Web3 and Blockchain

Learn what people mean when they say Web3, why it matters, and the role of tokens, the assets of the blockchain.

Many companies are starting to get involved in blockchain (think Youtube, JPMorgan, Square Enix…), so the space will definitely get bigger as more cash flows into the ecosystem. Now would be a great time to get involved, but there’s so many different resources to use, it’s hard to know which ones are the right ones. Some don’t even try paint the whole picture, or at the worst they teach mistaken ideas.
So that’s why I wrote this page, so it could serve as an introductory lesson for anyone who wants to take the first steps into exploring Web3!

What is Web3

In a nutshell, Web3 describes the next stage of internet that is more open, transparent and permissionless and runs on decentralized infrastructure such as blockchains

If web1 was a platform to consume content, and
web2 saw people consuming content created from other people but owned by platforms built by tech giants, then
web3 is a platform for consuming content that is created and owned by other people.

Instead of platforms owned by tech giants, people can use decentralized applications (Dapps) that are available globally.

Why is Web3 important?

Web3 brings significant benefits and opportunities for those who are willing to invest the time.

Benefits

Open - in that they are built from open-source software, by an open and accessible community of developers and executed in full view of the world.
Trustless - in that the network itself allows participants to interact publicly, or privately without a trusted third party
Permissionless - in that anyone, both users and suppliers, can participate without authorisation from a governing body

Opportunities

Financial Tools (payments, fund raising, lending, borrowing,..)
Identity solutions (self-sovereign, decentralized identifiers,..)
More secure voting and governance mechanisms
Efficient resources management (CO2 tracking, smart grid’s,..)
Digital ownership registries (e.g. land, collectibles, NFT’s,..)
Supply chain tracking

Blockchains

The defining infrastructure of Web3 are blockchains.

A blockchain is a linked list of transactions stored on a network of computers. Blockchains are:

Decentralized: Transactions are on a network of computers (nodes).
Immutable: Transactions cannot be changed once committed.
Open: Transactions can be viewed by anyone.

How blockchains work

Each block has:

A list of transactions
A hash (a long string of random characters) for the block
The previous block’s hash (this is how the blocks are linked)

To make transactions, you need to use a crypto wallet. These wallets don’t actually store crypto assets. Instead, they store two keys:

A public key links to an address that lets you send and receive transactions. Think of it as your email address. A private key proves that you own the tokens associated with your public address. Think of it as your email password. Since a private key is hard to remember (it’s a very long string of random numbers), wallets also give you a 12-24 word seed phrase. You shouldn’t share your private key or seed phrase with anyone.

Bob would send Mary bitcoin in 3 steps:

Bob tells his wallet: “I want to send 1 bitcoin from my public address to Mary’s public address.” Bob signs this transaction based on his private key. This signature proves that Bob actually owns 1 bitcoin. Bob’s wallet sends the transaction to nodes on the blockchain. These nodes then verify the transaction using Bob’s signature and public key. A node groups Bob’s transaction with other transactions into a block. It then works with other nodes to add the block to the blockchain.

What is a token?

First let’s define fungible and non-fungible assets

Fungible assets are interchangeable (e.g., the US dollar, bitcoin).
Non-fungible assets are unique (e.g., a piece of art, house deed, drivers license).

A token is a record of ownership of an asset.

Fungible tokens are ones like bitcoin, ether, and atoms (in the cosmos network)
Non-fungible tokens (NFTs) are unique