What is Web3
Web1 vs. Web2 vs. Web3.
When the web was established in the 1970s and 80s there were a set of open-source protocols that were designed to be open, transparent, and inclusive. This was Web 1.0. Then, in the early 2000s, some techies and internet pioneers decided that the web should be monetized and so a lot of propriety technology was created, aimed to build closed protocols on top of the open ones from Web 1.0 (such as Google or Facebook). These protocols made the web less inclusive and allowed a few tech giants to become some of the most valuable in history. An example of this is people using their services for free while the tech giants gathered data on their clients and sold it to others as a commodity. This was Web 2.0, and frankly right now most of the web in 2022 functions this way. However, with the dawn of blockchain came the promise of Web 3.0 which aims to bring back the open protocols from Web 1.0 and allow people to build together, transparently. In Web 3.0, the builders and consumers will collectively own IP through crypto protocols, and there will be a large sense of identity that the ecosystem will be collaborative and fair.
Problems Web3 Solves
- The ability to truly own our digital footprint, identity, and assets
- A higher level of trust that the systems we use in government and finance are going to work as they say they work and do what they say they do
- Better privacy and control over how our identity and data are presented and used
Emerging Tech Coming out of Web3
Cryptocurrency
Also known as crypto, it is a virtual or digital currency that is backed by cryptography which makes it almost impossible to counterfeit or fake. Crypto typically runs on blockchains which are distributed ledgers that have special functions and properties that will allow them to always represent the truth of the transactions as well as have an untampered and transparent history. This allows them to provide financial or governance systems which need very little human/hierarchical interactions (such as banks) and still allow them to be fully trusted and transparent. The most popular cryptocurrencies are Bitcoin and Ethereum at the moment.
Stablecoins
Stablecoins are cryptocurrencies that are backed by a stable asset in the economy such as the US dollar, or gold. This makes them more resistant to the wide variance and fluctuations in the value of other cryptocurrencies. The most popular stablecoin right now is Tether (USDT) which is pegged to the US Dollar. Other ones include Dai, Binance USD, TrueUSD, USD Coin, TerraUSD, and the Digital Gold Token among many others.
NFTs
An NFT stands for a non-fungible token which is just a piece of digital art (e.g. music, drawings, gifs, videos, ideas, etc.) that can actually be claimed and owned by people. This works because NFTs contracts live on the blockchain, so if I wanted to buy an NFT today and own it, there would be a blockchain transaction saying that I purchased that blockchain and everyone can check as well as verify as to whether that’s the case or not.
Metaverse
A virtual place on the internet that resembles a video game with a virtual world that can be explored. People can make avatars or characters and can enter these shared worlds, explore various items, interact with each other, and much more. The most notable example of this is Meta’s (previously Facebook) foray into this space with Horizon Worlds.
DeFI
DeFI stands for Decentralized Finance which removes central institutions from managing the control of the financial system. What is more is that since these financial protocols are decentralized, there will not be any fees that banks charge for various purposes, and you hold your currency in a digital wallet rather than a bank. Hence, if you own some Bitcoin or Ethereum which are both cryptocurrencies that have some value, you can store them in a DeFI entity that stores your currency on the blockchain.
Dapps
Dapps stands for decentralized apps which are applications that run on a peer-to-peer network like a blockchain. While most Dapps have this property, there are other practices around Dapps that are also important, and not always followed. Dapps should be open source and not have one person or authority controlling them. The data and records of a Daap should be public. All of these properties bring some really good benefits such as allowing them to have almost zero downtime, being protected from censorship and being transparent through the blockchain. Some of the drawbacks, however, are that they are prone to hacks given how open and transparent the creation process is. Finally, as it stands, not many Dapps prioritize user experience – and that will definitely change in the near future.
DAOs
A DAO is a decentralized autonomous organization. These are businesses that are all virtual and are collectively owned and managed by all the members instead of centralized leadership. Decisions and spending are made by member votes instead of C-level execs (e.g. CEO) and the decisions/votes are all managed by the DAO code which is fully open and transparent to be fair for all the members. While a transparent organization fully run by its members has a lot of benefits, it has a few disadvantages as well. One notable disadvantage is that it is quite dangerous to rely on a crowd of people who are not experts to make important decisions. DAOs are also prone to hacks that can destabilize the company, but that risk is there even for traditional businesses.
