Cryptocurrencies and WEB3: what are they and how they connected?

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Dec 3, 2023
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Cryptocurrencies and WEB3: what are they and how are they connected?

In the era of Web 1.0, the internet only provided the ability to view content, while Web 2.0 opened the path to creating it. Currently, we are approaching a new stage in the network's development — Web 3.0, often referred to in the digital assets domain as Web3. Web3 promises users control over their data and belongings in a digital environment, easy online transactions, and a higher level of personal information management.

Blockchain technologies and cryptocurrency ecosystems are already providing working solutions for Web3. For instance, users have the ability to conduct peer-to-peer (P2P) transactions and store digital assets in crypto wallets. Many blockchain projects have a decentralized structure and are accessible to a wide range of users.

Web3: the digital assets and decentralization revolution in the Internet

Electronic assets represent a potentially integral part of the new stage of the internet, known as Web3. This transitional phase is expected to correct the flaws of the current internet, such as the concentration of power in the hands of a few centralized social networks and the improper use of users' personal data. Thanks to decentralized and accessible blockchain technology, a more even distribution of communicative powers, currently under the control of central authorities, is possible.

Although in Web3 digital assets can be used for making payments, they can also function as tokens with diverse capabilities in digital economic systems. Blockchain technologies and cryptocurrencies contribute to the formation of a more community-oriented Web3, involving decentralized autonomous organizations (DAO).

Distinctive Features of Web3 Compared to Web2

The main stages of internet development are usually divided into three phases: Web1, Web2, and Web3. In the first era of Web1, users had no ability to modify online data or upload their own content to websites. At that time, the internet consisted of static HTML pages with simple one-way interactions, such as reading information forums.

Web1 served for content consumption and limited online interactions. Web2, on the other hand, provided users with a more interactive online space with the ability to actively participate in content creation. As these forms of online interaction primarily depended on social networks, Web2 gave rise to new categories of centralized technological giants.

The current structure of Web2 is continually evolving in response to its identified shortcomings. For instance, internet users are increasingly concerned about data tracking and control, as well as limitations on freedom of expression.

The dominance of centralized companies is especially evident when they start blocking specific users and organizations on their platforms. Web2 companies also use accumulated information to retain users on their platforms and create targeted advertising, which generates profits for external entities. Such economic incentives prompt large businesses to act against the interests of users.

The concept of Web3 represents the next stage in the evolution of the internet. At this stage, online platforms are moving towards decentralization, eliminating the need for trust and making them accessible to everyone. This shift elevates digital ownership, digital payments, and resistance to censorship to a new level for online products and services.

Blockchain and cryptocurrencies are potentially key technologies of Web3: the decentralized nature of these networks allows every participant to record information in the chain, tokenize assets, and create digital identification.

The Role of Blockchain and Cryptocurrencies in the Web3 Concept

Decentralization. Redistributing power and data becomes a critical task to overcome the main issues of Web2. Implementing blockchain and cryptocurrencies in Web3 will provide an opportunity to achieve decentralization, facilitating a broader distribution of information and control. Within Web3, it is possible to use publicly accessible distributed ledgers based on blockchain to increase transparency and decentralization.

Accessibility. Innovative blockchain initiatives replace outdated structures of traditional companies by providing open-source code for projects. The broad openness of applications built on blockchain ensures free access and interaction with them for anyone, regardless of location, without any restrictions.

Trustless System. Blockchain and cryptocurrency eliminate the need to rely on third-party institutions, such as a bank or a separate intermediary. Web3 users can conduct transactions, trusting their data exclusively to the network.

Payment gateway opportunities. In Web3, cryptocurrencies offer efficient means for digital payments. These digital assets can improve the current expensive and complex payment infrastructure of Web2, as they are free from geographical restrictions and do not require intermediary brokers.

New horizons of ownership. Cryptocurrencies already provide tools, such as non-custodial crypto wallets, which allow users to independently store funds, bypassing intermediaries. Users also have the opportunity to connect wallets to decentralized applications for diverse usage of their funds or to showcase their digital assets. Anyone interested can verify the ownership rights of these funds and assets through a transparent public ledger.

Resistance to restrictions. The structure of the blockchain ensures immunity from censorship, where no single party can unilaterally alter the transaction history. Once data is entered into the Ethereum blockchain, its modification or deletion is practically impossible. This aspect serves as a means of protecting users from governmental and corporate forms of censorship.

The Essence of Blockchain and Cryptocurrencies in the Perspective of Web3

Web3 can rely on various technologies not limited to blockchain or cryptocurrency. For instance, innovations such as Augmented Reality (AR), Virtual Reality (VR), the Internet of Things (IoT), and the metaverse can be significant for the evolution of the internet. While blockchain may provide the primary infrastructure for Web3, these technologies and solutions will contribute to creating a more engaging internet space and strengthening the connection with the real world.

The Internet of Things (IoT) will open opportunities for connecting diverse devices through the network, augmented reality (AR) will bring digital visual elements into the surrounding world, and virtual reality (VR) will form virtual spaces with objects represented as digital assets. Ultimately, the integration and interaction of these technologies will aid in creating a unified digital world in Web3 - the metaverse.

Cryptocurrency can provide digital internal means of exchange and many other functions. Utility tokens will offer diverse application options necessary for the development of Web3. In addition, Non-Fungible Tokens (NFTs) will serve to verify identity and ownership rights in the digital domain while maintaining control over personal data.

The Future of Web3 with Cryptocurrencies and Blockchain

Blockchain technology is likely to become a fundamental building block for Web3, yet users might not be fully aware of it. If blockchain-based applications are user-friendly and intuitive, we will use them without thinking about their underlying infrastructure, just as we don’t ponder the data servers and internet protocols underlying social networks.

NFTs provide the opportunity to showcase digital collectible items to other users and create unique digital identities. These non-fungible tokens can also be applied in other areas, including supporting processes in online games.

Thanks to blockchain and cryptocurrencies, there is a shift in the mechanisms of coordination and the execution of collective actions by Web3 users through the use of Decentralized Autonomous Organizations (DAOs). DAOs bring together people with common interests without the need for a central decision-making body. Instead, token holders participate in voting and make decisions collectively. All activities and votes are transparently displayed on the blockchain. Through these measures, DAOs can make Web3 more decentralized, transparent, and community-oriented.

Web3: the evolution of the Internet through the prism of blockchain and cryptocurrencies

Web3 is aimed at solving significant problems of the modern internet and reducing the influence of technological giants. Currently, it is merely a concept; however, the technologies likely to form the foundation of the future version of the internet are already under development.

Blockchain and cryptocurrencies are expected to play a key role in the Web3 revolution, as they provide decentralized and open interaction in a trustless system. Moreover, blockchain technology and digital assets can integrate with other important components of the internet, such as augmented reality (AR), virtual reality (VR), and the Internet of Things, collectively suggesting the most promising solutions.

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