Understanding the Relationship Between Blockchain and Web3

Summary

The Internet has evolved from the basic "read-only" Web 1.0 to Web 2.0, a phase defined by active user participation and a social networking focus. In recent years, we're steadily advancing into the next stage of the internet—Web 3.0, or Web3—in the digital asset landscape.

Web3 offers transformative possibilities, enabling true digital ownership, seamless online transactions, and greater control over personal data. The blockchain and cryptocurrency ecosystem has already produced effective products for Web3. For example, users can conduct peer-to-peer payments without intermediaries and collect or own digital assets through crypto wallets. Notably, many blockchain-based projects are decentralized by design, allowing anyone worldwide to freely access and use them.

Introduction

Digital assets are becoming an essential, intrinsic part of Web3—a next-generation internet expected to address major shortcomings of today's Web. These include the concentration of power within a few large social media platforms and the use of personal data without clear user consent. The decentralized, permissionless nature of blockchain is a vital tool for fairly distributing media power, replacing the centralized control of agencies and organizations.

While digital assets provide the native payment infrastructure for Web3, they can also act as programmable tokens with diverse roles across complex digital economies. Blockchain and crypto not only deliver technical infrastructure, but also foster deeper decentralization and community engagement through Decentralized Autonomous Organizations (DAOs). These organizations enable users to participate in governance and decision-making in a democratic and transparent manner.

How Is Web3 Different from Web2?

The Internet's key evolutionary leaps are commonly described as three eras: Web1, Web2, and Web3. Each marks a technological breakthrough and a shift in how users interact with the internet.

In the Web1 era (circa 1990s to early 2000s), users couldn't modify online data or upload their own content to the sites they visited. The internet then was mostly static HTML pages, allowing only one-way, basic experiences—like reading forums or news. Web1 was about viewing content, with minimal interaction and users acting mostly as passive consumers.

Web2 then emerged as a much more dynamic, interactive internet, where users could actively participate by creating and sharing content. Platforms like Facebook, YouTube, and Twitter enabled users to both consume and produce content. However, because these interactions were largely enabled and controlled by centralized social media platforms, Web2 led to the dominance of tech giants like Google, Facebook, and Amazon.

Today's Web2 ecosystem faces mounting pressure for change as its vulnerabilities and issues become ever more apparent. Users are increasingly concerned about how their personal data is tracked, collected, and used, along with issues of content censorship and free speech.

The concentrated power of tech companies is especially troubling as they leverage their monopoly positions to ban, restrict, or remove users and organizations—sometimes without clear justification or transparent processes. Web2 companies also routinely use user data to maximize site engagement and target ads for the economic benefit of third parties. These incentives often lead companies to act in their own financial interest, rather than prioritizing users' well-being.

Web3 envisions a better, fairer, and more transparent internet. Its main promises include making online platforms decentralized (not controlled by a single entity), trustless (no need to rely on intermediaries), and permissionless (open participation without approval). Web3 also brings true digital ownership, native payment systems, and censorship resistance as new standards for online products and services.

Blockchain and cryptocurrency are ideally positioned as foundational technologies for Web3 because they are inherently decentralized, letting anyone record on-chain data, secure assets, and create independent, secure digital identities.

How Do Blockchain and Cryptocurrency Match the Core Attributes of Web3?

Decentralization: As discussed, one of Web2's most serious problems is the concentration of power and data among a few major players. Blockchain and crypto can decentralize Web3 by distributing information and power broadly to users. Web3 can leverage public distributed ledgers powered by blockchain to ensure much greater transparency and decentralization than traditional systems.

Permissionless: Blockchain-based projects and apps can replace proprietary, closed systems with open-source code accessible to all. The permissionless nature of decentralized applications (dApps) enables anyone, regardless of location or status, to access and interact with them—no approval or restrictive conditions required.

Trustless: Blockchain and crypto remove the need to trust any third-party intermediaries such as banks, payment companies, or single organizations. Web3 users can transact directly without relying on centralized entities, trusting only the blockchain network and its transparent, pre-programmed rules. This reduces fraud risk and strengthens trust in the system.

Payment Infrastructure: Cryptocurrency serves as the efficient native digital payment backbone for Web3. Digital assets can vastly improve the cumbersome, slow, and expensive payment infrastructure of Web2 because they're borderless, operate 24/7, and don't require costly intermediaries. This cuts transaction costs and speeds up payments.

Ownership: Crypto enables powerful tools like wallets, allowing users to independently manage and safeguard their funds without banks or centralized exchanges. Users can easily connect wallets to dApps to invest, lend, shop, play games, or showcase and trade digital collectibles such as NFTs. More importantly, anyone can independently verify ownership of these assets using blockchain's transparent public ledger.

Censorship Resistance: Blockchain networks are built for strong censorship resistance—meaning no party, not even governments or powerful organizations, can unilaterally alter, delete, or falsify records of confirmed transactions. Once data is added to a blockchain like Ethereum and validated by the network, it's virtually immutable. This protects free speech and information from arbitrary censorship by governments, corporations, or other actors.

