What Is Web3 In Crypto, and Why Do We All Need Web5?

Imagine an internet where you truly own your identity, your data, and your digital assets—without relying on tech giants, third-party logins, or endless new tokens. That’s the promise behind Web3 and the even bolder vision of Web5, a concept championed by Jack Dorsey that aims to merge the convenience of Web2 with the radical decentralization of blockchain. As crypto, DeFi, NFTs, and metaverse projects push Web3 forward, Web5 raises the stakes with a focus on sovereignty, privacy, and building on the most decentralized network of all: Bitcoin.

Key Takeaways

• Web3 is an internet concept based on blockchain and cryptocurrencies, aiming at decentralization and giving users back control over their data.

• Web5 is the next stage in internet development, designed to return control of data to users. To achieve this, it uses Bitcoin’s decentralized crypto architecture.

• Web3 focuses on decentralizing applications and financial services, while Web5 focuses on digital identity and privacy. Web3 relies on multiple blockchains and token economies, while Web5 uses only the Bitcoin network and completely excludes tokens.

What Is Web3 Technology?

Web3 is an internet concept built on blockchain technology and cryptocurrencies. Its goal is to make the network more decentralized and give users back control of their data. In the Web3 era, the internet is shifting from a model where data and services are controlled by a small number of large companies (as in Web2) to a distributed network without a single point of control.

Thanks to peer-to-peer (P2P) technologies — especially blockchain — Web3 promises a more secure and resilient infrastructure, free from single points of failure.

How Does Web3 Link With Crypto?

In the context of cryptocurrencies, Web3 is closely tied to blockchain: many Web3 applications run on blockchain platforms (such as Ethereum), and transactions within them are carried out using cryptocurrencies and tokens.

For example, smart contracts — program code on the blockchain — enable the creation of decentralized services without intermediaries. Thus, Web3 is not just a technical update to the internet but a paradigm shift toward distributed data ownership and management.

As the Ethereum community notes, “Web3 puts power in the hands of individuals, not corporations,” giving users the ability to own and manage their own content and assets.

Examples Of Technologies and Projects in Web3

• Decentralized applications (dApps) are applications that run on blockchain and smart contracts without a central server. They cover various areas, from games and social networks to cloud storage. Examples include decentralized social networks, where messages are stored on the blockchain, and crypto games in which in-game items exist as tokens on the blockchain.

• Decentralized finance (DeFi) refers to financial services on the blockchain that operate without banks or intermediaries. In other words, they replicate traditional banking services in a decentralized architecture. Examples include lending and deposit protocols, where you can take out a crypto loan against collateral (for example, MakerDAO allows users to issue the DAI stablecoin against Ethereum collateral), or decentralized exchanges (DEXs such as Uniswap) for swapping tokens without the involvement of centralized exchanges.

• Decentralized autonomous organizations (DAOs) are communities or organizations collectively managed using smart contracts, without a single leader. The rules are embedded in the code, and decisions are made by voting among participants (token holders). For example, MakerDAO is an organization that manages a DeFi platform and the DAI stablecoin, where MKR token holders vote on important protocol decisions.

• NFTs (non-fungible tokens) are unique digital tokens that represent ownership of an object. NFT crypto art has opened up a market for artists and content creators, allowing them to sell their work as a single copy verified on the blockchain. Examples include the Bored Ape Yacht Club, an NFT artwork series where each token corresponds to a unique image, and land plots in The Sandbox metaverse.

• Metaverses and virtual worlds are online spaces integrated with blockchain, where users can own digital real estate and objects through tokens. Examples include the decentralized virtual worlds of Decentraland and The Sandbox, which have their own tokens (MANA, SAND) and NFT assets. These projects embody the idea of Web3, allowing users to own elements of the virtual world (land plots, avatars) and even manage the development of these worlds through communities.

What Is Web5 and Who Is Promoting It?

Web5 is a concept of an ultra-decentralized internet promoted by Twitter co-founder Jack Dorsey and his company Block (formerly Square). The term appeared in June 2022, when Dorsey announced the launch of the Web5 project, developed by his TBD division. The name is tongue-in-cheek: Web5 implies a combination of Web2 and Web3 ideas—merging the convenience of today’s internet with the possibilities of decentralization.

According to the concept, Web5 will be a new platform built on the Bitcoin blockchain, focused on protecting users’ personal data and digital identity.

Dorsey argues that the modern internet lacks a true layer of identity verification: today, our accounts and personal data essentially belong to third-party companies that require registration and passwords. Web5 aims to solve this problem, giving people back the right to own their digital identity and decide with whom and what to share.

