You’ve probably heard that there’s a major shift coming in the near future – one that will profoundly affect how we use the internet and what we expect from it. This shift is being called web3, and it will bring massive upgrades to security, user experience, scalability, and interoperability on the blockchain and with decentralized applications (dApps). But what does this all mean? What are the implications of web3? And how can you prepare yourself to take full advantage of the opportunities it brings? Let’s talk about it now!
So what is web3?
A definition that makes sense to many people is a highly scalable, decentralized system that allows users to self-own and control their data, identities, and interactions across different internet services — from Facebook to Twitter to Google Docs — without being constrained by any one company or entity. This definition basically points out two core ideas about web3: self-sovereignty and interoperability. If these two ideas sound abstract, well…that’s because they are!
Blockchain
A blockchain is a decentralized, distributed and public digital ledger that is used to record transactions across many computers so that any involved party can verify and audit them in real time without any trust or middleman. The original blockchain was invented for Bitcoin by Satoshi Nakamoto in 2008 and released as open-source software in 2009. Since then, numerous other blockchains have been created to facilitate value exchange (bitcoin) or identity management (Bitnation). These purpose-specific blockchains can be classified according to their use and are generally called smart contract platforms or token systems. The Ethereum platform introduced Smart Contracts on top of its blockchain, allowing developers to build applications using their own tokens on top of it, with Ether being used as gas for transaction fees.
Smart Contracts
A Smart Contract is a computer protocol intended to digitally facilitate, verify, or enforce negotiation or performance of a contract (i.e., programmable contracts). Smart Contracts run on top of blockchain-based decentralized networks and bypass third parties (i.e., banks, lawyers) in favor of network consensus as to their execution and enforcement. NFTs: A Non-Fungible Token is a specific type of blockchain token that represents something unique; they are cryptographically unique and one-of-a-kind tokens that will never be replicated on another blockchain; you can think of them as digital property you own.
Non-Fungible Tokens (NFTs)
What Are They and Why Do We Care? : When people refer to tokens, they’re usually talking about fungible tokens — units of currency that can be broken into parts or substituted for other units as a means of payment. Fiat money, like USD or Euros, is fungible (though in some cases it might have serial numbers or have been blacklisted by banks). For example, if one bitcoin could be subdivided into 1 million pieces each worth $1 and bought/sold in exchange for goods and services just like fiat money, then it would be classed as fungible. Non-fungible tokens (NFTs) are different.
How are NFTs different from fungible tokens?
NFTs are interesting because they give their owners access to a real-world good or service. So if I buy a CryptoKitty, I can sell it later to someone else, or breed my cat with another Kitty and create a new NFT that represents its children (and hopefully their children too). While fungible tokens represent digital dollars that are exchangeable for goods, services, or other tokens on secondary markets, NFTs represent unique items that can have value in their own right. The debate around what makes an asset fungible is one of many important considerations when designing games on top of blockchains.
How To Use NFTs Today
Owning a digital asset on an Ethereum-based network is as easy as sending a transaction from your wallet; all you need to do is add a small amount of Ether to it and send it to someone else’s address. It’s fast, easy, and inexpensive (the gas cost for transactions is minuscule) but requires that you have ETH in your wallet to make it happen. For security reasons, we don’t recommend sending ETH directly from an exchange platform or smart contract since they often require that you move ETH back into your account before being able to transact anything. Since NFTs are standard ERC721 tokens in Ethereum networks, they can be easily exchanged for one another if users prefer a specific token over another.
The Metaverse
Now that I know what blockchain, smart contracts, and NFTs are, it’s time to tackle a futuristic blockchain technology—the metaverse. The term metaverse is a portmanteau for meta virtual reality. In other words, it’s an idea that combines VR and blockchain technologies with our everyday world. Instead of being told how to think about something or seeing information presented in front of us (which might be true or false), we can create our own sense of what’s real within a system of rules that has been laid out ahead of time. One great example of metaverses is cryptocurrencies like Cryptokitties or CryptoPunks that let you collect and trade digital assets in games.
How to Invest in Web3
There are many opportunities to invest in web3, including but not limited to NFTs. Before you get started, take some time to research and learn about these kinds of investments and what makes them so powerful for a decentralized future. It’s important to note that many consider non-fungible tokens (NFTs) a core component of web3; in fact, applications like Augur rely on these tokens heavily—the entire app runs on top of them.
Have any questions about Web3?
Whether it’s web3, blockchain, NFTs, or a host of other concepts and buzzwords, there’s a lot of information floating around out there. We want to make sure you have your questions answered—and point you toward more resources if you want to learn more about these exciting topics! Let us know what questions you have in the comments below; we’ll try to answer them in a future post!
