If we map technological advancements in the last two decades, I would say Web3 ecosystem has had the most impressive peak 📈 in terms of value & monetary gains, & it isn't stopping anytime soon.

“Web 3.0 is about creating a more secure and private web, where users can trust that their data will be kept safe and confidential.” ~John McAfee, entrepreneur and cybersecurity expert.

So, now is the time to invest and seize the most out of it ! 💪

What is Web 3 ?

You might be thinking, the term "Web 3" itself seems to be like a 3rd part of Web, right ? 🤔 That would mean there must have been a 1st & 2nd part before this.

Guess what ? You are absolutely right ! 🎉

Web 3.0 ( also called Web 3 ) is the third iteration of web, meaning its version of web following the earlier versions Web 1.0 and Web 2.0.

Let's see the prior versions.

Web 1.0

Web 1.0 also known as read-only web, marked the early days of World Wide Web (WWW). It refers to the early development of Internet around 1990's & 2000's, web browsers like Netscape, Internet Explorer had functionality of only static websites. This meant users could only read from these & couldn't interact with them.
For example, users could only browse content uploaded by owners of websites, there was no content generation by users, etc unlike today.

Web 2.0

Web 2.0 is the updated version of Web 1.0. This meant websites now became more interactive, dynamic. Here, users could take part in them by uploading & creating content. It became sort of like people network than the one restricted only to owner of websites. It is also known as read-write / interacive web.
Interactivity was enabled by rise of sites like Facebook, Twitter, Instagram, and other media forms.

Web 3.0

Web 3.0 is the more advanced & decentralized web version, where there's no central authority and is called 'People's Web' because users have more ownership, ensuring a more democratic way of operating. Also known as "read-write-control" web.
It includes AI ( Artificial Intelligence ) driven architecture with ML ( Machine Learning ) and Blockchain taking the lead.

Introduction to Blockchain :

Now, you might be wondering, 'Why are we getting into Blockchain here, when we also have discussed AI / ML as part of Web 3 ecosystem ?'

The answer is because, Al / ML isn't inherent to Web3's core infrastructure like Blockchain, instead they serve to optimize performance and overall efficiency of Blockchain.

Although, a seperate blog could be written on this, but for more context, let's understand this precisely in few points:

Blockchain was one of the first technologies associated with Web 3. It's early adoption, popularity, applications in finance, governance & decentralized applications made it a central point of Web 3.
Also, it was the first widespread adoption compare to AI / ML. However, AI / ML has been developing from decades, their integration into mainstream tech, including Web 3, gained traction later than blockchain.

Let's dive into how blockchain originated from the beginning. 🚀

Origins of Blockchain

Setting Context

2008 Crisis : The financial institutions in the US, such as the banks utilized financial instruments to make money out of it. This led to them at stage of bankruptcy owing people as in public lot of money.
So, to avoid widespread collapse, the US government intervened and helped them out of going bankrupt by paying their debts. But, if we see the actual reason that these banks got into this position is because they gave out people lots of risky loans, leading to loss of those investments. This further led to housing market collapse and economic downturn.

What Next ?

The 2008 crisis raised multiple concerns about the legitimacy of these institutions and their unchecked actions. People began questioning how governments could bail out these institutions, considering their manipulation of the market on such a large scale to their advantage. The only ones who suffer most are the general public.
Remember : Although 2008 crisis is not the sole reason for creation of Bitcoin or Blockchain ecosystem, but one of the catalyst as this a prime example of what centralized authorities can do to their benefits.

Conclusion :

Why should only the government have control over currency ?

Why should a single authority decide for the people ?

Creation of Bitcoin

In 2008, Satoshi Nakamoto published a whitepaper titled "Bitcoin: A Peer-to-Peer Electronic Cash System". It showed the concept of a decentralized digital currency using blockchain technology.
This is where Bitcoin a decentralized digital currency ( also known as cryptocurrency ) was launched. It's a instance of blockchain technology, meaning its implementation / application of blockchain tech.

Phew😮‍💨, enough of this talk, let's get straight into the main topic !

