Explaining the evolution of the internet (web3) and its layers to a five-year-old.

By akohad Dec28,2022


Many people believe that web3 is the next generation of the internet, one that is decentralized and puts the power back into the hands of the users.

Web3 enable us to build a new kind of internet that is open, transparent, and secure.

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Back in the days of web1, the internet was much simpler, with fewer websites and ways to use it.

Web2 is how most people access the internet today. You use it when you go to a website, such as Google or Facebook, to look up information or talk to your friends online. Web2 is about connecting people to each other and to information.

In the traditional web, users don’t have much control over their online experiences or the information they share. They have to rely on companies and organizations to store and manage their information, and they often have to agree to terms of service that give these organizations a lot of control over how they can use the internet.

Web3 is different because it gives users more control over their online experiences and the information they share. It enables this through the use of decentralized applications (dApps) and decentralized storage solutions, such as IPFS. Social media dApps that run on decentralized networks allow users to interact with them directly without the need for a centralized intermediary. This grants users greater control over their data and how they use the application.

Using web3 for payments allows you to utilize cryptocurrency to send and receive money directly from other individuals. Imagine you have an online business, and you take payments directly from your customers without incurring fees from Stripe, PayPal, or other payment gateways. If you are a content creator, web3 can give you control over the ads and sponsors without YouTube or Facebook taking cuts from your profits.

In a nutshell:

Web1 — Read only

Web2 — Read and write

Web3 — Read, write, and own

In this post, we will explore the various layers of Web3 and how they work together to create a new type of digital economy.

The blockchain is the foundation of web3, providing the infrastructure for all the other layers to build upon. A blockchain is a distributed ledger that records transactions on multiple computers. It is called a “chain” because it consists of a series of blocks, each of which contains a set of transactions. These blocks are linked together in a chronological order, creating a tamper-evident record of all transactions.

Wait that sounds complicated; Let’s do it in ELI5, shall we?

A blockchain is a special kind of computer program that helps keep track of things. Imagine that you and your friends are playing a game where you each have a list of how many bubblegum stickers you are collecting. You can trade stickers with each other, but you want to make sure that everyone’s sticker list is accurate and up-to-date. You’ll need a paper to write on to track and take notes.

This is how it works:

1. Whenever someone trades stickers with someone else, they write down the details of the trade (who gave how many stickers to whom) on a piece of paper.

2. Then, they show the piece of paper to everyone else in the group.

3. If everyone agrees that the trade is valid, they all add the information from the piece of paper to their own lists of stickers.

4. This way, everyone’s list stays up-to-date and accurate, because everyone is checking and agreeing on the trades together.

That is an example of how the blockchain works; it is similar to digital paper or a ledger. In the real world, blockchains are used for various purposes, including tracking money and other valuable things.

Is this, however, what databases are used for? Yes, blockchains are databases with unique features.

Blockchain networks such as Bitcoin and Ethereum are immutable, which means that all user activities, such as trading, transferring, and receiving assets, cannot be changed once they have been recorded. These networks are operational 24/7, require no maintenance, have no central servers, have never been hacked, and are not controlled by anyone.

Private keys give the user ownership and control over their assets, whether they be cryptocurrencies, non-fungible tokens (NFTs), or any other digital asset. It is important to keep your private keys safe, as anyone who has access to them has control over your assets.

Let me put it this way:
A blockchain account is always made up of a pair of public and private keys.

Public key is like an email address that you can share with anyone so they can send you an email and make sure that it’s really you on the other end.

A private key is like a secret code that only you know. It’s a bit like the password to your email.

When you use a blockchain, you use your private key to “sign” a message to prove that it came from you. This is a bit like when you use your fingerprint to unlock your phone. Only you have your fingerprint, so it proves that it was you who unlocked the phone. In the same way, only you have your private key, so it proves that it was you who sent the message.

So, public keys and private keys are a way to manage your digital assets and keep your blockchain information secure.

Cryptocurrency is a digital asset that is used as a medium of exchange on the internet. It is decentralized, meaning it is not controlled by any government or financial institution. Bitcoin and Ether are the most well-known cryptocurrency, but there are many others, each with its own unique features and use cases.

Cryptocurrency is a bit like the money in your bank account, but it’s not physical, and you can’t hold it in your hand.

