- What exactly is Web 3?
- Web1 vs. Web2 vs. Web3
- The power of Web3
- Intro to Web3 coins
- Web3 wallets
- What else should I know about Web3?
There’s no denying Web3’s popularity. If you want to be a part of building the next generation of the internet, you have to find a way to get involved.
You might find this article helpful if you read our other articles or some blockchain-related courses and wonder what Web3 is.
What exactly is Web 3?
Web3 refers to anything connected to blockchains, cryptocurrencies, NFTs, DeFis, and DAOs. If it’s blockchain-enabled, it’s part of Web3. Gavin Wood, the Ethereum co-founder, came up with the idea.
Web3 is the third iteration of the internet. Let’s look back and see how far we have come.
Web1 vs. Web2 vs. Web3
Websites in web 1 were read-only, meaning they were just books or text pasted onto the internet, and users could not interact with them beyond building their web pages. Everything was in a separate box. Today’s internet is Web 2, the internet of writing rather than just reading. Users can interact with the internet and write rather than read text.
From the Like button to web pages that adjust based on user interactions, social media and mobile phone apps have changed how users interact with the internet.
In Web3, reading and writing have been built upon to create an internet of ownership. This means the blockchain can be used to verify ownership of pieces of the internet. In Web3, tokens, such as cryptocurrencies and NFTs, are crucial ownership mechanisms. It is now possible for anyone to own a piece of a project, community, art piece, or organization. The capabilities of Web3 extend beyond ownership. However, holding digital assets is a fundamental characteristic.
You can remember how the internet changed from one version to another using the simple phrase read-write-own. Web 1 was the internet of reading, Web 2 was the internet of writing, and Web3 is the internet of owning.
The power of Web3
All social media activity, email activity, and shopping activity in a Web3 world are recorded on a blockchain as people move between social media, email, and shopping. It may seem far-fetched to reinvent the entire Internet at this point, but Web3 is sparking new conversations and generating a lot of money, particularly from crypto investors.
On top of the World Wide Web, a robust, stable infrastructure has been developed. However, a small number of centralized entities have a stronghold on a large part of the web, unilaterally determining what can be done.
We can examine Web3’s power to own, be trustless, permissionless, maintain self-control, and resist censorship. A crucial mechanism of Web3 ownership is tokens, including cryptocurrencies and NFTs.
The Ownership Landscape of Web 3
Why do we need Web3? Why is ownership different today than in web 1 and web 2? Blockchain is the key.
A blockchain is a distributed ledger that anyone can access, but you cannot alter an entry made by someone else. Blockchains are similar to spreadsheets, but others cannot change them. Many blockchains exist, including Bitcoin, Ethereum, Solana, Cosmos, and Avalanche.
Each of these blockchains has its own ledger. There is no universal ledger in which everything from every blockchain is recorded. A chain is universally audited every time a new block is created, and a consensus is reached. Each blockchain contains a verifiable ownership ledger within its blocks. A chain is checked over roughly every 9 minutes to 30 seconds, depending on how long a block time it has.
As soon as you buy or claim a digital asset on the blockchain with your wallet, it remains there until you sell it. Every block contains a list of transactions, essentially the list of different owners. As a result, Web3 ownership takes on an entirely new life. No more relying on others to keep ownership records. Now, you can verify ownership without having to trust anyone.
We’ll also define the trustless aspect of Web3 below.
The lack of ownership in web 2 comes from platforms owning everything while creators don’t technically own it. Think of an Instagram influencer. None of the ad revenue from Instagram goes to them because they don’t own the photos on the platform — Instagram does.
In Web3, everyone’s an owner of their own assets because there’s a universally verifiable way to determine who owns each asset on the internet. This has never happened before. Ownership is a critical concept to understand in Web3.
Have you received your unique course completion NFT from us? We reward our learners with NFTs and tokens for completing and going through our courses. Share a link to your NFTs with us here!
Defining trustless and permissionless
Trustless and permissionless are two words that underpin what makes Web3 exciting. Without these concepts, blockchains wouldn’t be what they are today.
When an interaction is trustless, it means you don’t need to trust anyone else in the system for the system to work. For example, when you hold your money in a bank, you rely on the bank to send money to a particular address when you ask it to. That’s a trusted system: you need to charge another actor to get the money sent, and you can’t send it yourself.
In a trustless system, you don’t need an intermediary or third party to do anything for you. You can interact with other parties without requiring a mediator. There’s no bank sitting between you and the friend you’re sending money to, and no Venmo or Paypal. It’s just two wallets that can directly send money to each other, much like exchanging real-life cash.
