You must have heard the term Web3 extensively used in the context of the next generation of the internet. Web3 redefines how businesses operate and how services are delivered, creating entirely new customer experiences. From gaming to banking and education to retail, Web3 applications are transforming multiple sectors with remarkable capabilities.
While this change is impressive, building Web3 applications by Web3 development companies presents unique challenges along with significant opportunities.
This blog will explore the core challenges and opportunities encountered when creating and adopting Web3 applications.
What is Web3?
To understand what Web3 really is, let’s first understand its evolution from its predecessors:
Web1
Web 1.0 is the first version of the World Wide Web. It was basically a “read-only” internet that included static pages hosted on free web hosting services or ISP-run web servers.
Web2
Web 2.0 consists of worldwide websites fitted with user-generated content. It is the internet we use today. It comprises mobile applications, social media platforms, etc., allowing sharing and interaction with content.
Web3
Web3 is the next generation of the internet that is more secure, open, and way more interactive. Often referred to as the decentralized or semantic web, Web3 facilitates peer-to-peer transactions with enhanced safety and transparency.
The core technologies that support Web3 application development include:
- Blockchain: It is a distributed, decentralized ledger technology (DLT) that records transactions in a secure, immutable manner without any third-party interference.
- Smart contracts: They are software programs that automatically carry out transactions once the preset conditions are fulfilled.
- Decentralized Storage: A storage system where the data is distributed in a decentralized network of nodes, unlike traditional systems that have centralized servers.
- Digital assets and tokens: These are digital entities that hold value, such as cryptocurrencies, NFTs (non-fungible tokens), and more.
- Cryptographic Protocols: Advanced algorithms that secure data, transactions, and communication in blockchain systems.
Opportunities in Building Web3 Applications
Decentralization and User Empowerment
Decentralization is a fundamental characteristic of Web3 applications, allowing users to have greater control over their data. These applications are built on blockchain networks distributed across multiple nodes, enabling users to manage their data without depending on centralized entities.
Web3 applications are particularly beneficial for individuals and organizations seeking independence from traditional platforms. Building Web3 applications opens up opportunities such as creating staking platforms, Decentralized exchanges (DEXs), etc.
Global Accessibility
Web3 applications are designed to be accessible by anyone, allowing users from anywhere in the world to interact with decentralized platforms. This global reach eliminates geographical barriers and enables businesses to expand their offerings to previously inaccessible markets.
For instance, decentralized applications (dApps) function across borders, enabling seamless financial transactions and supporting remittance services. This accessibility is quite beneficial, especially in regions with limited access to traditional banking or services. These user-to-user transactions can be carried out without relying on costly and slow banking infrastructure.
Tokenization and New Business Models
Through Web3 development, physical and digital assets can be tokenized into tradable tokens. This creates new business models, including fractional ownership, microtransactions, and crowdfunding. Additionally, these models allow users to earn rewards, trade assets, and participate in decentralized transactions.
For example, Web3 has introduced the gaming industry to play-to-earn (P2E) models, where players can earn real value through participation. Similarly, decentralized finance (DeFi) is serving the finance sector by offering peer-to-peer financial services. Real estate can be tokenized with Web3, allowing fractional ownership. Thus, Web3 application development presents new, innovative ways to generate income and participate in digital economies.
Sustainable and Transparent Systems
Web3 serves as a fundamental framework for creating systems that are both transparent and sustainable. For instance, in the supply chain industry, Web3 applications can help businesses ensure transparency at every stage of the supply chain. In the government sector, Web3-based applications can enable decentralized and auditable voting systems. It ensures the authenticity and security of the electoral process.
Moreover, with the growing focus on sustainability, Web3 developers are building energy-efficient blockchains with consensus mechanisms like proof-of-stake.
Common Challenges in Building Web3 Applications
Complex Blockchain Development
Building a Web3 application differs significantly from traditional software development and requires extensive knowledge of various technologies, including blockchain protocols, smart contracts, and more. Web3 experts must understand the decentralized architecture of blockchain networks and the cryptographic protocols needed to ensure the application’s immutability. It is recommended that each step of Web3 application development be carried out by professionals who hold the necessary expertise, skills, and in-depth knowledge specific to that area. For instance, QA professionals can perform testing and debugging more effectively given their specialized training.
Security Vulnerabilities
Although decentralized applications are secure, they aren’t yet completely immune to cyberattacks. Security vulnerabilities often emerge due to flaws in smart contract coding, wallet interfaces, or decentralized storage systems. These flaws may give hackers the chance to take advantage of weaknesses, leading to data breaches, illegal transactions, or financial loss. Thus, it is critical to use high-coding practices and conduct rigorous testing to ensure the security of Web3 applications.
Scalability Issues
Scalability is one of the most prevalent issues in Web3 application development. While Web3 developers work to maintain decentralization and security, achieving scalability often becomes difficult. Moreover, mostly used blockchain platforms struggle to efficiently handle a high volume of transactions. It further hampers the transaction fee, speeds, and network congestion. These fees can deter users from interacting with dApps, especially for micro-transactions. Although the scalability is somewhat overcome by Layer-2 protocols (e.g., Polygon) and alternative blockchains (e.g., Solana), they present their own challenges.
Regulatory Compliance
Current government regulations and legal frameworks are often at odds with the decentralized nature of Web3 applications. As a result, governments and regulatory bodies seek to control the use of this technology and develop their regulations for cryptocurrencies, initial coin offerings (ICOs), and decentralized applications (dApps).
To avoid legal issues, developers must remain compliant with anti-money laundering (AML), know-your-customer (KYC) laws, and other important regulations. Web3 developers should collaborate with legal experts to find the right balance between maintaining the decentralized nature of their applications and ensuring compliance with regulations.
Interoperability Challenges
The complexity of Web3 ecosystems makes it difficult for Web3 developers to ensure seamless communication and interoperability between different blockchains. The lack of compatibility often results in siloed ecosystems where decentralized applications (dApps) struggle to integrate with other blockchain networks, limiting their functionality. Cross-chain solutions, such as bridges and interoperable protocols, can help address these challenges to some extent.
Conclusion
To put it concisely, Web3 applications have their own challenges but also present enormous opportunities across various industries. As Web3 continues to reshape industries, high-quality development and overcoming challenges are crucial.
At Webcom Systems, we specialize in building secure, scalable, and custom Web3 applications as per business and industry needs. Our Web3 developers use all the leading technologies and high-standard coding practices to develop applications for both big and small enterprises. Get in touch to learn more about our Web3 development services.
Recommended Read: Web3 Development Cost Explained: A Simple Guide
