Web3 Explained: Understanding the Internet of the Future to Stay on the Cutting Edge

Today’s internet is falling behind. Although apps like Instagram and Youtube seem to grant users easy access to data, you still get the short end of the stick. In the current web2 internet, you don’t control your own data, and that data is power. However, the internet has been undergoing a renaissance shift from the traditional web2 we all know to a more distributed, innovative web3.

But what exactly is web3? And how are protocols (see below) helping to build and drive this new era of the internet? Let's dive into the core ideas of web3, explore the protocols building this innovative ecosystem, and see how they are shaping a decentralized future.

Web3 is the Future of the Internet

Web3 is the next evolution of the internet, where decentralization and cutting-edge technologies redefine how we interact online. From distributed infrastructure, consensus mechanisms, and governance, decentralization is a core component of web3. It’s a stark contrast to the model of web2, which places control in the hands of increasingly fewer tech giants and authority figures. Web3 empowers people by giving them control over their interactions and creations online, eliminating the need for a central authority in the process. In turn, this gives users ownership of their own data.

In revolutionizing people’s relationship with the internet, web3 embodies both a technological and perspective shift. Web3 changes how we think about the internet, data ownership, and digital interactions. Behind much of the innovation are protocols, which are distributed network-based technologies fueled by decentralized participation. Many protocols are responsible for contributions driving web3 forward, like  Arbitrum, Chainlink, Ethereum, The Graph and Uniswap, to name a few. They enable the creation of a more equitable, transparent, and user-driven internet where power is distributed rather than centralized.

The Building Blocks of Web3

Let’s now explore the core infrastructure and key technologies that power web3 and drive the decentralized internet forward.

• Blockchain technology is a shared, unchangeable (often synonymously referred to as immutable) digital ledger that securely records transactions and tracks assets. Blockchains are the backbone of web3 and enable decentralized public data storage, ensuring transparency across a network.
• Decentralized applications, or dapps, are programs that run on blockchain networks, enabling peer-to-peer interactions without central authorities pulling the strings. They use smart contracts to update and maintain data, ensuring transparency and user control. They are key to the web3 ecosystem, powering decentralized finance (DeFi), gaming, and more. Some examples include PancakeSwap, SushiSwap, QuickSwap, ENS, and Decentraland.
• Smart contracts are programs stored on a blockchain, which automatically enforce and execute actions when predefined conditions are met. Unlike traditional contracts, they don’t need intermediaries, reducing the need for trust. These programmable contracts are foundational to dapps, enabling transparent transactions and automated governance. They play a crucial role in driving web3 adoption by ensuring decentralized functionality and security for users.
• Cryptocurrencies are a type of virtual currency. It uses cryptography for security, making them difficult to counterfeit or manipulate. Unlike traditional currencies like the US dollar or Euro, cryptocurrencies operate on decentralized networks based on blockchain technology. Examples include Ethereum and Bitcoin.
• NFTS (non-fungible tokens) are unique digital tokens stored on a blockchain that cannot be duplicated or replaced. They represent ownership or verify the authenticity of digital and real-world items, such as artwork, videos, or gaming assets. Unlike other cryptocurrencies, NFTs are one-of-a-kind and cannot be exchanged on a one-to-one basis (hence, why they are nonfungible).
• DAOs (Decentralized Autonomous Organizations) are organizations that are run by a community. That community shares a common goal, following specific rules enforced on a blockchain. DAOs use smart contracts, ensuring full transparency, and are built on open-source blockchains, allowing anyone to audit their treasuries.
• Protocols are a set of rules that govern how data is transmitted and received across a network, ensuring the seamless movement of data on the web. In web3, they manage vital tasks such as asset exchange, data storage, identity verification, and smart contract execution. They set the foundation for decentralized systems, delivering the security and infrastructure that empowers users and distributes control.

Let’s dive deeper into protocols and the role they play in web3.