You may ask, why do I need this?
In many countries, the banking system is corrupt, the money is unstable, and people can’t take their savings with them. For example, Ukrainian refugees could take their savings with them in trustless money—aka cryptocurrency—because they didn’t need to rely on a third party to hold it. If they’d kept it in a Ukrainian bank, they likely wouldn’t have gotten the money out before needing to flee.
Permissionless is the second piece of the puzzle. A permissionless system does not need to grant permission to use it. Unlike a bank account, which you need to share a lot of personal information to open, anyone in the world can use crypto, no matter what. This is liberating for people living under oppressive or totalitarian governments around the globe. Trustless, permissionless money is the root of cryptocurrency and builds the basis for Web3.
Check out Bankless DAO and understand what they are trying to promote with their efforts.
Self-custody in Web 3
One of the most important elements of understanding Web3 is to know what self-custody means. This is a topic we cover at length in our courses on wallets, but it’s critical to understand when learning about Web 3
Self-custody means you are the sole owner of your assets.
You hold everything on your own instead of requiring a bank to hold your money, social media platforms to store your images, publishers to store your articles, investment funds to hold your stocks, or galleries to store your art pieces. There’s no go-between holding anything for you and no one sitting in the center taking their cut every time you want to make a move with your asset. You’re the only one dealing with your digital asset.
That can be incredibly liberating. There’s no real estate agent taking a cut when you sell a house and no bank setting limits on what you can and can’t do with your money. It’s a feeling of pure freedom. But on the other hand, there’s an immense responsibility. If you lose your private key, there’s no helpline to call or “reset password” link to click. There’s no FDIC insurance or government safety net. Everything is up to you.
You have custody of your assets by having a crypto wallet or decentralized wallet. This wallet is open-source code that interacts with the blockchain. Your currency is stored on the blockchain, and your wallet interacts with it for you. You hold a seed phrase, a secret passcode to unlock your wallet in case you lose it. This is a proxy for your private key, a long string of letters and numbers that you typically won’t need to access but should never share with anyone or store online.
The public key, a string of numbers and letters that identifies your wallet, can be shared freely. This is like your phone number or home address: you share it with people. Self-custody is a liberating feeling but comes with great responsibility. Being able to own your assets and truly own them with no middlemen is a huge piece of what makes Web3 unique.
Fun fact of the day: When you sign up for an account on our app, we will create a custodial wallet that links to your account. When you participate in our ambassador program or earn $UUM (our native token), we provide you with a unique link where you can reveal your private keys to your wallet.
The internet is unique because of its abundance. Screenshots, copies/pastes, forks, and duplicates can be made. In contrast to physical goods, everything is open to the commons. Because all resources are available and open on the internet, it is difficult to make money since there is no scarcity. Web 3 introduces digital scarcity. Scarce things cannot be duplicated or forked because they are unique.
Think of a Picasso painting from the Blue Period: that item is scarce because there are only a certain number of Picasso’s from that era, and they can’t be duplicated or replicated. But a digital artist has a different situation. If they make digital art in the web 2 world, it can be infinitely screen-shotted and duplicated. If they want to make money on that print, they need to sell prints or items with the art on them, like on Etsy.
Crypto changes this because of the concept of digital scarcity, which is the ability of items on the internet to be scarce, just like in the physical world. This concept is what led to the explosion of the NFT space. When you mint a one-of-one NFT (meaning you don’t mint multiple copies of it), there is only one single version of that NFT. While it technically can be screen-shotted, there’s only one true owner of the NFT, which is recorded on the blockchain.
Just like you can go to a museum and take a picture of a Picasso Blue Period painting and then use that image to sell prints of the painting online, there’s still only one true owner who makes money when they sell the ownership.
In summary, digital scarcity allows you to own items on the internet.
Previously, in web 2, there were no actual owners of anything on the internet because it was impossible. The unique qualities of the blockchain make internet ownership possible because everything is tagged with a unique piece of code, and the ownership is trustlessly and universally verified on the blockchain.
Crypto is quite unstoppable. No one can shut down a crypto network: it just runs independently.
This is another critical concept in Web3: censorship resistance.
Say the government of North Korea didn’t like that Bitcoin exists because they feel it’s a threat to their currency. They want to find someone to arrest for owning the network or a team of developers to shut down and therefore shut off the whole network. They start digging in and realize it’s impossible to do. Because blockchains are decentralized, they cannot be shut down.
