How Startups Evolve from Web2 to Web3


Evolving into Web3 won’t be optional the way it is today for much longer. Statistics show Web3 is expanding. Over 73 million gamers globally use Web3-based games like Roblox and Fortnite. 23% of millennials in the U.S. collect NFTs.

The market capitalization of Web3 currently stands at $27.5 billion. It’s estimated that by 2030, Web3 will be worth $81.5 billion. Currently, 46% of finance applications leverage Web3 technology.

While the past year has been one of tough awakenings for Web3 builders and enthusiasts, users trust that destruction precedes much-needed advancement.

Market fluctuations aside, the potential of We3 and the underlying technologies is attracting startups to move from Web2 to Web3.

How Web3 Differs From Web2

Web2 is substantially marked by a centralized ecosystem based on a client-server model, fundamentally differing from Web3’s decentralized iteration of the internet. Web2 concentrated control and power in the hands of a few entities, such as Google, Microsoft, and Facebook. Web3 being decentralized, permissionless and trustless, aims to transfer that control back into the hands of users or participants in a given system.

Web3 allows us to dream of a world where Big Tech doesn’t hold the power to decide who participates in a platform and how their data and information are handled and exchanged. “Permissionless” in Web3 points to seamless inter- and intra-platform communication, and “trustless” points to the fact that users don’t need to trust a small group of authorities or a central entity but rather the network infrastructure.

These basic tenets of Web2 and Web3 lay the foundation for understanding how Web3 improves specific aspects of Web2.

How Web3 Improves Web2

Here are a few ways Web3 is significantly moving us closer to the ideal version of the internet, which is free, accessible and decentralized.

Banking the unbanked

Decentralized finance or DeFi offers millions of users a way to exchange assets, earn passive income, borrow money and more without intermediaries taking a cut or holding authority. This is a massive improvement on the traditional finance infrastructure controlled and regulated by a few and expensive for everyone else.

GameFi is still unfurling, where gaming economies are built on cryptocurrencies and non-fungible tokens (NFTs). A play-to-earn model incentivizes gamers’ engagement in the form of real-value assets they truly own.

Related Reading: How DeFi and Web3 Could Shape the Future of Finance

Reimagining organizations

Web3 brings the concept of decentralized autonomous organizations to revolutionize business and community models. DAOs distribute control and power to a user’s collective, allowing them to partake in the decision-making processes and changes within the entity, incentivizing participation through ownership and governance rewards. 

This allows startups to form decentralized entities, attract an interested and invested user base and use the networking effect to maximize reach.

Rerouting data ownership

One thing Web2 got massively wrong is data ownership rights. Big Tech companies hold enormous power and influence lives because they can access sensitive data from millions, if not billions, of users. Unfortunately, there is little we’ve been able to do about it.

Decentralization reroutes data ownership back to users, so they decide whether they keep their data private or public, for how long and under what conditions, ending the tyranny of a few decision-makers with the potential to influence lives significantly for profit.

Better data security

Since data can divert users’ attention to specific aspects and attention is the real currency, data stored in centralized systems is highly valuable, critical and vulnerable to hacks. Often insiders in organizations tip key information to external competitors for personal profit.

Decentralized systems resist such behaviors by design, making security more robust in Web3. Even though Web3 has its security challenges, it reduces the risk of malicious attacks significantly.

Ending censorship

Centralized systems run by a select group with specific ideologies often censor users. A Web2 entity can censor opinions and ideas that don’t suit their preferences. Web3 makes censorship difficult, if not impossible, for everyone. 

A decentralized web makes privacy and control accessible to all participants. It does that in one part by allowing all users to participate actively in a system’s governance by voting mechanisms.

Introducing automation

Smart contracts automate the agreement between multiple stakeholders, executing transactions automatically and irreversibly. They bring down operational costs, eliminate biases and secure transactions.

Projects must carefully audit smart contracts and test them for any vulnerabilities that malicious actors could potentially exploit for theft.

Safeguarding creator rights

Non-fungible tokens or NFTs add the layer of creator economy to Web3, making each digital asset unique in some way to prevent online forgery and safeguard creator rights. Creators in a Web2 world are perpetually worried about their art getting stolen or replicated and aren’t fairly compensated.

For instance, if a creator starts a community on a decentralized site, they can award the first ten subscribers with redeemable NFTs for spending time in the community.

Resolving interoperability issues

Interoperability is a critical feature to facilitate data exchange between Web2 and Web3. Ethereum Virtual Machine or EVM addresses interoperability by facilitating exchanges between blockchains.

Intra-Web3 communication is also important. Since Ethereum is the major player in DeFi and hosts a majority of DApps, compatibility with EVM is all the more critical for interoperability. Blockchains often operate in isolation and need a sidechain to connect with others. Sidechains run independently of the parent chain through a two-way bridge, such as the Gnosis Chain (formerly xDAI).

