Web3
Web3, or Web 3.0, also known as the decentralized web, pertains to a new generation of internet technology that incorporates the use of blockchain technologies and decentralized networks. It aims to create an internet where users have control over their own data, identities, and digital assets. In Web3, applications are decentralized, meaning they are not controlled by any single entity or authority. The Ethereum blockchain is a well-known example of a platform that supports Web3 applications.
DeFi
DeFi, short for Decentralized Finance, is a subset of Web3 and represents a shift from traditional, centralized financial systems towards peer-to-peer finance enabled by decentralized technologies built on Ethereum and other blockchains. DeFi applications aim to recreate traditional financial systems, such as loans, insurance, and exchanges, in a decentralized manner, removing the need for intermediaries.
Digital Asset
A digital asset is any text or media that is formatted into a binary source and includes the right to use it. A digital file without the right to use it is not an asset. Digital assets are categorized into images and multimedia, called media assets, and textual content. In the context of blockchain and cryptocurrency, digital assets typically refer to tokens or cryptocurrencies like Bitcoin, Ethereum, or NFTs (Non-Fungible Tokens).
Relationship and Differences
The relationship among these terms lies in their shared basis of blockchain technology and the principles of decentralization. Web3 is the broader concept encompassing the whole decentralized internet, including all sorts of applications, not just financial ones. DeFi is a subset of Web3, focusing specifically on financial applications. Digital assets are things that can be owned and transferred digitally, and their ownership can be governed and tracked using Web3 and DeFi technologies.
The main difference between these terms is their scope. Web3 pertains to the overarching concept of a decentralized internet. DeFi refers to a specific use case of Web3, focusing on financial applications. Digital assets, on the other hand, can exist on both Web2 and Web3, but their characteristics and functionalities can be vastly different. In Web3, digital assets are often decentralized, have their ownership recorded on a blockchain, and can be programmable (like Ethereum’s ERC-20 and ERC-721 tokens), while in Web2, digital assets are usually centralized and controlled by a single entity.