What is Web3 and Cryptocurrency?

Published: January 9th, 2022

I wanted to preface this article with a bit of information about myself, so you understand my background and knowledge.

I’ve been interested in Cryptocurrency and the web3 space since about 2015/2016, where I dabbled with Bitcoin, Ethereum and a few other projects.

I got back into the space in a more serious way towards the end of 2019 and since then have closely followed the progress towards ETH 2.0, the merge, DeFi (Decentralised Finance) and NFT’s (Non-fungible tokens).

It’s such a busy space now that’s it’s pretty impossible to stay up to date with everything, so now I follow a few projects, dip in and out of their Discord servers, and try and wade through Crypto Twitter to stay in the loop.

I’m writing this as an overview of Web3, to help people understand the space better and to solidify my knowledge so I can articulate it better. This is no way an in-depth look, just a quick overview of the space and a few key areas that I think are important to understand.

I’ve also mentioned a few projects at the end of the article that I personally think are interesting.

What is Web 3.0?

I think @eshita put this best…

  • Web 1.0: read only
  • Web 2.0: read / write
  • Web 3.0: read / write / own

To go into a bit more depth if you’re not sure what that means….

  • Web 1.0: Newspapers, magazines and articles online. Maybe the start of online shopping.
  • Web 2.0: The creators/social/centralised web. Think Facebook, Instagram, YouTube, Twitter.
  • Web 3.0: This is the decentralised web. You own your digital identity and products. Things like Ethereum Name Service. It’s being built right now.

What is the Centralised and Decentralised Web?

When people talk about the centralised web, it refers to the issue that these large companies like Facebook, Twitter, YouTube, Steam, Twitch, OnlyFans, Reddit, Instagram are the actual owners of your following/audience/business.

We are the product; they track us and store data about how we use their websites. Their game is to keep our attention for as long as possible to sell targeted ads.

All that user data concentrated in the hands of a few creates the risk that our data will be hacked and abused by baddies and governments. And it is.

A decentralised web would be a more distributed web. No company, individual or state can control its use. There would be no gatekeepers, and everything would be more interoperable.

For this to happen we need the underlying communication protocols, networks, and services to be decentralised and distributed as well.

This kind of web will help stop things like the Great China Firewall, the Facebook–Cambridge Analytica data scandal, Edward Snowden’s Global surveillance disclosures.

Perhaps with a more interoperable internet, you could even easily move your following from Twitter or YouTube to another platform or provider. You would own your following; you would own the value that you’ve built.

“Web 2.0 is the transmission of information but web3 is the transmission of values.” - Pascal Gauthier, CEO of Ledger

What Is a Blockchain and a Smart Contract?

A blockchain is essentially just an open (or public) distributed ledger.

Smart contracts are essentially programs stored on a blockchain that run when predetermined conditions are met.

I’ve embedded these short videos below, that I think do a very good job of explaining these ideas and in a more engaging way than reading about it.

What is Layer-1 and Layer-2?

A Layer-1 network refers to a blockchain (like Ethereum or Bitcoin, Litecoin, Binance Smart Chain, Solana, Cardano, etc) while Layer-2 refers to a network or technology that operates on top of an underlying blockchain protocol to improve its scalability and efficiency.

Layer-2 examples are zkSync, Optimism, Arbitrum and Loopring. They’re available to use right now and more and more protocols are adding support.

Total Value Locked on Layer-2

Source: l2beat.com

What is De-Fi?

In short, decentralised finance is traditional finance on the blockchain using cryptocurrencies. This includes Stablecoins (a token that is pegged to an external asset, like the US dollar). Lending platforms like Aave, Alchemix and much, much more.

Check out the protocols I’m interested in (mentioned at the end of the article) to get an idea about what’s possible in this space.

Total Value Locked in De-Fi Protocols

Source: defipulse.com

What is a DAO?

A decentralized autonomous organization is an entity with no central leadership. Decisions get made from the bottom-up, governed by a community organized around a specific set of rules enforced on a blockchain.

I think this is a great idea, but I don’t think that everything can be a DAO, and I don’t think that every decision can be made via a governance vote (owners of the governance token).

The ENS DAO made a constitution, or binding set of rules that determine what governance actions are legitimate for the DAO to take.

This is a great way for the organisation not to be bogged down by having to vote on every single action or change that DAO members want to make, but still have governance members agree to the general direction of the DAO.

Interesting Crypto Projects

Here are a few projects that I think are very interesting. I may come back and add to these at some point.

Of course, don’t randomly invest in anything just because you read about it here. Do your own research.

  1. PoolTogether - PoolTogether is a crypto-powered savings protocol based on Premium Bonds. Save money and have a chance to win every week.
  2. Alchemix - Self-repaying loans! Add your collateral/assets and take a loan of the future yield upfront.
  3. RocketPool - Decentralised Ethereum staking protocol.
  4. Olympus - Enabling protocol owned liquidity for DAO's.
  5. Curve and Convex - Exchange liquidity pools.
  6. Tokemak - Decentralized liquidity providing/market making protocol and tokenised liquidity.
  7. Gitcoin - Where communities unite to build & fund the open web.

Featured Photo by Behnam Norouzi

Categories: Web3

George McEntegart

I'm a New Zealand-born web developer based in North Devon, UK. I love to help people grow their brands and businesses.