For more about DAOs, check out the following articles:
Decentralized autonomous organizations (DAOs) (article from Ethereum)
Decentralized Autonomous Organization (DAO) (article from Investopedia)
What is a decentralized autonomous organization, and how does a DAO work? (article)
Common Web3 Terms
The Web3 vocabulary is vast and continues to expand with each passing week as new protocols and frameworks get created. Below are some resources to help get you started with understanding all the foreign words and phrases from web3 land. Ones like “Smart Contract”, “Proof of work” or “Double-spending” or “gas” for instance.
Comprehensive Collection Of Commonly Used Words In Web3 And Their Meanings (article)
Web3 Stack (for developers)
While Web3 is the wild west right now and constantly evolving, there are a few patterns and themes that have emerged. A good way to think about the stack is via abstractions. In traditional programming we have assembly code that can speak directly to the hardware, then low-level languages like C/C++ that compile to the assembler. And there are even higher-level languages like Java which allows one to not worry about the details of how memory is allocated and enables one to very quickly create complex programs with a little bit of loss of control. Finally, there are No Code platforms like Retool that allows one to simply create programs and write software processes by just dragging and dropping like you would in a PowerPoint presentation. This example illustrates how we go from very low-level frameworks that give us the utmost control of our programs (e.g. Assembly/C) to the highest level frameworks that allow us to create something in minutes instead of weeks or days but we lose a little bit of control. The Web3 stack is starting to be organized the same way, and here’s how.
Chains
In the lowest level of Web3, we have the blockchains which are not new if you’ve been following along in the article. Ethereum, Solana, Avalanche, Polygon, Cardano, and Polkadot are some of the popular ones, and there are many others. A given blockchain, say Ethereum, is nothing but a network of nodes (or specialized servers) that together maintain the integrity and function of the blockchain. Even you reading this article can actually spin up a node or server of your own and connect it to the Ethereum chain, but this would be a fairly complex endeavor and most people choose not to do this. Most people choose to work higher in the stack and use the frameworks others have already built. The value in this stack is that it is ripe for innovation. Because the layer is so low level, and a lot of the concepts are in the theoretical/research space, you can create and innovate your own blockchain as a creator.
Nodes
A little higher up the stack, we have the node providers. These are simply software frameworks that contain a complete copy of a blockchain and which have already built the nodes for you. This would be useful if you want to check, accept, or reject various transactions as well as manage and control the validity of transactions. Some popular node providers are Infuria, Alchemy, and Chainstack among many others. However, when you use a node service, you are still quite limited in what you could do. For instance, you can’t use a Node provider service and ask what are all the transactions in the network. For this reason, working with nodes is a very niche low-level aspect of web3 that only blockchain developers actually have an interest in.
APIs
The most common abstraction for developers in web3 are the APIs which is what they would interact with the most. This is because APIs already have Chain and Node level infrastructure all connected and all one needs to do is create, query, and search transactions within the nodes. The APIs will allow you to check all types of information necessary for building web3 apps such as user balances, token metadata, and much more. Some common APIs are Moralis, Alchemy, Blockchain API, and The Graph, but there are many more.
For more information on APIs here are some resources:
Alchemy API Alternatives – Web3 Development Platforms (article)
Exploring the Web3 API Economy (article)
Platforms
The most comprehensive abstraction near the top of the stack is using platforms for web3 development. You can think of platforms as a one-stop-shop where all the chains, nods, APIs, and frameworks live with added benefits of authentication, database storage, etc. Platforms make it very simple to create web3 apps and require less back-end coding because they solve most of the common problems when configuring and setting up a web3 app. The only drawbacks are that they are pricier to use than setting up your own configurations, and you may lose a little bit of control in how you can configure and run your web3 apps. Some common platforms in the web3 space are Moralis, thirdweb, Alchemy, and buildspace among others.
Applications
At the very top of the stack, we have the applications which the consumers interact with daily. These applications typically speak directly to the platforms and rarely do they have to traverse lower to speak to the APIs, Chains, or Nodes. Here are some popular applications below:
OpenSea – The largest NFT marketplace – https://opensea.io/
Coinbase – An app to buy/sell crypto – https://www.coinbase.com/
Brave – A browser that can seamlessly connect with the web3 ecosystem – https://brave.com/
MetaMask – A platform that allows you to seamlessly connect to the blockchain and Daaps specifically – https://metamask.io/
Axie Infinity – An online game where you can breed and battle monsters and even potentially make a profit from your gaming endeavors – https://axieinfinity.com/
Horizon Worlds – Facebook/Meta’s metaverse which is a VR world with many features such as stand-up comedy, games with friends, and much more – https://www.oculus.com/horizon-worlds/
Loot – Randomized loot for gamers all placed on the blockchain to be transferrable in other Daaps – https://www.lootproject.com/
This explanation was inspired by
Web3 Tech Stack 2022 – Programmer explains (video)
How to set up a wallet
What is a crypto wallet?
