Web3 Architecture Explained: Step-by-Step System Design Guide

Web3 refers to the next generation of the internet where applications run on blockchain networks instead of centralized servers. In Web3, users control their assets, identities, and data through cryptographic wallets rather than relying on a single company or platform.

A common example of Web3 is a decentralized exchange (DEX) where users trade tokens directly from their wallets without depositing funds into a centralized platform. NFT marketplaces, blockchain wallets, and decentralized finance (DeFi) apps are also typical Web3 examples.

For beginners, Web3 can be understood as an internet where you log in using a wallet instead of a username and password, and where digital assets like tokens or NFTs are owned directly by you. Transactions and rules are enforced by code on the blockchain rather than by a central authority.

Web2 platforms store user data on centralized servers and control access, monetization, and rules. Web3 shifts ownership and control to users by using blockchains, smart contracts, and decentralized storage, reducing reliance on intermediaries.

Yes, most real Web3 applications still use a backend for tasks like authentication, indexing blockchain data, notifications, rate limiting, and business logic. However, the backend does not control asset ownership or core protocol rules, which remain on-chain.

No, cryptocurrency is just one part of Web3. Web3 also includes decentralized identity, NFTs, DAOs, blockchain-based gaming, data ownership systems, and trustless financial and governance applications beyond simple payments.

Users typically log in by connecting a crypto wallet and signing a message to prove ownership of their address. This signature replaces traditional passwords and allows identity verification without sharing personal credentials.

Smart contracts are self-executing programs stored on the blockchain that define rules, permissions, and asset movement. They act as the core logic layer of Web3 applications, ensuring transparency and trustless execution.

Most Web3 systems are partially decentralized. While core logic and asset ownership may be on-chain, components like frontends, indexing services, and notifications often rely on centralized infrastructure for performance and usability.

Web3 can be safe, but it requires users to manage private keys and understand basic security practices. Unlike traditional apps, there is usually no password recovery, so users must be careful with wallets, approvals, and signing permissions.