Simplified — Blockchain, Web 3, NFTs & The Metaverse: Part 1
Months ago Twitter was buzzing with words like “Blockchain, Web 3, NFTs, and The Metaverse”. We saw lots of people change their bios to “Web 3 Enthusiast” and “NFT Artist”. Stories of individuals becoming millionaires overnight by selling their NFTs for millions of dollars became the order of the day. Graphic designers and portrait artists seemed to have found their new passion and were only interested in one thing— NFTs.
In October 2021, when Zuckerberg announced that the parent company “Facebook” was changing its name to “Meta”, the NFT craze seemed to explode even more. This was as a result of Zuckerberg’s explanation that the name change was to reflect the company’s growing ambitions beyond social media and capture its vision for working and playing in a virtual world — “The Metaverse”. At this point, everyone seemed to have an opinion on this technology and where it was headed, and there was no shortage of “hot takes” scattered all over social media.
It is evident that we are now fully in a digital and technological era, and so we are constantly surrounded by so much tech news and conversations. Now, if you’re just a regular person like me, then this probably all seems too much and somewhat confusing. Maybe you’ve tried keeping up with the latest tech trends, but after a while you got bored and overwhelmed. Yeah, I know. But don’t worry, I gatchu.
This article will be in four parts, one for each of these concepts. Here, I’ll do my best to explain and break down these terms, so you’re fully equipped to analyze and digest all tech gists and you may occasionally start dishing out your own “hot takes” 😉. Cool?
Okay, let’s get to it then!
Blockchain
Prior to the invention of Blockchain, there were many attempts to create digital currencies in the past, but they always failed. The prevailing issue, you may ask? Trust.
Imagine Anna* decided to create a new digital currency called ‘A-Dollars’. How could we trust that Anna won’t give herself a million ‘A-Dollars’, or transfer my A-Dollars into her wallet?
Well, 20 years ago we couldn’t trust that. Which is why digital currencies were hardly a thing then. Today, we have over 18,000 digital currencies that can be trusted and it’s all thanks to blockchain. Currencies like bitcoin that run on blockchain also can’t be faked, hacked or double spent (spent more than once)— so people that own these currencies can trust that they have some value.
So what is Blockchain?
Blockchain was created as a response to the trust crisis that swept the world in the wake of the 2008 financial crisis. The blockchain system was presented as a “trustless” alternative to existing financial institutions and even governments.
Blockchain is a collection of records that are linked to each other and make it difficult or impossible to change, hack, or cheat the system. Unlike most normal databases, like SQL, where someone in charge can change or manipulate the data, blockchain is different because nobody is in charge. Blockchain owes its name to the way it stores transaction data — in blocks that are linked together to form a chain. As the number of transactions grows, so does the blockchain. Blocks record and confirm the time and sequence of transactions, which are then logged into the blockchain within a discrete network governed by rules agreed on by the network participants.
Blockchain is a shared, immutable (which means irreversible) ledger that facilitates the process of recording transactions and tracking assets in a business network. This asset can be tangible (a house, car, cash, land) or intangible (intellectual property, patents, copyrights, branding). Virtually anything of value can be tracked and traded on a blockchain network, thereby reducing the risk and cutting costs of all processes involved.
For example: Keeping records of transactions is a crucial part of any business. Payments, registrations and verifications are often handled in-house or through third parties like brokers, bankers, or lawyers, etc. The presence of the middle parties increase processing time (24 hours, 3 working days, etc) and costs for businesses, but are eliminated through blockchain as transactions are made automatically and immediately.
Okay, but why is there so much buzz and hype around Blockchain?
Simply because businesses have found a better way to function. Businesses run on information, and the faster this information is received and the more accurate it is, the better. In our increasingly technology-dependent world, larger transactions occur over digital networks and these are susceptible to cyber crimes. Most traditional processes require the need for a middleman, but blockchain avoids this long process and facilitates faster movement, thereby saving businesses’ time and money.
Let’s take an easy instance.
Assume Anna* wants to transfer money to you from her bank account. She would log into her bank app and transfer the amount to you using your account number. When the transaction is complete, your bank updates their transaction records and you receive a credit alert. Right?
It seems simple enough, doesn’t it? However a couple of things could go gone wrong in processing this transaction:
- Anna’s* bank might be experiencing technical issues (I’m sure we have all experienced this!)
- Anna’s* account could have been hacked
- Her transfer limits of the day could have been exceeded
- The transaction could be debited from Anna’s* account, but never credited to yours.
- An employee in the bank or a hacker could have tampered with the transaction
- Additional transfer charges could make the transfer unsuccessful.
There are so many other things that could prevent the transaction from being completed instantly, and businesses don’t have time to waste. Additionally, individuals and enterprises both experience online threats such as identity theft, credit card fraud, and financial hacks. As such, the need for a network that allows us to transfer value in a trustless environment has become more apparent. This is essentially where the Blockchain technology becomes useful.
The benefits of blockchain stem mostly from the trust it promotes and its built-in features, such as transparency, privacy, security, and data integrity. Trust allows users to engage with unknown parties, broaden markets, and increase demand for products and services, thus boosting their earnings.
In recent years, major organizations like IBM, Walmart, and Visa loudly declared flourishing blockchain implementations, and IT giants such as Amazon Web Services (AWS), IBM, Microsoft, Oracle, and SAP have also thrown their support behind it wholeheartedly.
With the advancement in fintech, financial institutions and government central banks are exploring blockchain technology as a foundation for virtual currency exchange. It’s also the foundation for smart contracts to transfer and preserve intellectual property rights in various industries, such as the legal and entertainment industries.
Indeed, several businesses are considering blockchain-based applications as a safe and cost-effective solution to create and manage a distributed system that retains records of all digital transactions. As a result, blockchain is rapidly seen as a solution for securely recording and exchanging data among numerous organizations.
Still here? Good. Let’s talk a bit more.
Blockchain operates on a distributed, decentralized, and peer-to-peer (P2P) monitored bases. Each transaction carried out on the blockchain is irreversible, nearly immediate and virtually masks the identities of senders and receivers. The blockchain network can track orders, payments, accounts, production, and much more, and because members share a single view of the truth, you can see all details of a transaction end to end, giving you greater confidence, as well as new efficiencies and opportunities.
Interestingly, most people assume Blockchain and Bitcoin can be used interchangeably, but in reality, that’s not the case. Blockchain is the technology capable of supporting various applications related to multiple industries like finance, supply chain, manufacturing, etc., but Bitcoin is a currency that relies on the Blockchain technology to be secure. However, the first notable application to effectively employ blockchain was Bitcoin. As a result, blockchain has become synonymous with Bitcoin and its equivalents, such as Dogecoin and Bitcoin Cash (BCH).
So that’s it! I hope you now have a better and simpler understanding of the blockchain technology and its use cases. Stay tuned for Part 2 of this article, where I’ll announce the next tech concept and take a similar approach towards making it sound not-so-complex.
“Technology is the campfire around which we tell our stories” — Laurie Anderson.