A token is a special kind of cryptocurrency that is used to represent something else. Imagine you have a membership card that you can use to buy things at an exclusive toy store. The membership card is a token because it represents your identity. In the same way, some cryptocurrencies can be used as tokens to represent other things, like a stock in a company, a ticket to a concert, or an actual token that can be used to play video games at an arcade.

Coins are a type of cryptocurrency you can use to buy things or trade with others. Just like you can use real coins or paper money to buy things, you can use digital coins like Bitcoin or Ethereum to buy things online. Some people use coins to invest in them and hope their value will increase, like buying stocks or gold.

So, cryptocurrency is a type of digital money you can use to buy and sell things online, and coins and tokens are different. They all use complex math and computers to keep them secure and make sure that they can’t be copied or faked.

The governance layer of Web3 is where we find decentralized autonomous organizations, or DAOs.

DAOs are organizations that are run entirely on smart contracts, with no central authority. They allow for decentralized decision-making and can be used to govern anything from a small community to a large corporation.

Imagine a group of friends who want to start a lemonade stand together.

They can create a DAO to run their lemonade stand. They can write rules into the smart contract to decide how much lemonade they will sell, how much they will charge, and how they will divide the money they make. They can also use the smart contract to vote on important decisions, like what kind of lemonade to sell or whether to open a second lemonade stand.

DAOs are a way for people to work together and make decisions without needing a physical location or a boss. They can be used for all sorts of things, like running a business, organizing a charity, or making art.

Decentralized applications (dApps) are a kind of software that runs on a blockchain. They’re a bit like the apps you use on your phone or computer, but they’re built on a blockchain instead of a central server.

Think of it like this: when you use an app on your phone, you connect to a central server that stores all the information and does all the work. With a dApp, there is no central server. Instead, the information and the work are spread across many different computers connected to the blockchain.

dApps can be used for all sorts of things, like social networks, games, and financial services. They’re often designed to be open and transparent so that anyone can see how they work and participate in them.

Because they run on a blockchain, they’re often more secure than regular apps. They can also be used to do things that regular apps can’t, like store important information in a way that can’t be changed or deleted.

dApps are a new way to build and use software, and they have the potential to change the way we use the internet and interact with each other online.

Non-fungible tokens (NFTs) are digital assets that represent ownership of a unique item or property. Imagine you have a special toy that only you have. It’s one-of-a-kind, and there’s no other toy like it in the world. An NFT is a bit like a digital version of that toy. It’s a way to prove that you own something special and unique, like a digital artwork or a virtual collectible.

Some expensive NFTs are used to refer to the profile picture (PFP) or avatar associated with a particular social media account or online profile.

Here are a few examples of how NFTs can be used:

1. Digital art: An artist creates a digital artwork and sells it as an NFT. The NFT represents ownership of the artwork, and the buyer can display it or resell it just like a physical artwork.

2. Virtual collectibles: A game or app allows users to collect virtual items, like virtual pets or weapons. An NFT represents each item, and users can buy and sell them just like physical collectibles.

3. Virtual real estate: A virtual world allows users to own virtual land or properties, and an NFT represents each piece of land. Users can buy and sell the NFTs just like they would physical land.

4. Tickets and passes: An event or venue can sell tickets or passes as NFTs, so that users can easily prove ownership and transfer tickets to others.

5. Physical asset representation: A physical NFT can be a digital representation of a physical asset, like an actual painting, a house, clothes or even toys.

6. Digital identity: Using an NFT as a user’s identity can provide a way for users to prove ownership of their on-chain activities, and it can also provide a way for other users to interact with and recognize each other in a digital context.

These are just a few examples, and there are many other ways that NFTs can be used. Essentially, an NFT is a way to represent ownership of a unique digital piece of content.

Decentralized finance (DeFi) uses blockchains to create financial products and services. DeFi allows for greater accessibility and inclusion in the financial system, as it is open to anyone with an internet connection. It is a way to use cryptocurrencies to access financial services like lending, borrowing, and trading. It’s a bit like a bank, but it’s not controlled by any one person or group.

This is my favorite blockchain use case, and I’ve written a separate article to explain and discuss it in order to onboard new people to crypto, particluarly DeFi.

Web3 is a vast and complex ecosystem. It is composed of multiple layers, each serving a specific purpose and contributing to the system’s overall functioning. It is important to understand the role of each layer and how they work together in order to participate in this new digital economy.

And always remember the Golden Rule:

Keep your private keys safe, and always be aware of the risks associated with web3.

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By akohad

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