There’s no owner of the network or set of people necessary for the network to continue functioning. This makes cryptocurrencies censorship resistant.
They can’t be sanctioned by governments or “turned off” by someone who doesn’t like them. They’ll keep running on their own forever. This is important because many people live in areas that aren’t very friendly to cryptocurrency. So, their government may think they can shut them down. However, that’s not possible because of decentralization. Think of a grassroots political movement that has spread to many different individuals.
There’s no way to shut that movement down because there’s no centralized provider even to shut it down.
The censorship resistance of crypto makes it appealing to people living with controlling or totalitarian governments. Crypto runs on its own as long as a network of individuals keeps it going. A decentralized network is also more resistant to internet outages or technical problems.
For example, some validators use AWS as their WebHost. If AWS shut down tomorrow, the entire network would not shut down because others would still be there to run it. Censorship resistance, however, can be criticized because governments can still try to censor individuals and punish those who use the network. It’s not a perfect solution, but it’s one major step forward in giving individuals an alternative to restrictive and totalitarian governments.
Intro to Web3 coins
What’s the deal with Bitcoin?
Bitcoin (BTC), often called “digital gold,” is the cryptocurrency that started it all.
The white paper, or the technical documents explaining how it would work, was released in 2008 by someone using the pseudonym Satoshi Nakamoto. The white paper gained traction in cryptography circles since the study of cryptography has existed since at least Roman times. Caesar’s Cipher, an encryption device that could be used to pass secret messages, was one of the first known examples of encryption.
It took a few years to take off, but by the mid-2010s, Bitcoin had become a name that many were familiar with. The concept of a fully trustless, permissionless, internet-native currency without any middlemen taking their cuts along the way started to catch on. Bitcoin uses a Proof of Work model, meaning miners (high-powered computers run by people or businesses) compete to see who can break the algorithm first. Whoever cracks the code mints the next block, which includes all the transactions waiting in the queue. All the validators (more computers run by people) check to ensure there are no malicious transactions. As soon as the block is signed, the race to mint the next block begins again.
Bitcoin is stored on the blockchain, and wallets are used to interact with the blockchain to move the Bitcoin. Every time someone wants to move some BTC, there must be a transaction that goes through the process of getting included in a block. Bitcoin is so enticing for so many people because many live in countries without a stable currency or a reliable banking system or government to hold their funds. They need a different option to secure their funds, and Bitcoin provides that.
Bitcoin also cuts out all the intermediaries taking their cuts.
For example, if you want to send money overseas, you need to jump through tons of hoops and take many steps to ensure you can send the money. Instead, you send it to your friend or family member in a few minutes. Bitcoin has faced criticism for opening up an opportunity for money laundering. However, because the entire blockchain is transparent and easily traceable, money laundering still mainly happens through the traditional banking system. However, as with any new technology, there will always be critics and late adopters.
What about Ethereum?
Ethereum’s functionalities led to an explosion in smart contract development, which led to decentralized applications (dApps), decentralized finance (DeFi), and decentralized autonomous organizations (DAOs).
Ethereum (ETH) is quickly becoming a household name like Bitcoin. If Bitcoin is crypto’s digital gold or reserve currency, Ethereum is crypto’s oil or energy source that makes the world run. Ethereum is a blockchain that is often called the new world computer. Ethereum differs from Bitcoin because applications are not built on the Bitcoin network. After all, it’s not smart contract compatible. Ethereum, however, is the home for many decentralized applications.
Ethereum was founded in 2015 by a group of individuals, most notably Vitalik Buterin, who is still heavily involved in the ecosystem, and Gavin Wood, who found another chain called Polkadot. Ethereum supports smart contracts, pieces of code that execute actions when certain parameters are met. Think of a smart contract as an “if, then” statement that does an action only “if” something is met.
Ethereum’s functionalities led to an explosion in smart contract development, which led to decentralized applications (dApps), decentralized finance (DeFi), decentralized autonomous organizations (DAOs), and Non Fungible Tokens (NFTs). Ethereum started using a Proof of Work model like Bitcoin and is transitioning to Proof of Stake when no one needs to operate a miner. Instead, each validator needs at least 32 ETH to participate in the alternative to mining but doesn’t have to compete in solving the problems.
A validator is chosen to mint a block each time rather than the miners needing to compete. Then, all the other validators check to ensure the block doesn’t have a malicious transaction.
