The main idea behind web3 is to decentralize ownership of the internet. In other words, instead of a few companies (Facebook, Google, etc.) owning the content, the users/creators own the content and the means of monetization.
Everything is more transparent because the code is visible to everybody. Thus, creating more trust. A company cannot change the rules on a whim.
- You (creator/user) own your money
- You (creator/user) own your content
Without an intermediary to hide stuff, everything becomes more trustworthy and transparent.
In simple words: Web3 is the internet owned by the people.
However, other concepts need explaining for the rest to make sense.
The blockchain is a series of ledgers or a network of computers where the information is stored. Every transaction is written in the blockchain and is visible to everyone.
What is a token?
There is nothing with more hype on the web3 than NFT's. However, the acronym and what it stands for are difficult to understand.
So let's go by parts.
A token is a "thing." So it can mean different things depending on the context, from a coin to a piece of art, a sign, etc.
In my mind, it is a synonym for "artifact."
Artists say "artifact"; engineers say "token."
"Fungible" will help us define "Non-Fungible." Every dollar is worth the same. No one cares about the specific dollar when you say you have a dollar. A dollar is a dollar.
Non-Fungible are the opposite. There's only one Monalisa. There are many copies, but only one is THE Monalisa. A Non-fungible token is a unique artifact.
An NFT is a receipt, but it is decentralized open for everyone to see. When you buy something, you receive a receipt that proves your ownership in the real world.
Here is a tweet where I try to explain the deal with NFTs:
Bitcoin is the best-known crypto coin. I don't think it is that important, but Satoshi Nakamoto created bitcoin. So that is an answer for trivia night.
Why does bitcoin matter?
Firstly, it is decentralized. In contrast, the US Federal Reserve controls the US Dollar. Bitcoin users regulate Bitcoin.
Secondly, everyone can see the transactions made with bitcoin. No intermediary. Every transaction is transparent.
Lastly, the rules are already written. No one will ever be printing more bitcoin or deciding its worth. Therefore, no one can change the rules.
You can read the whitepaper here.
Ethereum is the second most popular coin after Bitcoin.
But Ethereum is more than just a coin; it is more of a technology.
It means that developers can use the ethereum chain to write dapps (decentralized apps). Like marketplaces, games, etc.
Ethereum uses "gas" to process transactions, like a tax paid to the network.
"Smart contracts" are the programs that set the rules for transactions within the ethereum blockchain. These conditions cannot be changed once the app has been launched. Everyone can see the code and use it, but no one can change it.
We are transitioning to ETH2, which supposedly makes transactions cheaper.
Cryptocurrency is money on a blockchain. And you can do almost everything that you can do with regular money. Every coin has advantages and disadvantages. That's why there are so many.
Should you own crypto?
I don't know.
So far, it has been an excellent long-term investment, but it has been too unpredictable for the short term.
Even though I own a few coins and NFTs, I am not sure they will be valuable in a few years. This is because each time you buy crypto, you are betting. Sometimes you win; sometimes you lose.
Wallet and marketplaces
The first obstacle you will find when you buy crypto is that you can't do anything with it. To use your crypto coins, you must transfer them to a wallet.
A wallet can be physical (hardware) or virtual (software). The easiest way to start is with a hot virtual wallet. Like Metamask.
Be on the lookout for scammers.
The easiest way to avoid being scammed is to be very careful about who you share your wallet with. If you plan to hold your coins for a long time, try a cold (hardware) wallet.
What is a DAO
Perhaps the concept that excites me the most is the DAO. A DAO is a decentralized autonomous organization.
A traditional organization, think of any company, has hierarchies and exclusivity. There are bosses, and you have to be employed to work there.
DAOs are communities built around a purpose. The roles, earnings, etc., are all managed by smart contracts. Meaning everything is transparent and open.
DAOs have many advantages, like letting people interested in a cause work towards a goal. However, it probably doesn't surprise anyone that management is a tad more complicated.