WEB3 IS NEW.

If you haven't heard of Web3 before, then you probably haven't heard of Web2 and Web1 either. It makes sense to first talk about Web3's precursors and what differentiates them from the latter.

Web1 lasted from the internet’s earliest days in 1991 to about 2004. The content creators of Web1 were the few individuals capable of understanding and actually working with the new technology. Web1 content was non-interactive, primarily text-based with some illustrations or graphics. We can think of Web1 as the READ web.

Web2 is known as the social and interactive web. It's what most of us think about, when we think internet. This begs the question why change, when the current system obviously works. There are many flaws, two of the most drastic being monetization and data protection. Companies selling our data has become a common issue these days. Companies sell your data because they offer their services (Google, Twitter, etc.) for free. Why are they free to begin with? Because they needed to onboard as many users as possible. Users have known these platforms as a free service and are therefore not willing to pay. It’s obvious that data protection and monetization are strongly intertwined. Web3 aims to solve both, that’s why many place their trust in this rather new technology. We can think of Web2 as the READ & WRITE web.

Web3 is also called the decentralized web. Decentralization is one of the key principles of Web3, since the main source of failure in today’s Web2 are centralized systems, databases, and platforms. Web3 doesn’t run on centralized servers, where central authorities (e.g. Meta) are able to take every single piece of datea or change it to their liking. Web3 runs on servers that the participants themselves contribute to the cause, these are so-called nodes. This creates a distributed, resilient, and robust network of objective truth. Web3 introduces a new way of paying for all kinds of services. While traditional Web2 apps rely on a middleman (visa, paypal, cashapp) to handle transactions, Web3 offers a native/integrated payment method utilizing cryptocurrencies (e.g. Ethereum). Cutting out the middleman means, at least in theory, that buyers pay less and creators earn more. More infor on why this isn't quite the case yet later down the line. Web3 should enable everyone to PARTICIPATE.

Here are some of the key criteria of Web3 besides decentralization:

• ✅ Verifiable
• 🌐 Distributed and robust
• 🏢 Self-governing
• 🆓 Permissionless
• 💵 Native built-in payments

Don’t shy away if this seems a bit much or doesn’t make much sense yet. Just read on as we take a shallow dive into some of the most important characteristics, topics, and technologies of Web3. If any of the topics have piqued your interest, click on the links below to take a deeper dive.

Decentralization means rejecting a single entity of authority and power (e.g. banks, governments, companies) in favor of a distributed network.

The decentralized system of authority of Web3 is the blockchain.

Blockchains are a distributed system of transaction records not unlike a regular ledger. Transactions recorded on the blockchain are public and organized into blocks 📦 of hundreds of transactions.

When you make a transaction using cryptocurrency, it is included in one of these blocks of transactions. After the block is full, the decentralized network of participants verifies all transactions in the block. As soon as the verifiers are done, the block is accepted into the chain of blocks that form a record going all the way back to the first transaction.

The process of verifying blocks (also called mining) is incredibly resource-intensive. Miners ⛏️, using their high-end hardware, need to solve complex computational riddles and earn a reward if they are the first to do so. After the riddle has been solved the newly 'mined' block is now due to be verified by all other nodes. If the majority of nodes deem the block valid, the block is added to the blockchain. Since the riddles are so difficult to solve, miners are incentivized to add and work only for valid, legitimate transactions. This ensures that invalid transactions are not added to the blockchain and that the network is protected from malicious attacks.

This 'proof of work' 👷 led to the negative image of blockchains and cryptocurrency in popular media. The technology is changing rapidly, and other methods such as 'proof of stake' 💵 are being introduced. Staking allows holders to use a portion of their cryptocurrency holdings to verify new blocks added to the blockchain. This method would ensure the same level of safety and security without any environmental implications.

Cryptography is all about encoding and decoding messages. A simple example for encryption is the Caesar's Cypher. Here each letter in the source sentence is encrypted by replacing it with a letter some fixed number of positions down the alphabet.

