Web3, blocksplained

Abstract

‘Web3’ is shorthand for decentralized internet applications built on blockchains. Based on distributed ledger technology, Web3 applications seamlessly encompass value tokenization (the basis of peer-to-peer payments and many other uses) and decentralized management of information, with great emphasis on their aspiration to re-shape the digital economy. To date, Web3 initiatives have been attracting sizeable resources from venture capital firms. Nevertheless, the technological limitations at the basis of decentralized applications prevent a full understanding of the effective potential of Web3. Our work provides an essential overview of the phenomenon, with a focus on the actual incentives it offers to different economic agents as well as to individuals. We pinpoint the key drivers that may contribute to the large-scale establishment of distributed ledger technology as the new paradigm underlying internet applications, and differentiate them from the hype put forward by the crypto-community.