Thus, the main idea behind Web5 is to give users complete control over their data and online identity—without intermediaries.

Key Differences Between Web3 and Web5

Decentralized Identity and Data Control

Web5 prioritizes user sovereignty. In this model, each person has a decentralized identifier (DID) and personal data storage linked to it. Users decide what data to share with applications and what to keep private.

In Web3, the emphasis was on decentralizing applications and finance, but the issue of user data storage and unified identity was never fully resolved (often, data is still stored within the application or on distributed file systems such as IPFS).

The Web5 concept is built on an open protocol without external validators or central servers. User data is stored in a distributed network of personal nodes (Decentralized Web Nodes), and applications interact directly with these nodes rather than through centralized APIs.

No Proprietary Tokens or New Cryptocurrencies

Web3 projects typically issue various tokens (governance tokens, NFTs, cryptocurrencies) to incentivize participants and raise funds. In Web5, the focus is on the platform and protocols themselves rather than on the token economy. This approach is meant to avoid speculation and the influence of venture capital, which in Web3 often receives a large share of tokens—and with it, significant power.

Based on the Bitcoin Network

Web5 is built on top of the Bitcoin blockchain, leveraging its reliability and decentralization, since Bitcoin is one of the most decentralized networks and is not controlled by any company.

Today, more users are turning to convenient Bitcoin app solutions that make it easier to manage Bitcoin and other cryptocurrencies without relying on middlemen. One popular option is a lightweight Bitcoin wallet, designed to simplify digital asset management. Every wallet is linked to a unique blockchain address, meaning any transaction can be verified through the public ledger. This blockchain address is key to ensuring both transparency and security. But many people still ask—is a blockchain wallet safe? The answer lies in the decentralized nature of the technology: when private keys are stored securely, a blockchain wallet remains one of the most reliable tools for managing digital assets.

Unlike Web3, where proprietary blockchains (Ethereum, Solana, Polkadot, etc.) with their own tokens are popular, Web5 avoids creating new blockchain platforms and instead uses the existing Bitcoin infrastructure. Interaction between Web5 applications and the blockchain is expected to be minimal—limited to confirming identifiers and transactions, without storing user data on-chain.

How Does Web5 Work?

Imagine a user who loves music and uses various streaming services.

In Web3, their data is scattered: playlists and preferences are tied to each individual application, and the user has to manually recreate their music collections in any new service.

In the Web5 model, the user stores their preferences (lists of favorite songs, favorite artists) in their own decentralized storage (DWN). When registering with a new music app, they simply grant it access to their data—and the service instantly adapts, as if the user had been using it all along. At the same time, the data remains under their control: the user can revoke access or transfer the information to another app at any time.

If we talk about crypto assets, a DWN can also function as a decentralized crypto wallet. The logic is the same.

Predictions and Opinions: When to Expect Web5 and How Realistic It Is

Currently, Web5 is an open project in active development, and no official launch date has been announced. The TBD team regularly publishes code and documentation in the public domain on GitHub. Jack Dorsey has stated that Web5 is one of his company’s top priority projects and that work on it is being taken seriously. The developers emphasize that the project is real and will definitely “come to life”—in contrast to skeptics who see Web5 as nothing more than a marketing ploy.

In addition, part of the crypto community believes that for the platform to succeed, it must be convenient and reliable enough for people and companies to voluntarily switch from familiar Web2/Web3 services to new Web5 dApps. Convincing millions of users to store their own data and use decentralized identifiers is no easy task. There is also the question of compatibility: a huge industry has already been built around Web3, and Web5 will have to compete with or integrate into these existing solutions.

Only time will tell how feasible this is.

Frequently Asked Questions

What’s the Difference Between Web2 and Web3?

Web2 is an internet model based on centralized platforms where user data is controlled by large companies. In contrast, Web3 leverages blockchain to give individuals ownership of their data and assets.

How Does Web3 Work?

Web3 works by replacing centralized systems with decentralized exchanges, DeFi wallets, and smart contracts. These enable peer-to-peer interactions without banks or tech giants. In short, Web3 shifts power from corporations back to individuals through blockchain.

What Technologies Does Web5 Combine?

Web5 combines the decentralized foundation of Bitcoin and blockchain address systems with new protocols for identity and privacy. Unlike Web3, it avoids token-driven models or speculative NFT platforms and instead focuses on secure identity layers and decentralized wallets.