If you take a closer look at the implementation of the Caesar's Cypher above, one thing becomes obvious — one could pretty easily decypher this message without access to the encryption key. That is something we don't ever want to happen in Web3, that's why we use encryption methods that are a bit more complicated than the example above.

Cryptocurrency is a digital, and decentralized form of currency. Transactions made using cryptocurrency cut out the middle-man (e.g. your bank, visa, paypal, cashapp). Cryptocurrencies can be used to buy, and sell goods or as an investement opportunity.

Today, you can choose from a rich ecosystem of cryptocurrencies (also called coins), the most established being Bitcoin, and Ether. Many more coins, and altcoins (unestablished currencies) are on the rise offering unique features, and advantages.

This guide is going to focus on Ether, and the Ethereum network because of its wide adoption overall, and its popularity in the NFT space.

Crypto transactions require you to pay a transaction fee. This transaction fee goes to the miners, who worked hard to verify your transaction. On the Ethereum blockchain, transaction fees are called gas.

When you go somewhere by car you will certainly need some sort of fuel. It works the same way on the Ethereum blockchain. Without gas you won't get very far. But there is one key difference between real fuel and virtual gas. The more gas you pay the faster your transaction is accepted, verified, and processed. Your car doesn't go any faster if you paid more fueling up.

Gas fees are currently pretty high on the Ethereum network, and are one of the main barriers of entry for people who don't have tons of money to spare. This could change when the network changes from 'proof of work' to 'proof of stake', as the process of verifying blocks of transactions wouldn't need as much energy anymore.

Crypto wallets are applications that store your assets and keys. There are two types of keys:

Public keys 🔓 are somewhat like your bank account number. You can give them out to institutions, individuals, etc. to receive and make payments. You can generate an infinite number of public keys. Public keys in Web3 function like your username or email account to log into decentralized applications.

Private keys 🔐 are kind of like your bank account's password. Don't ever give them out to anyone, ever. Your private key is used to sign transactions and prove that you are the owner of the account.

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Smart contracts, like their real life counterpart, contain a set of agreements or actions between two parties. The main difference lies in the way they are executed. Smart contracts live on the blockchain, and are therefore 100% open-source. In addition, they work completely autonomously. They don't rely on a justice system or other authority like real contracts do. Smart contracts are used to automate transaction processes.

DApps or decentralized Applications are apps that are connected to the blockchain. DApps form the foundation of Web3 and are meant to carry out all sorts of tasks without the need for a central authority or intermediaries. DApps come in all shapes and forms, and range from marketplaces to social networks, etc.

NFT stands for Non-Fungible-Token. Fungibility refers to something being exchangeable for something of equal value. Think of trading $1 for another 1$ note. Non-Fungibility means that it's a token that is unique and therefore NOT exchangeable.

An NFT is a certificate of digital ownership 📝. What's interesting, and also kind of complicated is the thing you are actually buying. We perceive NFTs primarily as a form of digital art, but in theory an NFT can be pretty much anything: music, a movie, you name it.

The picture above shows you what you are actually buying. Surprise! It's not just the monkey JPEG 🙊. This is the implementation of the certificate of ownership aforementioned — a metdata file that includes all of the asset's attributes. But where is the visible asset owners share on social media 🔎? The link where it says 'image' in the metadata file points to the asset that lives somewhere on a decentralized server.

So, to summarize, it's not really about the JPEG or MP3, it's about digital ownership of a unique asset. NFTs can be viewed as an investment opportunity 📈 to be traded on the blockchain. NFTs offer an entirely new way for artists 👩‍🎨 to make money and actually live from their art. Many marketplaces offer built-in royalty models. Artists can set a royalty percentage, which allows them to get paid on every resale of their work.

NFTs could have endless applications in the future, even for the average jack. Think about concert tickets for example. If they were to be NFTs, you wouldn't have to carry them around, you'd only ever need your crypto wallet. If you can't make it, you wouldn't need to resell them on some shady platform. You could utilize one of several NFT marketplaces that offer unique and transparent financial insights (e.g. the cheapest tickets to get). The venue would maybe even incentivize reselling the tickets due to them earning royalties on each resale.