These posts are recaps of my weekly Twitter space with @cryptobesties! They take place every Monday @ 8:30 PM EST so if you can’t make it to one or don’t prefer learning from recordings, refer to this for a rundown.
what is web3?
The internet goes through transformations every few decades. I like to think of the dimensionality of these transformations like actual physical dimensions.
The first dimension is data; it’s where all of this actually begins. There was always so much knowledge everywhere - so much information - that it only makes sense that this entire phase of innovation surrounds data and what to do with it.
The second dimension is accessibility: this is the core of web1. The question people began asking was, “how do we get all of this information out to people easily and effectively?” What web1 effectively did was make a lot of information and data accessible to a lot more people than it could have ever reached without the internet. The most basic websites during the 90s web1 era were all about creating access.
The third dimension is monetization: this is what web2 became. The question evolved to, “now that we have access to all this data, how can we make money from it?” It’s funny when you think about it, but monetization also came with the ability to create without barriers. This was the rise of the content creation platform, the digital advertising space, and the core of how most of us interact and live on the internet now. There is also an element of community and interaction here, becoming a conduit for monetization.
Three dimensions are easy to wrap your head around: it’s how we live every day, which is also why web2 is so natural to all of us.
So what’s the fourth dimension? Decentralization and accountability: the crux of web3. Web3 asks the question, “now that we’ve mastered monetization, how do we break down the concentrated silos of information and power that have been created? How do we have more transparency and accountability in this increasingly terminally online and digital world?”
Like a fourth dimension, a completely web3 world is hard to visualize. That’s one of the bigger skepticisms against the movement: how can you decentralize such a deeply centralized landscape?
To be honest: we just don’t have the widespread mechanisms to fully envision a web3 world, just as we don’t have the mechanisms to immerse into the 4D. So we have no idea what life would look like – yet.
I think a good glimpse into what a decentralized and accountable web would look like is looking at smaller web3 communities and DAOs where you have governance and voting, on-chain transparency, and doxxed founders/developers. We’re definitely not there yet on a widespread level – and there’s no knowing if that complete transformation will even be possible – but there are people actively investing in this future of web communities.
what is cryptocurrency?
Cryptocurrency stems from the root concept of cryptography: the idea of security wherein data is anonymously created and owned. The cryptography involved in cryptocurrencies is a combination of blockchain technology and hashing.
Cryptocurrencies are cryptographic money wherein the “money” is created via different mechanisms. It’s not dissimilar to the current process of “printing” money, except with some cryptocurrencies, no “centralized” agency gets to determine how many are printed. There’s a degree of decentralization in this economy. Whether that degree is too extreme or not enough is a different conversation for different currencies and their working mechanisms.
I think of crypto as the mode of transition from web2 to web3. Since the crux of web2 in many ways was monetization, crypto presents an opportunity to continue that monetization in a web3 framework. The crypto landscape is quite large – some common coins for beginners are Bitcoin, Ethereum, Solana, XRP, Cardano.
We’ll talk more about cryptocurrencies in a future recap.
what is the blockchain?
The blockchain is the underlying technology behind all of this.
It’s essentially a public record of transactions and transfers: you can see every single transaction that takes place on a given chain between different wallet addresses. The owners of the addresses may not be identifiable (although mechanisms like ENS help with this), but there’s no hiding the actual movement of assets between wallets. By “chains,” I refer to blockchains like ETH, BSC, SOL, MATIC. All of them have their trackers (etherscan, bscscan, solscan, polygonscan), so you can see the transactions associated with any given wallet.
A new record is added to a block whenever a transaction or interaction with the chain occurs. Once a block is filled, it is added to the end of the chain: this creates the blockchain. It essentially works like a database or a ledger but is fundamentally different because it is distributed. A network of scattered computers validates the chain transactions before they are added to the blocks - it’s all just data and code. There is always a permanent record of everything which can never be altered once committed to a block.
Different networks use different methods of cryptographic proof to sustain their transactions. There are three common types:
- Proof of Work: what people usually refer to as “mining” (BTC & ETH1)
- Proof of Stake: users “stake” a set of coins - locking them up in a communal safe for a limited amount of time - which sustains transaction verification (proposed ETH2, MATIC)
- Proof of History: relatively new – essentially timestamps everything and uses that to verify transactions - SOL
More on these in a future recap.
what are smart contracts?
When I first began learning about all of this, this is how I understood the functioning of smart contracts:
Imagine you’re a new freelancer about to begin working with a client who has never worked with a freelancer before. There’s uncertainty and doubt on both ends: we’ve signed a contract, but what if the product isn’t good enough or the client reneges on payment? What if you’re stuck at an impasse on the release of goods and funds?
A smart contract would effectively say that the payment and the product are locked up in this contract. Then, when both parties agree that everything is satisfactory, the product and the payment will be released to the client and the freelancer simultaneously.
Now, while this isn’t the primary use of smart contracts right now, I always found this example to be very illuminating on the contract’s functionality. What smart contracts are actually used for is transactions on the blockchain – it’s the glue that brings all of these self-functioning pieces together for the web3 ecosystem.
Smart contracts are used for trading, investing, borrowing – any transaction between 2+ people on the blockchain. You may have heard of them most commonly in conjunction with NFTs (more on them in a future recap as well) – many NFT collections implement a smart contract for minting and transacting. These can help reduce gas fees for transactions while implemented well and also allow for customizations on the NFT based on the transaction.
An example that sticks out is the Fortune Magazine cover NFTs, which had conditions built into its smart contract that would modify the cover based on who bids or wins the auctions. It helped gamify the auction, making it a lot more dynamic and interactive than any regular art auction.
Anyone can build and deploy a smart contract to a chain – contracts are created via programming languages like Solidity, Vyper, or Yul+. To deploy a contract to the network, you need to use gas—more on gas fees in a future recap.
to summarize
Web3 is almost like the fourth dimension of the internet, built on the promises of decentralization and accountability. Cryptocurrency almost acts like a bridge between the monetization of web2 and the decentralized system of web3. Blockchain is the underlying technology behind cryptocurrency and helps with the accountability factor of web3. Finally, smart contracts are how everything interacts with each other and makes transactions and transfers of money or assets possible.
Next week, we’ll be covering crypto wallets and purchases. If you can’t join the Twitter space at 8:30 PM EST on Monday, stay tuned for the recap that will follow!
In case you’d like to correct anything in this post, reach out to me on Twitter and I’m happy to make the correction! We’re all learning together so let’s keep it collaborative and encouraging.