Web3? Blockchain? Cryptocurrency? These modern technological terms can be very confusing, as they all seem to bleed into each other. But each of these terms differs from the next in various ways. So, what are the main differences between Web3, blockchain, and cryptocurrency?
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What Is Web3?
Web3 has certainly been a buzzword in recent years. This refers to the most recent iteration of the internet, known as Web 3.0. Web3 can be a little tricky to get your head around, as it incorporates many different concepts and technologies. But we’re going to break it down into its simplest form.
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In short, Web3 integrates decentralization, blockchain technology, and cryptocurrency. This kind of internet isn’t entirely foreign to the one most of us use today, but Web3 has some key differences from Web2. We can still use social media, buy products, check the news, and do everything else we enjoy online. But some core characteristics of Web3 differentiate it from previous iterations, starting with decentralization.
You may have heard of decentralization before, especially in terms of cryptocurrency and Web3. This is a model that networks, platforms, and applications can follow. In a decentralized system, power and data are spread across multiple connection points (also known as nodes), meaning that no one entity ever has the majority of data or power within the system. It not only prevents corruption but stops server crashes causing total shutdowns. If one node fails, this will not affect the other nodes, and the network can keep functioning as normal.
The idea behind Web3 is to use decentralization to keep things distributed, fair, and transparent. Using decentralization will also incorporate blockchain technology. We’ll discuss blockchains in more detail a little later, but what’s worth noting here is that blockchains also use decentralization and allow organizations to store data in a secure setting.
Web3 has also been heavily associated with virtual reality, a technology that allows users to immerse themselves in a virtual, digital world using a headset and controllers. Of course, virtual reality has been around for decades, but its use in Web3 has sparked some interesting ideas and a fair amount of controversy.
Another key concept behind Web3 is ownership. Ownership has long since been a point of contention in the online space, as large companies (or “big tech”) now own huge amounts of user data, much of which is sensitive. Data leaks, the misuse of data, and the unauthorized collection of data have been common news topics over the past decade, which has caused many to reexamine the ownership element of the internet. So, how does Web3 tackle this?
Web3 focuses on handing ownership of platforms and data over to the users themselves. It creates a permissionless ecosystem in which all users are included in the decision-making processes of platforms. What’s more, these platforms will function via a token-based system, which involves using tokens for products, services, and community voting (or governance). Compared to Web 2.0, this internet model offers more fairness in control and participation, giving power to the majority, not the minority.
What Is a Blockchain?
Blockchains aren’t the easiest technology to grasp, as they’re complex in how they work. However, on the surface, you can think of a blockchain as just that: a chain of blocks. This image helps in understanding how blockchains work. Each block contains information and is linked chronologically to the next.
In a typical blockchain that hosts a cryptocurrency, transactional data is stored within each block and information about the block itself. The block header, block size, transaction size, and timestamp are all included in a given block, as well as the “magic number,” the hash of the hashPrevBlock, and the hashMerklRoot.
On public blockchains, the entire ledger of previous transactions can be viewed by anyone. Bitcoin, Ethereum, Dogecoin, Litecoin, and most other cryptocurrencies exist on a public blockchain, though private blockchains also have applications in certain industries.
Another great thing about blockchains is that they’re hard to hack. To successfully control a blockchain, an attacker would need to control 51% of the overall power. Because blockchains consist of hundreds or thousands of nodes, the attacker must compromise over half of the active nodes to gain control. This gives blockchain technology the edge over many other forms of data storage and recording.
Blockchains also give users a higher level of privacy than traditional financial services. Blockchains will display the wallet address of the sender and recipient, but that’s where it ends. Your name, contact details, and other sensitive information will never be displayed on the blockchain, which helps you maintain your anonymity. It’s worth noting that a skilled cybercriminal could uncover someone’s identity via their wallet address, but this isn’t very common.
There are also privacy coins you can use if you want your wallet address to remain private and untraceable.
What Is Cryptocurrency?
In the simplest terms, cryptocurrency is a type of virtual asset that exists on a blockchain. You can think of cryptocurrency as the groceries and blockchains as the conveyor belt.
As the name suggests, a core element of cryptocurrency is cryptography, a code-making process that protects data by converting it from plaintext to encrypted text. Encrypted text is random and indecipherable, making it much harder to exploit the stored data. This layer of security is what attracts many to cryptocurrency, as it offers privacy and a higher level of safety against malicious attacks.
Because cryptocurrencies are entirely virtual, they don’t have any physical representation. In short, cryptocurrencies are simply code and nothing more. You may have seen pictures of golden Bitcoin coins, also known as Casascius coins, but these are used to store virtual Bitcoins and have no inherent value in the market itself.
Cryptocurrencies can and do have value, with some worth tens of thousands of dollars each. But the value of a cryptocurrency is almost always subjective to the demand. If the demand for a crypto plummets, the price will very likely plummet along with it. There is also very little regulation surrounding cryptocurrency, meaning scams, fraud, and other crimes are common, with many perpetrators never being identified. Governments around the world are looking to crack down on this issue, but the prevalence of crypto crime is worth keeping in mind.
New Technologies Can Be Tough to Grasp
There’s no shame in finding crypto, Web3, and blockchains confusing. These technologies are highly complex in many ways and have only entered mainstream conversations in recent years. But it is entirely possible to understand crypto, Web3, and blockchains and how they differ, and we’re here to help you do it!