Blockchain :

If we go through the standard definitions of internet, it means " A decentralized and distributed ledger technology across a network of computers in a secure and transparent way ". Doesn't quite make sense, right 😅? Don't worry, let's understand what it means by breaking down these terms ( i.e ledger + network of computers ).

Ledger

A blockchain is a simple ledger. The ledger refers to the entire record-keeping system in blockchain. Now, what's a ledger ? Think of it as a book which has collection of accounts with transaction records. It's like the book where you keep track of who owes you money and whom you owe. For example, if some of your friends owe you money & you owe money to others, so you would write it in a book to keep track of these transactions as records.

Similarly, in the blockchain ecosystem, a ledger is like a digital version of this record book. It's consists of accounts with detailed transaction records, only catch is this ledger immutable. This means once transaction is recorded, it can't be changed, manipulated or deleted.

If you want to make changes to this transaction ledger, it can only be made through consensus ( i.e general agreement among group of people or entities ) of the majority of participants in a blockchain network. Don't worry, we would explore consensus in seperate section.

Now, we've understood what a ledger is, but still "What does the term Blockchain mean ?"

Breaking Down the Term "Blockchain"

The word Blockchain is made up of "Block" + "Chain". A block is individual unit of data that makes up a blockchain ledger, and the chain refers to series of interconnected blocks. Each block contains a list of validated transactions, a timestamp, and a reference ( hash ) to the previous block in the chain.

Conclusion : The ledger ( or Blockchain ledger ) consists of series of interconnected blocks. Each block contains transaction data & is linked together with other blocks in sequential order, forming a Blockchain.

Reference Example :

The ledger is like a big digital record book.
Blocks are the pages in this book, each containing a set of transactions.

Network of Computers

In this context of blockchain, network of computers refers to decentralized network of nodes ( meaning computers ) that collectively maintain the blockchain ledger.

Nodes : Nodes are individual computers or servers that are connected to the blockchain network. Each node stores a complete copy of the blockchain ledger.

What makes this Network of nodes Decentralized ?

DLT ( Distributed Ledger Technology ): DLT means that transactions and their details are recorded simultaneously in multiple places. The ledger is distributed across a network of computers (nodes), ensuring that no single entity has exclusive control over the data.
Consensus Mechanisms: These blockchain networks use consensus mechanisms like Proof of Work (PoW) and Proof of Stake (PoS) to add new blocks to the chain and ensure the legitimacy of transactions.

How do these Blocks operate on these chains ?

We have seen how these blocks work superficially, let's see how they actually function in depth. All this time, we've observed that blockchain cannot be manipulated or altered by any single entity unless the network nodes reach a consensus to modify the blockchain's state.

But, how is it so secure? And how can no one make changes at will without other's permission on these chains? How is the ledger made immutable ?

The answer lies in its workings.

Structure of Blockchain

In the above image, there are four blocks interconnected to each other, building up a blockchain. There are 4 fields here: Block Id ( or block number ), Nonce, Data, Previous hash and current block hash / hash.

Block ID or Block No : It's unique identification value given to a block to differentiate it from other blocks in the chain. This helps node in network to verify specific blocks.
Nonce : Nonce is an abbreviation for the phrase "number used once." It's a random number used only once & is generated for specific condition required for creating a new block.
Data : It's the information contained in the block which includes core data like transaction details, metadata with other elements. These varies depending on type of blockchains. Metadata includes timestamps (exact time of block creation), transaction count ( no. of transactions included in the block ).

Before defining 'Previous Hash,' let's first understand what 'Hash' means.

Hashing : It's a process that uses a mathematical formula, known as "hash function" to convert the input data ( i.e message ) into a sequence of random numbers and letters. The output of this is called a hash code or hash. The output or the hash is an encrypted value that doesn't resemble the original data input.
The most popular cryptographic hash function algorithm used in blockchain technology, especially for creating secure hash values is "SHA-256".
The way this works is we input a message and it generates a sort of hash value which is a gibberish / random value using the SHA256 hash function. The unique thing is these hash values can't be decoded back to original input data as they are designed to be one-way functions.
This means, if you have your transaction details in the input box, that's converted to a hash value, due to the complex computations it uses, it's impossible to reverse the process and obtain the original data.

