Web3 refers to a "decentralized web", and typically encompasses both DApps (decentralized applications) and DeFi (decentralized finance) including assets, tokens, or cryptocurrencies.

But web3 involves a lot more than just the latest way of managing finance or coding. It is a brand new philosophy when it comes to how the web is managed and how users are able to access it. In web3 we will no longer depend on centralized, monolithic authorities such as Wall Street, Big Tech, and governments.

A decentralized network involves a code that powers the application and is spread across multiple servers (hundreds). And the "severe" in these cases could be a "black box" stationed at a "server farm", or the computer that you are using right now.

In a decentralized network, an individual user can offer their device or machine to become part of this network (and in certain cases even be rewarded for their efforts).

Blockchain will often go hand-in-hand with DApps, and this follows a very similar philosophy. The blockchain is similar to the database or is also sometimes called a "distributed ledger", since every new entry will be added on top of a row (below it), in a chain that possibly never ends.

Similar to traditional databases, the blockchain may contain records such as financial transactions. But unlike a traditional database, in the blockchains, the ledger will have no host or centralized authority. It can also exist simultaneously across thousands of servers and computers, and be shared and used by everyone in the decentralized, large group.

Essentially, it is a publicly accessible, open, distributed ledger used to record transactions that occur between two different parties. Blockchain does require that all the history in that ledger will be consistent with all the other computers in that chain. This is of particular importance when it comes to verifying transactions such as trading crypto assets.

In a blockchain, if one of the parties wants to sell Bitcoin to another party, ownership of that seller has to align with information in an identical ledger that is hosted on several (usually thousands) other computers. This is the reason why it is far more resilient to the hazards of hacking.

Blockchain is a technology that is the foundation of Bitcoin, Ethereum, and many other cryptocurrencies. DApp infrastructure is frequently used for gaming online, cryptocurrency tools, and DeFi lending protocols, but in "theory", any of these applications could run as a type DApp.

Web3 is self-governing and trustless, which means it doesn't require blind faith from some form of central authority to safely manage all your data. By default, web3 is far more secure. It is basically a new type of infrastructure, and the latest way to build things that you are already accustomed to using.

Does Web3 Have Any Shortcomings?

Web3 definitely has a few shortcomings. To begin with, it can be very challenging to understand and this is especially true for newcomers since old analogies (such as your data is like files and your database is like a file cabinet) are no longer applicable. It can also be extremely resource-intensive and use up a lot of energy.

But overall, the advantages outweigh most of the risks and the innovations that are happening daily will likely see the majority of these problems solved.