A crypto wallet is simply a place where you can store your cryptocurrency.
What are the different types of wallets?
The main types of wallets are hosted (or custodial) wallets, non-custodial wallets, and physical wallets. Hosted or custodial wallets allow a 3rd party (e.g. a bank or a company like Coinbase) to hold your crypto for you and offer you peace of mind and security that it will be safe and that they will not lose your crypto. While custodial wallets can be more secure they also offer you less control of what you can do with your crypto. On the other hand, non-custodial wallets are wallets that are managed by you, and you have to remember a private key or password to recover your crypto. This password must be kept in a very safe place because whoever has access to it has access to your crypto. The upside of non-custodial wallets is that they give you complete control of how you can manage your crypto and what you can do with it. Finally, there are physical wallets which are hardware devices holding information to your crypto wallet. These are the most secure, but also the most expensive and complex to use.
Another commonly used term when it comes to crypto wallets is the notion of a hot or cold wallet. A hot wallet is one that is hosted on the internet so it is always connected potentially opening you up for security breaches. However, a hot wallet is very user-friendly and flexible. A cold wallet on the other hand is storing your crypto access physically somewhere such as with a hardware wallet (e.g. your computer or another physical device) or simply on a piece of paper.
Three popular wallets
Coinbase
Coinbase is one of the most popular and mainstream apps that allows you to buy, sell, send, receive, and convert crypto. With Coinbase you can choose between a custodial wallet or a non-custodial wallet.
Use Coinbase if you want the most popular and secure solution that gives you access to a myriad of different cryptocurrencies.
How to set it up and use it:
Coinbase Wallet Tutorial for Beginners: FULL Guide & Review! (2021) (video)
MetaMask
MetaMask is an open-source platform that is supported by the developer community. It is essentially a browser extension and app that allows you to very quickly and seamlessly link up a non-custodial crypto wallet and connect to decentralized applications on the Ethereum Blockchain (such as the game Axie Infinity) both as a consumer and also as a developer. Note that at the time of this writing MetaMask only supports connecting to the Ethereum Blockchain which also happens to be the most popular in the world. If you want to work with other blockchains, MetaMask won’t work
Use MetaMask either if you are a Web3 creator, and/or you want the most flexibility with your crypto.
How to set it up and use it:
MetaMask Tutorial for Beginners – How to Set Up MetaMask (video)
Ledger Nano X
The Ledger Nano X is one of the simplest and most secure physical devices that can store your crypto. Think of it as a secure USB drive. As of this writing, many crypto storage review sites tout the Ledger Nano X as one of the best physical wallets. Use it if you want the store your crypto with the highest amount of security and control, and don’t mind paying a premium in order to do this.
How to set it up and use it:
Ledger Nano X Tutorial: Beginners Guide on How to Set up a Ledger Nano Wallet
Other wallet providers:
Best Bitcoin and Crypto Wallets for April 2022 (article)
Best Crypto Software Wallets (article)
6 Best Crypto Wallets of 2022 (article)
If you want to start developing in web3, where do you start?
First, join a community like Odyssey and TLDR Crypto to stay up to date on all things web3. Then, I would review the content from Web3 University for a deeper and more dedicated learning experience. Finally, check out Moralis, Polygon, Thirdweb , and Buildspace. These are platforms akin to Google’s Firebase that can guide you step-by-step in creating on the web3 platforms and have the resources available to help you create something from scratch on their platforms.
Check out the following resources to learn more:
The Web3 Stack: Reference for Developers (article)
The Complete Guide to Full Stack Web3 Development (article)
Adieu 👋
That’s all for now! I hope this guide energizes you to create the next cool web3 app, or become a more informed citizen who can navigate this treacherous and ever-changing web3 future. If there is one takeaway from this post you should remember, it is to not get hung up on any web3 feature or cryptocurrency in particular. It is still the very early days and who knows what the next Google of crypto might be.