And that's how all details are secured within these blocks. 😉

As we understand what a hash is, we can get to previous hash now.

Previous Hash : Each individual block in a blockchain contains a hash value. Since these blocks are interconnected in a sequence (chain), the 'previous hash' refers to the hash value of the preceding block in the chain. This previous hash value is included in every subsequent block as a reference to the block that came before it.

We have understood the sturcture of blockchain, now we will see the workings.

Understanding Aspects of How Blockchain Works

Genesis Block : You must wonder, this is a chain, so there must be a starting point to it, right ? Yep, the first block in a blockchain is called "Genesis Block". It's the messiah of the blockchain, as it has no block as predecessor, lacks previous block hash & forms foundation to subsequent blocks. Also, it's harcoded

into blockchain's initial codebase.🫡
After genesis block, further blocks are linked together in chain, and like before each block contains hash of previous block.
Consider the above reference of 4 blocks. When we put data into the genesis block, it generates a hash for that block. For the next block (Block No. 2), when data is entered into it, the hash generated for Block No. 2 combines the hash of the genesis block along with the data of the current block (Block No. 2) in it. This process continues for all the blocks.
Conclusion: The combined data ( previous block's hash + current block's data ) is hashed using the cryptographic hash function to produce the hash value for the current block.

This was about how individual blocks operate and link to each other.

What if we want to add new blocks ? What happens when one of the block in the chain tries to cheat or does shady things to manipulate the chain ?

Consensus Mechanisms :

Consensus as discussed earlier means agreement of all peers ( i.e nodes / computers ) in the network to validate blocks or any change in ledger / state of blockchain. This process ensures trust, even if a new, unknown block is added, by validating that it comply to the established rules and has been agreed upon by the majority of the network participants. Major two consensus mechanisms are PoW( Proof of Work ) & PoS( Proof of Stake ).
a) PoW ( Proof of Work ) : It's a type of consensus mechanism launched with Bitcoin network, that ensures transaction validity and new block creation in the network. The execution of PoW is done by "Miners". Miners are individuals or entities that use computers to participate in blockchain network. They contribute their computational power to perform the process of "Mining".
They compete to solve complex mathematical puzzles. These puzzles, known as hash puzzles, act as a security measure to ensure that adding a new block to the blockchain requires significant computational effort. The first miner to solve the puzzle gets the right to add a new block of transactions to the blockchain.

Why do they solve puzzles ? Why are they given puzzles in the first place ?
Miners collect transactions from users and verify them ensuring they follow blockchain protocol. These transactions are then grouped into blocks. Then they compete to solve a complex mathematical puzzle (hash puzzle) associated with the block they want to add to the blockchain. These puzzles are also a way to demonstrate that they have expended computational resources ( i.e proof of work ).
The miner to first solve the puzzle demonstrates the solution ( proof of work ) to the blockchain network. Other nodes in the network verify the solution to ensure it meets the puzzle's requirements and that the transactions within the block are valid.
Once verified, the block is added to the blockchain. The incentive for these miners is that everytime they add a new block ( mine a block ) they are rewarded with some amount of cryptocurrency which is the currency associated with the blockchain with other transaction fees of blocks.
Other major advantage of PoW is that this ensures that making an attack on blockchain, for e.g making fraudelent transactions requires control of 51 % of network. To execute a 51% attack, an attacker would need to control more than half of the total computational power of the network. This means, in terms of value it's almost hundreds of billions of dollars. I don't think anyone has that much computational capacity! 😂
Some examples of blockchains that use PoW are Ethereum, Bitcoin, Dogecoin.
b) PoS ( Proof of Stake ) : PoS is another type of consensus mechanism, but unlike PoW, not everyone can participate in the network by showing their work. Instead, participants, known as validators need to put their own share of cryptocurrency ( digital currency ) at stake.
This means if they fail to validate the block, they get their stake slashed which is they lose their amount of coins they put as collateral. Their selection depends on the amount of cryptocurrency they have put.
Blockchains like Ethereum 2.0, Polkadot are examples of these.

