Let’s start by clearing up a common misunderstanding. Web3 is not a new technology. It’s been around for over a decade, but over the last 12 months, it’s begun to gain widespread popularity. Especially after the recent Ethereum Merge, which has made it more efficient, accessible to a broader range of users, and more environmentally friendly (reducing energy consumption by a whopping 99.95%!).
So, what exactly is Web3? At its core, it uses blockchains, cryptocurrencies, and NFTs (non-fungible tokens). It’s different from technologies that came before in that it’s all about identity, experience, and ownership. These developments alone have enormous potential for shaping our future, so let’s dive in and explore these terms and what they mean for us!
What initially drove the need for this kind of technology was a radical view that ownership shouldn’t be centralised and owned by a single company or an entity – it’s very risky. At its core, blockchain is a way to share information across a distributed network. Instead of just one big company like Microsoft or Google having all your data, it’s shared across the blockchain. This means that your data is not controlled by a single entity, which is a massive revolution in the world of data ownership.
Cryptocurrency is a digital payment system that has disrupted the traditional banking industry. Instead of relying on banks or a centralised entity, it’s a peer-to-peer system that enables individuals to send and receive payments from anywhere in the world. Within Web3, cryptocurrency has several functions, with one of its primary roles being to maintain the network and incentivise users to keep using and running it.
It’s worth noting that cryptocurrency is just one aspect of Web3, and there’s often confusion between cryptocurrency and blockchain. Although the two are related, blockchain is a foundational layer that distributes information rather than storing it centrally. Cryptocurrencies or tokens, on the other hand, live on the blockchain and can be shared, traded, purchased, or moved around.
All of the above evolves into what we now know as NFTs, which are a specific type of token or smart contract that lives on the blockchain and contains information. In most cases, this information is attached to a picture, and because blockchain is immutable and always true, we can use this technology to prove that a particular picture is an original copy.
This feature of NFT technology has lent itself nicely to the art world. If you want to know that you own the original copy of a piece of artwork, then NFTs have the characteristics to let you prove that. And because digital assets can be traded, artists can earn money by selling these pieces of artwork. This is why many artists view Web3 as the future, as they can create art collections and release them so people can buy and own original pieces of art.
However, NFT technology has many other use cases beyond art. This one source of truth that NFTs offer can be applied to many aspects of our daily lives. For example, NFTs can be used in our passports, driving licences, or other forms of identification.
As Web3 is in a developmental stage, businesses starting to build their Web3 strategy now will grow with it and will be the first to capitalise on its countless opportunities. Let’s build the digital products and services of the future.
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