Web3? Blockchain? Cryptocurrency? These modern technological terms can be very perplexing because they all seem to blend together. However, each of these terms differs from the other in a number of ways. What are the key distinctions between Web3, blockchain, and cryptocurrency?
Web3 has undoubtedly become a buzzword in recent years. This refers to Web 3.0, the most recent version of the internet. Web3 can be difficult to grasp because it incorporates so many different concepts and technologies. However, we will reduce it to its most basic form.
Web3 combines decentralization, blockchain technology, and cryptocurrency. This internet isn't entirely different from the one most of us use today, but Web3 has some key differences.
We can still use social media, buy products, read the news, and do anything else we want on the internet. However, some key features of Web3 distinguish it from previous iterations, beginning with decentralization.
Web3 is based on the idea of using decentralization to keep things distributed, fair, and transparent. Blockchain technology will be used in conjunction with decentralization. We'll go over blockchains in more detail later, but it's worth noting that they, too, use decentralization and allow organizations to store data in a secure setting.
Web3 is also closely associated with virtual reality, a technology that allows users to immerse themselves in a virtual, digital world by wearing a headset and using controllers.
Another important concept underlying Web3 is ownership. Ownership has long been a source of contestation in the online world, as large corporations (or "big tech") now own vast amounts of sensitive user information. Data breaches, data misuse, and unauthorized data collection have been common news topics over the last decade, prompting many to reconsider the ownership aspect of the internet. So, how does Web3 deal with this?
Web3 focuses on transferring ownership of platforms and data to users. It establishes a permissionless ecosystem in which all users are included in platform decision-making processes. Furthermore, these platforms will operate on a token-based system, with tokens being used for products, services, and community voting (or governance). In comparison to Web 2.0, this internet model provides more equity in control and participation, handing power to the majority rather than the minority.
Blockchain
Blockchains are not the easiest technology to grasp because they operate in a complex manner. On the surface, a blockchain appears to be nothing more than a chain of blocks. Each block contains information and is chronologically connected to the next.
Each block in a typical blockchain that hosts a cryptocurrency stores transactional data as well as information about the block itself. A given block contains the block header, block size, transaction size, and timestamp, as well as the "magic number," hash of the hashPrevBlock, and hashMerklRoot.
Anyone can see the entire ledger of previous transactions on public blockchains. Most cryptocurrencies, including Bitcoin, Ethereum, Dogecoin, Litecoin, and others, exist on a public blockchain, though private blockchains have applications in certain industries.
Another advantage of blockchains is that they are difficult to hack. An attacker would need to control 51% of the overall power to successfully control a blockchain. Because blockchains are made up of hundreds or thousands of nodes, the attacker needs to compromise more than half of the active nodes in order to gain control. This gives blockchain technology an advantage over other methods of data storage and recording.
Blockchains also provide greater privacy to users than traditional financial services. Blockchains will display the sender and recipient's wallet addresses, but that's it. Your name, contact information, and other sensitive information will never be displayed on the blockchain, allowing you to remain anonymous. It should be noted that a skilled cybercriminal could learn someone's identity.
Cryptocurrency
In its most basic form, cryptocurrency is a virtual asset that exists on a blockchain. Consider cryptocurrency to be the groceries, and blockchains to be the conveyor belt.
Cryptography, as the name implies, is a key component of cryptocurrency. It is a coding process that protects data by converting it from plaintext to encrypted text. The encrypted text is random and unintelligible, making it much more difficult to exploit the stored data. This layer of security is what draws many people to cryptocurrency because it provides privacy and a higher level of protection against malware activity.
Cryptocurrencies have no physical representation because they are entirely virtual. In short, cryptocurrencies are nothing more than code. You may have seen images of gold Bitcoin coins, also known as Casascius coins, but these are only used to store virtual Bitcoins and have no inherent market value.
Cryptocurrencies have value and some are worth tens of thousands of dollars. However, the value of a cryptocurrency is almost always determined by demand. If demand for a cryptocurrency falls, the price will almost certainly fall with it. Because there is little regulation surrounding cryptocurrency, scams, fraud, and other crimes are common, with many perpetrators going unnoticed. Governments all over the world are attempting to solve the problem.
There's no shame in being perplexed by crypto, Web3, and blockchains. These technologies are extremely complex in many ways and have only recently entered mainstream discussions. But understanding crypto, Web3, and blockchains and how they differ is entirely possible.
