a key issue. Governments worry about cryptocurrencies being used for money laundering, terrorism financing, or tax evasion. If a decentralized network’s tokens serve as currency, it threatens traditional monetary policy.

However, it’s not a simple yes-or-no question. China’s digital yuan and Europe’s CBDC research show governments can adopt blockchain tech while maintaining control over money supply. Thoughtful regulation—clear rules, classification, fair enforcement—is essential.

Technical Risks and Complexity

DeFi ecosystems are increasingly complex. Interacting protocols can have vulnerabilities; bugs can cause cascading failures. Token incentives may lead to speculation bubbles harming ordinary users. Technical flaws can result in lost funds.

This isn’t unique to Web3—traditional finance also has risks. But in Web3, transparency allows anyone to audit code, making vulnerabilities more visible and potentially easier to fix.

The Legal, Policy, and Technological Dialogue

What Web3 is ultimately depends on how legal and policy frameworks shape its development.

Code as Law

Currently, cybersecurity relies on manual enforcement—audits, compliance checks, security personnel. Web3 introduces a new paradigm: rules written into smart contracts that are automatically enforced by code.

For example, governments could encode anti-money laundering rules into smart contracts. Once deployed, the network automatically rejects suspicious transactions. No company can bypass these rules because they are enforced by the protocol itself. This “law as code” can greatly improve compliance efficiency.

Regulation as a Partner, Not an Enemy

A common misconception is that Web3 should be “unregulatable.” But history shows that lack of clear regulation often leads to misuse and stricter bans. Constructive regulation—clear rules, proper classification, fair enforcement—can accelerate mainstream adoption.

Regulations like Europe’s MiCA or U.S. state-level digital asset laws are attempts to create such frameworks.

The Future of Business in the Web3 Era

The ultimate question about what Web3 is: how will it change business?

Democratization of the Creator Economy

In Web 2.0, creators depend on platforms—YouTube, Spotify, Instagram—controlling distribution, algorithms, and revenue. Web3 enables direct connection between creators and fans. Musicians can sell songs as NFTs directly. Writers can tokenize their work and build financial communities.

New Business Models

Traditional internet monetization relies heavily on advertising. In Web3, models diversify—subscriptions, tokenized services, community ownership. An app might issue tokens to early users, who then benefit from the platform’s growth. This “users as investors” model creates new incentives.

Cross-Platform Ecosystems

When assets truly belong to users, they can be used across platforms. Assets earned in a game can be traded or used in virtual worlds or marketplaces. This interoperability breaks down platform silos, creating a unified digital economy.

Looking Ahead: From Concept to Reality

There’s no fixed answer to what Web3 is, as it’s still evolving. But some principles are clear: user control over data, true ownership of assets, distributed rather than centralized power, transparency instead of black boxes.

Achieving these principles requires technological innovation, supportive policies, and user adoption. We are still in early stages, with challenges ahead. But compared to the early days of the internet, we now have clearer technical pathways, broader applications, and deeper theoretical understanding.

The simplest way to understand what Web3 is: it upgrades the internet from “read-write” to “read-write-and-own.” In Web 2.0, you create content but don’t own it. In Web3, ownership remains with the creator from start to finish. This simple yet profound shift is reshaping the future of the digital economy.