If you want to play around the the blockchain, and understand blocks better, I suugest try this website: https://guggero.github.io/blockchain-demo/#!/block

So, far we have gone through iterations of Web 3, history of it's creation, blockchain workings and almost all topics and terms related to blockchain have been touched.

Now, let's explore the most exciting part "Applications of Blockchain." 🔥

Applications of Blockchain :

Applications of Blockchain span across every sector imaginable, wherever there's a need to eliminate centralization. A recent example is Solana blockchain addressing issues in the ticket booking platform 'Ticketmaster'. Through XP, a blockchain-based ticket marketplace, Solana's low transaction fees and speed eliminate hidden fees between buyers and sellers. I would recommend see the application yourself to better understand the solution. Watch the Video

Ok, this is just a single application of blockchain, if we were to broadly classify major applications of blockchain, they would include :

Cryptocurrency
Smart Contracts
DApps
DeFi ( Decentralized Finance )
NFTs
DAOs

Let's briefly get to know each of them.

Cryptocurrency : In simplest way it's digital money. This started with Bitcoin as it was the first cryptocurrency. Cryptocurrency isn't issued by any government or central authority, instead it's peer to peer ( meaning decentalized ). Key thing to note is cryptocurrency is hightly volatile ( not stable ) & isn't pegged to any physical asset. This means they solely depend on supply & demand. For e.g, Bitcoin has maximum supply of 21 million coins.
Generally, each blockchain has it's own cryptocurrency designed to specific functionalites. Few examples are: Bitcoin ( BTC ), Ethereum ( ETH ), Polkadot ( DOT ), Solana ( SOL ) and so on.
Apart, from the above cryptocurrencies , the most popular names in cryptocurrencies are :

--> Altcoins which were created with improvements and as an alternative to Bitcoin. For e.g, Dogecoin

--> Stablecoins were developed to tackle volatility issues. They are pegged to stable assets like fiat currencies ( currency issued by government ). Examples of stablecoins: USD Coin (USDC), DAI, Binance USD (BUSD).
Smart Contracts : A smart contract is a programme that runs on blockchain network. It's basically a contract / agreement which automatically executes itself only when pre-defined conditions are met. These conditions are encoded into the contract in the form of code, typically written in a language like Solidity.
Once a smart contract is set up on the blockchain, it works by itself to enforce the terms of the agreement automatically and openly, without any middlemen involved and is immutable. This means its code and terms cannot be changed or altered once deployed on chain.
Smart Contracts were brought into practical application when Ethereum was launched in 2015, before that only the concept was floating around. 💭

Here's a what a smart contract looks like :

// SPDX-License-Identifier: MIT
pragma solidity ^0.8.0;

// Define a contract named Voting
contract Voting {
    // State variables
    mapping(address => bool) public hasVoted;
    mapping(string => uint256) public voteCount;

    // Event triggered when a vote is cast
    event Voted(address indexed voter, string candidate);

    // Function to vote for a candidate
    function vote(string memory candidate) public {
        require(!hasVoted[msg.sender], "You have already voted");
        voteCount[candidate]++;
        hasVoted[msg.sender] = true;
        emit Voted(msg.sender, candidate);
    }
}

DApps ( Decentralized Apps ) : These are applications built using blockchain technology. This means they are decentralized. DApps operate on smart contracts and use languages like solidity and rust for application development.
The choice of programming languages for DApp development varies across different blockchains. For example, DApps on Ethereum are typically developed using Solidity, while Solana supports Rust for its smart contracts.
Popular DApp Examples

