hello friends 🙋🏾♂️
I originally put this together as a resource for a few friends so it's largely oriented around their most common web3 and crypto questions/misconceptions. 70%+ of it is curated from content created by people 10x smarter than me. I’ll do my best to update it from time to time and feel free to comment questions directly on the google doc or DM me with any concerns / corrections.
If you’re entirely new to Web3 and or the world of crypto, I hope this guide is a helpful start to your journey down the rabbit hole. Have fun and always DYOR.
* Jay 🏄🏾♂️ 🏄🏾♂️
* Last spanish version (8-Oct-2021) by Daniel Zárate based on this paper: Web3 Starter Pack” por JAY -Spanish Version
What the fuck is “Web3”?
It’s probably most helpful to think about Web3 in the context of previous internet paradigms, Web1 and Web2:
Web1 (1980s - early 2000’s) The first phase of the Internet, Web1, was mainly about providing the everyday consumer with online content and information.
* As consumers could only read information or content online, and not yet interact with it, Web1 was incredibly static.
* When you think about Web1, think Internet Explorer, Yahoo, or Netscape. While web1 was read-only, the companies we associate with web1 were built on open protocols (meaning pretty much any person or organization could build on the internet and know they were subject to the same rules as the next person or organization).
Web2 is the version of the internet most of us know and use today. Where Web1 was static and “read-only,” Web2 was “read-write,” and interactive. Under Web2, the internet became more usable: web2 was dynamic and users could consume, interact with, and create content on the internet themselves.
* Along the way, the internet became largely dominated by the four behemoths we know today as Apple, Amazon, Facebook, and Google. Web2 also saw an explosion in the use of smartphones, and most of internet use was through mobile apps and hardware built by these companies. While this meant more people could participate in the internet, it also meant the internet was becoming increasingly controlled by the leading digital platforms.
* Why is this a problem? In the centralized internet we know today, Apple can take a 30% cut on all paid-app downloads and in-app purchases, Twitter and Facebook can de-platform the POTUS, and the everyday consumer has less privacy, security, and control over their online information than ever before.
Web3, the future internet we’re moving towards, is a decentralized internet. Under Web3, the internet is shared online and governed by the collective “we,” rather than owned by centralized entities.The Web3 world is one that has open-source protocols at its foundation. Web3 is about rearchitecting internet services and products so that they benefit people rather than entities.
Web3 analogs (from left to right): Showtime, Audius, Mirror, ___, Filecoin & Arweave, Livepeer, The Graph, Decentraland
Learn more: Why Decentralization Matters (Chris Dixon), Web2 vs. Web3 (Ethereum.org), The Value Chain of the Open Metaverse (Packy McCormick)
Crypto basics: let’s start from Square 1…
What is a blockchain?
Blockchain is an immutable, digital ledger that facilitates the process of recording transactions and tracking assets in a network; it is updated and shared across many computers in a network.
How does a blockchain work?
Each transaction that occurs is recorded as a “block” of data. Each block is connected to the ones before and after it, forming a chronological “chain” of data as an asset moves or ownership of an asset changes. The blocks confirm the exact time and sequence of transactions, and the blocks link securely together to prevent any block from being altered or a block being inserted between two existing blocks. Each additional block strengthens the verification of the previous block and hence the entire blockchain, making the blockchain immutable.
But how does it really work?
Blockchain networks are driven by systems of aligned incentives. A well-functioning public blockchain requires a community of users, node operators, developers, and miners, who all play roles in a mutually beneficial network ecosystem.
A blockchain is maintained by a distributed network of parties (“miners” or “validators,” depending on the kind of chain). These parties produce blocks jointly via consensus. In simple terms, the parties vote on how to process a set of transactions—or in other words, how to construct the next block. The block with majority support is the one that is written permanently onto the chain.
Learn more: The Technology That Underpins the Cryptocurrency Industry (Gemini)
What are the benefits of blockchain technology?