Related Reading: Why Build in Web3

How Startups Can Evolve from Web2 to Web3

Define a strategy

A blockchain aims to optimize workflows, processes and visibility across trustless and permissionless systems. Companies can utilize Web3 technologies to improve internal processes or enhance customer-facing aspects of the business.

So, before any development begins, a startup needs a strategy that outlines the specific use cases of blockchain technology, for instance, and each use case’s impact on the bottom line. 

  • Security & privacy – Startups must consider privacy and protection requirements to decide if they need a public or a private blockchain. Moreover, Web3 financial products are expected to function as a digital banking system with strong privacy, fail-safes and rigorous testing. Web3 thus requires security by design.
  • Data ownership – Many Web2 products centralize ownership of power and control, which needs a seismic shift to arrive at Web3. How can you distribute ownership and control back to your customers/community?
  • Code access – Web3 sees giving customers full access to your codebase as a best practice. You also can only release smart contracts by fully auditing them, unlike in Web2, where half-baked applications can be tested with a small user group for feedback and iterative development.
  • Community building – Startups looking to move to Web3 must understand that the ecosystem lives and dies with the community. In Web2, organizations work to extract value from their customers, communities and users. In Web3, the focus is on providing as much value as possible through DAOs. When community members believe in your vision and project, they use their tokens to vote and collaborate.
  • Culture shift – There is also a wider conversation about the cultural change Web3 brings to an organization through improved collaboration and transparency. If a Web3 product isn’t open-source, it’s still following the Web2 paradigm. Can you enable innovators to see your codebase, improve it and partake in the community with equal power distribution?

Related Reading: Everything You Need to Know About the Bitcoin Lightning Network

Choose an infrastructure

After those strategic decisions and finalizing a business area to make community-led, decentralized and transparent, choose a platform. Most Web3 applications were previously built on Ethereum, the first smart contract platform. Today, there’s an abundance of options for you to choose from.

Choosing the right infrastructure ensures compatibility with current systems and regulatory requirements. You can choose between public, private and hybrid blockchains. Public blockchains are marked by high transaction volumes, project variety and popularity but are also often expensive and lacking in privacy. Public blockchains are best suited for consumer-focused projects, such as gaming.

Private or permissioned blockchains act as private databases where only select members create and view transactions, nodes and smart contracts. These are best suited for pilot projects and internal applications.

Hybrid blockchains bring the best of both worlds, being relatively inexpensive and providing access to private environments and integrating with public blockchains.

Know the regulations

One of the challenges currently faced by up-and-coming Web3 organizations is navigating the legal space. We suggest you acquaint yourself with regulatory requirements on Web3 organizations and projects before investing in the space.

Related Reading: What You Should Know About Regulations in a Web 3.0 World

How Web2 Giants Entered Web3


Mark Zuckerberg rebranded Facebook to Meta in October of 2021 to reflect the change of gears. Meta’s crypto aspirations were revealed way before in 2019 after a failed project- A Messenger-integrated payment option. Then, the tech giant uncovered its intention to launch a universal stablecoin backed by different fiat currencies.

The plan was to create a global digital payment network through its social media reach of over two billion active users across Facebook, Instagram and WhatsApp. However, Facebook’s tainted reputation in managing user information made regulators suspicious. The stablecoin shut down last February.

Since then, Meta has aimed to be a leader in the metaverse, spending billions of dollars on VR tools and hardware. However, it struggles to transition from Web2 to Web3 and build something true to Web3’s values- decentralization, transparency, trustlessness and permissionlessness.


In September of 2022, Twitter’s head of consumer product marketing, Justin Taylor, announced that users would be able to verify NFTs and display their NFT collection on their Twitter profiles to showcase their status as digital asset owners.

As of this writing, users subscribed to Twitter Blue can select an NFT as their profile picture, and those with verified NFTs see their assets appear in a hexagon. Twitter could make a lot of other changes. Decentralized identity, NFT-based or otherwise, could help advertisers target highly relevant ads while also protecting user autonomy over their data.


In March of 2022, Microsoft announced it would support Astar Network to implement Web3 applications via Astar’s incubation platform by providing various services, mentorship and marketing support to specific startups in the program. 

In the same month, Microsoft also invested in ConsenSys, a Web3 platform headed by the Ethereum co-founder Joseph Lubin. The tech giant also acquired video game company Activision Blizzard for $69 billion to secure its place in the metaverse.

In September of 2022, Microsoft led a $20 million investment in the first decentralized data warehouse, Space and Time, which transforms any central database into a trustless data source connected to smart contracts.

Related Reading: Web3 & Metaverse: Key Challenges

The Web3 world has its challenges. However, startups looking to move into Web3 would be better off starting early, experimenting fiercely, failing forward and landing just in time to gain off Web3’s maturity, as and when that happens.

KiwiTech runs a Web3 Center of Excellence to provide startups with trusted mentorship, access to experts in blockchain technologies, and supportive consultancy. Learn more about it here.

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