-- > Uniswap: A decentralized exchange (DEX) on Ethereum

-- > Aave: A decentralized lending protocol

-- > MakerDAO: A decentralized autonomous organization (DAO) on Ethereum
DeFi ( Decentralized Finance ) : In terms of value, DeFi alone has surpassed value of $200 billion including protocols like Uniswap, Aave, and Compound, which facilitate decentralized trading, lending, and borrowing without intermediaries. DeFi means financial services on blockchain or financial services built on top of blockchain or built using blockchain. To date, it remains one of the biggest usecases of blockchain in the Web3 ecosystem.
If we consider the problem for its creation, it arises from the centralized control of finance by governments and financial institutions, as seen during the 2008 crisis. They had complete control over money and could act with unrestricted authority. The alternative is DeFi, where no centralized institutions exist, and power is distributed among participants.
The launch of Ethereum in 2015 brought smart contracts into the blockchain ecosystem, enabling programmable, automated transactions without intermediaries. This capability set the stage for DeFi applications.
If we track early projects in DeFi space, MakerDAO, Compound were the initial key ones that came into existence. MakerDAO introduced the concept of stablecoins with DAI, which are pegged ( tied )to the US dollar. Compound, on the other hand, launched a decentralized lending and borrowing platform that enables users to earn interest on their crypto assets or borrow against them.
If you want to explore DeFi projects and their current statistics in more detail, checkout DeFiLlama.

Before moving to NFTs, we need to know about tokens and coins.

Both tokens and coins are forms of cryptocurrency.

Coins : They are native assets of blockchain used as medium of exchange on that network. They operate on their own blockchain. SOL (Solana's native coin) exists on the Solana blockchain, and ETH (Ethereum's native coin) exists on the Ethereum blockchain.
Tokens : They are assets that operate on another blockchain, meaning they don't have their independent blockchain and built on top of existing chains. Examples include ERC-20 tokens, ERC-721 tokens (NFTs).

NFTs ( Non-Fungible Tokens) : NFTs are digital tokens on blockchain that represent ownership of unique items or assets. In simple terms, NFTs are digital certificates showing ownership of unique things.
The idea of NFTs was to create unique non-interchangeable tokens that represent ownership or sort of proof of being authentic for digital assets. Non-Fungible means something that is unique and can't be exchanged or replaced with something of same kind.
The process of its creation starts from "Tokenization", where a digital item like artwork, music, videos, etc is turned into a unique digital token on blockchain.

Even if two NFTs represent visually similar artwork or share some characteristics, their unique identifiers and metadata differentiate them as distinct assets.
The special thing about NFTs is their digital identity and history stored securely on the blockchain, not necessarily their visual appearance or content uniqueness.
When NFTs come to mind, there are plenty of remarkable examples showcasing how they add value to digital assets. For instance, Twitter CEO Jack Dorsey sold his first tweet as an NFT for an astounding $2.9 million. 🤯
Another one is of "Bored Ape Yacht Club" which is collection of thousands of NFTs. The Bored Ape Yacht Club traded $1.4 billion on the OpenSea ( marketplace for NFTs ).
DAOs ( Decentralized Autonomous Organizations ) : A DAO, short for Decentralized Autonomous Organization, operates like a digital company or community that functions autonomously, without a central authority. Decisions within a DAO are made collectively, governed by predefined rules specific to that organization. These protocols can vary widely across different DAOs.
DAOs use smart contracts to ensure transactions or decisions are transaprent and executed as agreed collectively. They use them as governance models ( structure for making decisions ).
Participants who have stake in DAOs get voting rights to create new governance model proposals. But, these proposals will only pass if majority of stakeholders approve it.
There are numerous examples in everyday life where DAO's can be implemented. Consider a discord of gaming community where memebers want to decide to organize upcoming events. A DAO model can be used here to propose & discuss ideas openly and then vote on a system that runs on blockchain. Here, smart contracts could ensure that decisions are executed automatically when majority agrees for a decision.
For e.g in application, "The DAO" which aimed to operate as decentralized form of investor-directed venture capital fund. Although there was a failure in this, but I love the application of a decentalized venture firm.

Wrap-Up 🎬

So, I have equipped you readers everything you ought to know about Web 3 from its beginning to all sectors and advancements. The thing about applications of Web 3 is all the sub topics need a seperate blog to discuss in detail and I have so much to share about them. I will create more blogs on individual topics like Smart Contract, DeFi, NFT's and its workings pretty soon.

Thank you for giving it a read ! I am open to conversations, collaborations, or building new relationships. Feel free to shoot me a DM or reach out on any of these platforms :

If you feel my blog added value to your learning, you can give it a like and follow me for my upcoming blogs. Your support means a lot !

Thank You ! 🙏

Understanding Web 3: A Complete History and Evolution Guide

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