Trust: Blockchain’s decentralized nature means that information is stored and synchronized across a number of computers and is tamper resistant, creating trust in the data. Consensus on data accuracy is required from all network members, and all validated transactions are immutable because they are recorded permanently. No one, not even a system administrator, can delete a transaction.
Dive deeper: What Does Trustless Mean? (Gemini)
What are nodes?
Nodes are the “boots on the ground” of blockchain networks. They are the physical computer hardware that runs their respective platform’s blockchain software. Nodes serve several critical functions:
1. They vote on and validate blocks of transactions
2. They communicate with other nodes to agree on the state of the blockchain
3. They store the history (state) of the blockchain as a universal source of truth
4. They are the endpoints of the network that enable users to access and interact with applications built on the network.
What are smart contracts?
Smart contracts are programs (chunks of code) stored on a blockchain that automatically execute when predetermined conditions are met. Smart contracts are typically used to automate execution of an agreement so that all participants can be immediately certain of the outcome, without any intermediary’s involvement or time loss. Smart contract applications include everything from games to logistics tools to DeFi dapps.
Learn more: Intro to Smart Contracts
Let’s go a bit deeper...
Proof of Work
* Under PoW, a distributed network of miners around the world race to solve increasingly difficult cryptographic problems in order to create a new block on the blockchain containing the new transactions. Solving these problems requires a lot of energy. When a block is entered into the blockchain, the transactions in it officially become part of the record. Miners who successfully create a block are rewarded with freshly-minted tokens and all of the transaction fees within the block.
Proof of Stake
* Under PoS, participants (validators) deposit a certain number of native coins as stake into the network of validator nodes. If a node is chosen to validate the next block, they'll check that all the transactions within the block are valid. If everything checks out, the node signs off on the block, and adds it to the blockchain. As a reward, the node receives the fees associated with the transactions inside the block and freshly minted tokens. If a validator approves fraudulent transactions, they’ll lose a part of their stake. As long as the validator’s stake is higher than what they receive from transaction fees, they can be trusted to correctly do their job.
Proof of History (technically not a consensus mechanism)
* Proof of History uses cryptographic timestamps to sequentially order each transaction that occurs on Solana to provide verifiable ordering without requiring all nodes to agree simultaneously.
Learn more: PoW, PoS, PoH
What is ~Ethereum~???
I’m so glad you asked.
Ethereum is a decentralized, blockchain-based global supercomputer that launched in 2015 to serve as the foundation for an ecosystem of interoperable, decentralized applications (dApps) powered by token economies and automated smart contracts.
* Assets and applications designed on Ethereum are built with self-executing smart contracts that remove the need for a central authority or intermediary.
* The network is fueled by its native cryptocurrency ether (ETH), which is used to pay transaction fees on the network.
* Open-source, programmable, private, and censorship resistant, Ethereum forms the backbone of a decentralized internet, which has already spawned significant innovation like Initial Coin Offerings (ICOs), stablecoins, and decentralized finance (DeFi) applications.
Learn more: Ethereum White Paper, Own the Internet: The Bull Case for Ethereum (Packy McCormick)
What is composability?
Composability allows anyone in a network to easily build on top of and around existing products and services to devise new use cases; use cases that many did not know were possible until they were invented. (Think about Excel, and how chaining functions creates an enormous number of potential computational pipelines, add Excel’s power and flexibility grows with each additional function.) Ethereum’s composability has allowed users a high degree of freedom in being able to affect relatively complex transactions under one security framework, on one chain, and with relative ease.
What is DeFi?
DeFi refers to “decentralized finance,” an effort to transform the financial-services industry by making transactions faster, cheaper, and more secure.
Think of DeFi in layers:
1. The blockchain – Ethereum contains the transaction history and state of accounts.
2. The assets – ETH and the other tokens (currencies).
3. The protocols – smart contracts that provide the functionality, for example a service that allows f