New to the world of Web3? I got you! Here's your 101 guide.
WTF is Web3?
Web3 is the next iteration of the internet. Whether you've noticed it or not, the internet has evolved. In the early days (aka Web1), the focus was on building critical mass online with people and companies building static websites just to have an online presence. This period also used a basic username and password combination to log in to services.
Web2 is our current era of the internet. It's much more social and relies on multinational corporations for participation and monetization. In addition, you log into services with your Facebook or Gmail account. However, your personal information is not your own and these corporations who have your information are able to sell it to others.
Web3 puts the power back into the hands of people making it decentralized. Using blockchain, users own their information and products with digital wallets, which will also be how we log into different accounts and manage digital currencies. These wallets are, in theory, traceable because all activity on the blockchain is public, however, while we can see that wallet 0.XYZ performed transaction ABC, we still don't know the specific person who owns that (or any) wallet.
WTF is a blockchain?
Blockchain is a decentralized database that stores digital information enabling users to build onto a specific chain. Each blockchain is comprised of "blocks" with limited capacity that users build on until that capacity is reached, at which time the completed block is added to the chain. What sets blockchain apart from other internet databases is that it is more secure and provides a public ledger of activity that is meant to build trust among users.
There is not just one type of blockchain; different blockchains serve as different platforms (e.g., Facebook vs. Twitter) and are generally not interoperable (though this is continuing to evolve). For example, if you buy an NFT built on Ethereum there is a very good chance that you can only pay for it with ETH. So, if you are interested in collecting NFTs, you may end up needing several wallets and a range of different cryptocurrencies.
Blockchain is also generally bad for the environment as the GHGs associated with mining crypto can be quite high and also translate into gas fees (sometimes thousands of dollars worth) when purchasing things like NFTs.
Examples of blockchain: Ethereum, Solana, Celo, R3.
WTF is cryptocurrency?
Cryptocurrency is a digital currency that is secured by cryptography, making it extremely difficult to counterfeit or double spend. They are not operated or regulated by any financial institution and instead use a decentralized system to record transactions, such as blockchains. In order to use digital currencies, you need to have a digital wallet.
Because of their unregulated nature, cryptocurrencies are highly volatile in their value which can make them a risky investment. Further, cryptocurrency exchanges have been subject to cyberattacks, which could lead to an irreparable loss of assets.
Because of the high value of many cryptocurrencies (e.g., Bitcoin), it is not uncommon to see prices in fractions, such as 0.002 BTC.
Examples of cryptocurrencies: Bitcoin (BTC), Ether (ETH), Dogecoin (DOGE).
WTF is a Stablecoin?
Stablecoins are a type of cryptocurrency whose value is linked to a regulated/real-world asset, like the US dollar. They were created in response to the high level of volatility of regular cryptocurrencies but are still currently unregulated.
The whole premise of a stablecoin is to provide confidence in its value yet remain decentralized. While extremely minor (think a change of one-thousandth of a point) fluctuations are fine and normal, changes in one-tenth or more are bad as the whole point of them is to be more or less one-to-one with the asset they're tied to.
Examples of stablecoins: USDT, QCAD, USDC.
WTF is an NFT?
A non-fungible token (NFT) is a digital asset that has real-life representation and is minted (created) on the blockchain. Their (usually high) value is attributed to supply and demand; they are often limited in number thus driving up their cost. This concept of scarcity is generally in contrast to other digital creations where supply is unlimited which makes them digital collectibles that can be shown to people online.
NFTs can be purchased or traded on platforms such as OpenSea or Rarible. They offer exclusive ownership rights and are beneficial to the artist whose creation is being sold, as a key principle of NFTs is ensuring that the creator continues to receive royalties for their work.
In addition to art, NFTs can also be used for music (Timbaland and Ashanti) and provide access to private real-world events (Bored Ape Yacht Club and VeeCon).
WTF is the metaverse?
Put plainly, the metaverse is a 3D virtual/immersive version of the internet. Those who are into video games (e.g., FPS games or Fortnite) are likely already familiar with this concept. This virtual world allows you to create an avatar where you can socialize with other avatars, go shopping (to buy NFTs or clothes for your avatar), attend metaverse concerts, and more. Real-world businesses (e.g., Nike) are able to patent their products in the metaverse so you know those Dunks you're buying (with crypto) are "real".
At present, it is still unclear if the metaverse is a single virtual place or if it is segmented up by different companies (e.g., Meta and Fortnite have separate metaverses)
WTF is a DAO?
A decentralized autonomous organization (DAO) is a type of club that is built on the blockchain. They are community-led entities that don't have a hierarchical structure. They are typically built around a common goal and any actions taken by the DAO are voted on by members who have signed onto the community's rules (created via smart contract on the blockchain, making them transparent). Due to their anonymous nature, you may or may not know who exactly is involved in the DAO.
DAOs serve as a way to pool funds to buy/invest in things that an individual may not otherwise have the means to. One DAO wanted to buy an authentic copy of the US Constitution.