Proof of Stake is much more environmentally friendly than Proof of Work because it uses much less energy. It is also simpler and more efficient because you don’t need to own mining equipment to be a validator. Ethereum is the network that underlies so much of what we consider Web3 today. While Bitcoin laid the foundation and created hard money for the crypto ecosystem, Ethereum allowed for the explosion of business and innovation via smart contract development.
Alt Coins + Governance Tokens
Thousands of other cryptocurrencies exist outside of the powerhouses of Bitcoin and Ethereum. Possibly the most famous is DogeCoin, a coin that, with the help of Elon Musk and his Twitter followers, rose incredibly high before falling back down with its fellows. Altcoins (alt for “alternative”) is a phrase used to describe any coin except Bitcoin or Ethereum. These altcoins are often governance tokens for different networks or DAOs. Or, they might be DeFi coins with complicated tokenomics plans.
Altcoins usually change prices in a very volatile way. They might make a huge gain one day, then crash much lower than anyone thought possible the next day. Altcoins are typically precarious investments but are useful for governance and DeFi. A governance token is a token that gives you voting power in a network. In a DAO, a decentralized autonomous organization, you typically need a certain number of tokens to be able to cast votes. These governance tokens are like voting chips you need to hold in your crypto wallet.
In DeFi, tokens such as network airdrops or tokens emitted over time are also used to incentivize users. In addition, DeFi tokens can accrue value or represent a network stake, such as the stETH token you receive from Lido when you stake ETH. You should be aware that there are a lot of altcoin scams out there, so you should research to ensure the token is legitimate before buying it.
One of the problems with many altcoins is that they may be considered unregistered securities. Securities or stocks represent a piece of ownership in a company and must be registered by the SEC and follow specific standards, such as quarterly reporting.
This makes holding and trading some altcoins riskier than you may want. Do your research and know the possible risks and benefits of having altcoins.
Web3 wallets or crypto wallets are often categorized into two categories – Hot and cold wallets.
Hot wallets are connected to the internet and are more vulnerable to hacks than cold wallets. Some might argue that owning a cold wallet is the safest way to secure one’s funds and assets. A cold wallet is typically a device a user possesses offline and only connects one’s laptop or mobile device as needed.
What else should I know about Web3?
This article was adapted from one of our courses — Intro to Web 3. The course will give you insights into cryptocurrencies, wallets, NFTs, DAOs, DeFi, and GameFi. You can also test your knowledge and earn tokens(money) on the subject after completing the entire course with interactive quizzes inside the course.
Ready to get started? Click here to download our app right now!
Why is Web3 important and why you should care?
Today, it isn’t uncommon to see technological advances and how fast the space is growing. Web3 represents the next generation of technology. Web3 also refers to the 3rd generation of the internet.
Learn more about why you should care about Web 3 here.
What is the difference between Web3 and Web 3.0?
Coined by Ethereum cofounder Gavin Wood in 2014, “Web3” drew the interest of cryptocurrency enthusiasts, big tech companies, and venture capitalists, booming by 2021. Decentralization, blockchain technology, and token-based economics are some concepts incorporated into Web3. Web 2, however, holds that data and content are centralized in a few companies.
What is the difference between Web3 and the Metaverse?
While Web 3 focuses primarily on who will rule and govern the internet in the future, the Metaverse focuses on how users interact. The Metaverse allows users to journey through a virtual world through virtual reality, augmented reality, artificial intelligence, social media, and digital currency. With the Metaverse, internet users browse it but can also live in it.
What does Web3 run on?
Web3 refers to decentralized blockchain apps that don’t monetize personal data. These apps are a vital part of Web3’s ecosystem.
How to invest in Web3?
Learning how to invest in Web3, it is essential to become familiar with the many different players.
Investors should also understand how each asset class and financial instrument works to ensure that their Web3 investments align with their long-term goals.
It is best to invest in Web3 by purchasing or acquiring relevant crypto tokens. After all, cryptocurrencies and blockchain technology are expected to drive the Web3 revolution. Choosing which Web token to collect is perhaps the most challenging part. A great strategy in this regard is to diversify across a selection of projects likely to shape the internet’s future.
How do content creators make money in Web3?
The whole idea of Web3 is to make income easier for creators than it was for Web1 and Web2. But no matter what web generation you’re in, making money online is usually about earning directly from your audience or a centralized platform.
Please head over to our other article, where we share how content creators can monetize in Web3.
Where can I take Web3 courses for free?
Build a Web3 career quickly by learning about Web3 on Continuum.