It seems that anytime someone mentions ‘Web3,’ they think of Bitcoin, digital monkeys, or ‘getting rich quick.’ If that’s you, I don’t blame you for thinking this way. Our Social Media feeds are littered with content surrounding Bitcoin highs and lows or celebrities pushing the next big NFT project.
For myself, Bitcoin, amongst many other cryptocurrencies and Web3 projects, has acted as an avenue for me to invest in blockchain because I believe this innovation will shape the way businesses will build on the internet in the future.
If you want to get involved in the business of Web3, I believe this is what you need to understand before jumping in.
Blockchain is the foundation for everything Web3 related
If you don’t understand or believe that blockchain technology is going to play a major role in the way businesses use the internet today, then investing any time or resources into Web3 is probably not a good decision.
The blockchain is a decentralized network that validates and stores the movement of data between two entities and stores this information on something called a ledger. The way I like to imagine a ledger is if your credit card provider was to have a website that listed every single transaction that has been processed; Similar to your personal credit card statement but for everyone. If you wanted to see whether or not Jimmy Johnson actually bought something himself, you could go to this website and see if he actually did. The ledger acts as a source of truth which plays a major role in the value proposition of a blockchain.
Where the ‘decentralization’ comes into play is that when I use my credit card to buy a coffee, my Credit Card provider confirms whether or not I can pay for that coffee. On the Blockchain, instead of a single entity such as Visa, confirming the transaction, you would have a network of individuals like you or me, confirm the transaction and move the funds from one place to another (This is what ‘Mining’ is).
Here is a poorly designed graphic that demonstrates the difference between a transaction on a centralized vs. decentralized network…
The Web3 Hierarchy
I believe because the way we purchase Bitcoin and Ethereum is pretty much the same, the average person doesn’t actually know, or even realize, there is a drastic difference between the two. In fact, I believe it’s the reason that the price of Bitcoin and Ethereum are almost spitting images of themselves (ie. when Bitcoin drops, Ethereum drops)… but that’s a conversation for another day.
In the grand scheme of things, Bitcoin and Ethereum are polar opposites but are the two leaders in their respective categories of decentralized finance (deFi) and decentralized applications (dApp) which are two applications of the blockchain.
This is an important first step, in my opinion, to make a smart Web3 investment.
Key differences between DeFi and dApps
DeFi (decentralized finance), refers to financial instruments that don’t rely on a single institution to act as the source of truth between two entities. This is primarily what cryptocurrencies like BitCoin and DogeCoin fall under.
dApps (decentralized applications), combine the decentralized nature of moving data between two entities with a user interface that the average person can utilize. This is what an NFT (Non-fungible Token) falls under.
So for example, if we used your average bank as an example, this is what it would look like in Web3. The banking app on your phone or if you login on your desktop and send an e-transfer; that would be a dApp. The actual currency, verification, and movement of funds from myself to someone else, that’s deFi.
My Opinions and Take on Web3
When writing this, I did my best to stay as unbiased as possible while using my own definitions of these concepts, however, if you are interested in my opinions and what I think, here are a couple of ‘Hot Takes’ I have within this Web3 space:
- The only way Bitcoin, or any cryptocurrency, will replace USD, CAD, or any first-world fiat is if we lose trust in our government to not value the dollar for what it is worth (albeit, inflation rates in North America do make me question this).
- Most people involved in DeFi are the equivalent to Day-Traders.
- The NFT space is the equivalent to the Art Resale market.
- Digital Art is only a single use-case for NFT’s and NFT’s are only one use-case of a decentralized application.
- NFT Technology is the first mainstream adoption of a dApp and will be the driving force of mass adoption in the business community.
- More definitive regulations around Web3 is a necessary evil for mass adoption.
- This concept of ‘decentralization’ on the internet has existed for ages. When we torrent movies through Pirate Bay or downloaded songs from LimeWire, you didn’t get it from a single source but rather, a ‘peer-to-peer’ network (Thanks for that one, Aaron).
- Web3 should really be called Web2.5.
- There will likely never be a completely decentralized network. Even in a ‘DAO’ (a decentralized autonomous organization), you still have a centralized source that is deciding what to vote on.
Final Thoughts
I got into the world of cryptocurrency back in 2017 and it’s been nothing short of an emotional rollercoaster. The peaks and troughs of this space is not for someone who has a low-risk tolerance. But I never got into this because I was hoping to get rich quickly; I believe in the blockchain and that was what I was investing into.
Right now is a fun time to be learning and getting involved in the world of Web3 if you’re an early adopter. If you want to chat or collaborate, connect with me on twitter.