Protocols: The Fuel Behind a Web3 Universe

Web3 protocols are revolutionizing the future of data, creating secure, transparent, and innovative digital ecosystems. These protocols power the next generation of blockchain technology, enabling trustless transactions and dapps.

Discover some of the web3 protocols driving the rapid expansion of the decentralized internet and reshaping important industries:

Arbitrum is an advanced blockchain scaling solution for Ethereum. It optimizes transaction speed and reduces gas fees (transaction costs). By improving the scalability and efficiency, it plays a crucial role in enabling web3 adoption and decentralization on the Ethereum network.

Chainlink is a decentralized oracle network that connects blockchain-based smart contracts with real-world data, APIs, and external systems. It acts as a bridge between blockchains and the offchain world, enabling smart contracts to securely access and use data that isn't natively available on the blockchain. It’s a widely relied upon building block for dapps.

Ethereum is a key protocol in the web3 ecosystem, serving as a foundational decentralized blockchain that empowers developers to create and deploy smart contracts and build dapps. These self-executing contracts, with terms embedded directly in code, power dapps on the Ethereum network, eliminating the need for intermediaries. Ethereum's ERC-20 and ERC-721 standards have transformed the creation of cryptocurrencies and NFTs, which are fundamental components of the web3 landscape.

The Graph is a decentralized protocol for indexing and querying blockchain data, enabling developers to efficiently access data from decentralized applications and blockchains without relying on centralized servers. The Graph introduced and popularized subgraphs as the industry standard way web3 accesses data. Subgraphs are open APIs for querying specific blockchain data, facilitating the development of complex dapps. It’s a dynamic and rapidly expanding protocol that empowers developers to build faster and more efficiently in web3.

Uniswap is a decentralized exchange (DEX) protocol initially deployed on the Ethereum blockchain. It allows users to trade cryptocurrencies directly with each other without needing a centralized exchange. It uses a system called an automated market maker (AMM), which relies on pools of funds to make trades happen and set prices based on supply and demand. As a key player in the decentralized finance (DeFi) sector, Uniswap plays an active role in the growth of web3.

Redefining the Future of Web3’s Decentralization

Web3 is securely built on blockchain technology, decentralized networks, and cryptocurrencies to foster direct peer-to-peer connections, cutting out the middleman and handing back control to individuals. By championing decentralization, transparency, and user ownership, web3 allows individuals to take full  control of their data, ensuring that the value generated online is distributed more equitably across the network.

Join the web3 revolution with The Graph ecosystem.

Are you ready to immerse yourself in the world of web3? Start by diving deeper into protocols and see how they can transform your web experience. The future of the internet is decentralized. Learn more about innovations in web3 and stay current on the latest news by subscribing to The Graph Newsletter.

About The Graph

The Graph is the source of data and information for the decentralized internet. As the original decentralized data marketplace that introduced and standardized subgraphs, The Graph has become web3’s method of indexing and accessing blockchain data. Since its launch in 2018, tens of thousands of developers have built subgraphs for dapps across 90+ blockchains - including  Ethereum, Solana, Arbitrum, Optimism, Base, Polygon, Celo, Fantom, Gnosis, and Avalanche.

As demand for data in web3 continues to grow, The Graph enters a New Era with a more expansive vision including new data services and query languages, ensuring the decentralized protocol can serve any use case - now and into the future.

Discover more about how The Graph is shaping the future of decentralized physical infrastructure networks (DePIN) and stay connected with the community. Follow The Graph on X, LinkedIn, Instagram, Facebook, Reddit, Farcaster and Medium. Join the community on The Graph’s Telegram, join technical discussions on The Graph’s Discord.

The Graph Foundation oversees The Graph Network. The Graph Foundation is overseen by the Technical Council. Edge & Node, StreamingFast, Semiotic Labs, Messari, GraphOps, Pinax and Geo are seven of the many organizations within The Graph ecosystem.