A few months ago, if someone told me I would be writing an article on Web3 and the blockchain, I would argue about it. As an enthusiast, I had so many confusing questions to which I got some not-so-clear answers, but now I am here publishing my first piece about Web3.
Thanks to Web3ladies for accepting me into the web3CohortIII program, which is in collaboration with Polygon. The knowledge gained thus far has helped clarify many things for me as a beginner. I am sharing this article to help you start on your Web3 journey by simplifying some buzzwords that are everywhere.
Making sense of Web3
The Web, also referred to as the World Wide Web (www), serves as the basic building block of the Internet by offering websites and application services. Let's review Web 1 to Web 3.
Web1
Web 1 is the first appearance of the www or the internet, which occurred roughly between 1990 and 2004. They were static pages owned by businesses. They referred to them as the read-only web because they cannot be interacted with (Ability to send and retrieve information).
Web2
This version of the Web first appeared in 2004 with the introduction of social media platforms. It is based on the idea of centralization. Users can now interact with the internet sending data and information as they please. Because of this interaction capability, Web2 is known as the read-and-write web. Information and data are stored and retrieved in a physical location known as a Server, which is a centralized location. These servers are housed in a physical space owned by an authority.
The authority controls the data and information, as well as whatever happens to them, leaving the owner of the data and information with little or no control over it.
Web3
Web 3.0 represents the next phase in the evolution of the internet. It is built upon a concept of decentralization (Transfer of authority from a centralized entity to a distributed network).
In simpler terms, the Internet will not be in the hands of any authority rather it will be distributed among nodes (nodes are compared to small servers all around the world) or networks. Every node or network involved has authority over what happens to information and data on this Internet.
Unlike Web 2.0, user information sent or received is not stored on a server owned by an authority; rather, it is distributed across multiple nodes in a network. This distributed data or information is saved in a database or ledger known as THE BLOCKCHAIN
Blockchain
Blockchain is a distributed database or ledger that is shared among nodes on a specific network. It digitally stores information in an electronic format. All information stored on the blockchain is distributed among all nodes in the network where it is stored. This implies that there is no central authority and that no single entity can decide what happens to information on the blockchain network.
A blockchain collects information in groups known as blocks. Each block has a limited capacity, and when it is full, it is closed and linked to previous blocks. When a block is added to the chain, it is given an exact timestamp.
The Blockchain is immutable, which means it cannot be edited, deleted, or destroyed. In a nutshell, blockchain is a method of storing data and information without relying on any company, organization, government, or legal entity to keep things secure or accurate.
Use case of the blockchian
Since we now understand what blockchain is, let's look at some places where it is used
Currency
Cryptocurrency is made possible by Blockchain technology. A cryptocurrency is a medium of exchange, similar to the dollar, but in this case, a digital format that employs encryption techniques to control the creation of monetary units and to verify fund transactions. It has no physical form and its supply is not determined by a central bank (A central authority), implying that its network is completely decentralized.
Cryptocurrency transactions take place over the network, and transaction records are kept on the blockchain, which cannot be altered or deleted.
The value of traditional currency may be jeopardized if the country becomes unstable, but this is not the case with cryptocurrency because it is not dependent on any economy or government permission or authorization. Some cryptocurrency examples include:
Bitcoin (Most Popular)
Ethereum
Matic
Solana
DodgeCoin
BNB
BUSD
All the currencies are created on the blockchain.
Finance
Integrating blockchain into banks allows customers to see their transactions processed quickly, even on weekends or public holidays. This process eliminates stress, fraudulent activities, unnecessary arguments, and whether or not transactions were processed- because all transactions that occur are recorded on the blockchain, which is public.
Transactions cannot be altered, changed, or deleted. It fosters trust between financial institutions and their customers. Wells Fargo and HSBC, for example, are using blockchain technology to settle cross-border payments.
Smart Contracts
Smart Contracts are built into the blockchain to facilitate, negotiate, and verify contracts without the use of a third party. Smart contracts are computer programs that are written onto the blockchain to meet a set of conditions that both parties agree to.
If the conditions are met, the contract is immediately executed without any entity having the ability to change or halt its execution. This is only possible with smart contracts. Smart contracts are mostly used in gaming.
NFTs
Nfts stand for Non-Fungible Tokens. This means that these tokens cannot be replaced with anything else. A bitcoin or any other digital currency is fungible, which means it can be traded for another bitcoin and you will get the same thing, unlike NFTs.
NFTs are anything digital, such as music, art, or photographs. The majority of NFTs are part of a blockchain, and the blockchain keeps track of who owns and trades these NFTs. To explain NFTs, imagine you are an artist who creates an artwork and wants to sell it online. To do so, you would need to find a way to mark and track ownership so that the purchaser has proof of ownership. This is where the blockchain comes in after the purchase.
The blockchain records these digital item transactions/trades, and no one can change them or transfer ownership to someone else. Once purchased and recorded on the blockchain, ownership is immutable and cannot be altered.
DEFI (Decentralized finance)
Decentralized finance is a blockchain-based financial technology that eliminates banks' and institutions' control over money, financial products, and financial services. In centralized finance, banks or cooperatives hold or keep your money and determine transaction fees.
Transactions occasionally fail and users are still charged, but in a decentralized finance system based on blockchain, intermediaries such as banks that stand between users and their money are eliminated, and users are able to determine their transaction fee and how long it will take to process.
Users could also conduct any financial transaction over the world wide web from any part of the world because it is directly recorded on the blockchain. Decentralized applications, which run on the blockchain, are used to handle these transactions.
Conclusion
From web1 to Web3, the World Wide Web has evolved in stages. Web3 employs decentralized blockchain technology, which eliminates the need for a central authority because information is shared among network nodes.
Web3 has numerous applications ranging from finance to digital currency to NFTs and so on. Web3 has many advantages, but it also has disadvantages, which were not mentioned in the article. As a beginner, you will continue to come across new and emerging buzzwords in the Web3 space because it is still a developing technology.