Are Blockchain and Cryptocurrency Essential for Web3?

Web3 isn't limited to blockchain or crypto—it can also incorporate other advanced technologies unrelated to these fields. For example, Augmented Reality (AR), Virtual Reality (VR), the Internet of Things (IoT), and the metaverse may be vital to the new era of the internet.

While blockchain may play the most critical role as Web3's foundational infrastructure—providing security, transparency, and decentralization—these other technologies and solutions can enrich online experiences and strengthen real-world connections.

Specifically, IoT can connect billions of devices—from smartphones and smart home gadgets to industrial sensors—creating an interactive network of intelligent devices. Meanwhile, AR overlays digital visuals and information onto the real world via cameras or smart glasses, and VR creates entirely computer-generated environments with objects represented as digital assets. Ultimately, scaling and integrating these technologies can deliver a unified, comprehensive Web3 metaverse—a virtual world where people work, play, connect, and create.

Crypto isn't just a digital payment platform—it can do much more. Utility tokens can unlock a wide range of essential use cases for Web3, including service access, governance voting, rewards, and profit sharing. Non-Fungible Tokens (NFTs) can verify unique identities and asset ownership in the digital world, all without compromising user control or data privacy.

How Will Web3 Combine with Cryptocurrency and Blockchain?

Blockchain could become one of Web3's most important core foundations—but interestingly, end users may not even realize or care about its presence. If blockchain-based apps are user-friendly, with intuitive interfaces, people won't have to think about the complex technical infrastructure—just as we never worried about data servers or internet protocols when using social media in the Web2 era.

NFTs let users display and flaunt unique digital collectibles to others in the community, supporting unique, personalized digital identities in Web3. NFTs aren't just collectibles—they can represent real-world asset ownership, event tickets, educational certificates, or power core processes in online games such as item, character, and virtual land ownership.

Blockchain and crypto can dramatically reshape how Web3 users organize, coordinate, and carry out collective actions through Decentralized Autonomous Organizations (DAOs). DAOs empower people to self-organize around shared interests and goals without a central authority or top-down leadership. Instead, governance token holders vote democratically to decide the organization's direction, strategy, and actions. All activities, transactions, and voting outcomes are publicly recorded on the blockchain for anyone to audit. As a result, DAOs have great potential to make Web3 more decentralized, transparent, and genuinely community-driven.

Conclusion

Web3 has enormous potential to solve the core structural problems of the modern internet and significantly reduce the monopoly power of big tech. Yet it must be recognized that much of this is still an aspirational vision rather than a complete, tangible reality. We're still in the early stages of the Web3 revolution, with considerable technological, regulatory, and user adoption challenges ahead.

Still, these foundational technologies—especially blockchain and crypto—are likely to underpin the next era of Web development and evolution. Experts and researchers often cite blockchain and crypto as among the most promising technologies for unlocking the Web3 revolution, as they're designed from the ground up to enable decentralized, permissionless, and trustless interactions.

Importantly, blockchain and digital assets don't compete with or replace other core Web3 technologies such as AR, VR, or IoT. Instead, they can complement and reinforce each other to build a more complete ecosystem. In short, when intelligently and harmoniously integrated, these technologies can deliver the most powerful solutions—creating a truly comprehensive and effective Web3.

FAQ

What are the core differences between Blockchain and Web3?

Blockchain is the foundational technology for data storage, while Web3 is the application ecosystem built upon it. Blockchain acts as the backend, and Web3 is the user-facing interface and application layer.

How does Blockchain technology support Web3 development?

Blockchain provides a decentralized, secure, and transparent platform for Web3. It enables secure digital transactions, removes intermediaries, and creates new digital economic models. This technology forms the basis for sustainable Web3 applications.

Why does Web3 need Blockchain? What is their relationship?

Web3 requires Blockchain for data transparency, immutability, and user privacy protection. Blockchain supplies a decentralized distributed ledger, enabling reliable data exchange across different platforms.

What role does Blockchain play in Web3?

Blockchain is the fundamental backbone of Web3, building decentralized networks, securing data, and allowing users to control their assets via automated smart contracts.

What are the practical purposes of Web3 in Blockchain?

Blockchain in Web3 enables decentralized, secure, and transparent transactions without intermediaries. It enhances user privacy, reduces costs by eliminating brokers, and enables direct value sharing between parties.

What other technologies does Web3 rely on besides Blockchain?

Web3 depends on layer 2 technologies like Optimism, Arbitrum, smart contracts, oracles such as Chainlink for off-chain data, and distributed consensus protocols.

What is the development outlook for Blockchain and Web3?

Blockchain and Web3 have strong growth potential, driven by rising adoption in decentralized finance and new applications for data security. Innovation continues to advance sustainably.