Web3 and Cryptocurrency: The Future of Internet and Finance?

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There are so many new terms coming at us every single day, from Bitcoin to SAAS and everything in between, how should people know what to focus on and what could add value to their lives? With plenty of keen eyes on Bitcoin, at least when it first came out and became popular, this new technology promised to change everything, much like people are saying about Web3 right now. If you are of the curious kind and don't want to be left behind, or perhaps you're just wondering whether your company should be working on a crypto strategy just in case it does surpass actual money, then it's essential to know the basics and go from there. Once you know the fundamentals, you can decide whether risk is your cup of tea, or you could opt for long-standing and longer-term investments like property. Let's take a look.

The Basics of Bitcoin

If you are living in the western world, there's no way you haven't heard at least whispers about cryptocurrency and investing in it. From rappers to movie stars, everyone seems to be getting a piece of the action. But, as sure as the sky is blue, you have also heard about Bitcoin crashing and people losing all their "money". Every year or two, this seems to be the case and the value tanks. But what exactly is tanking? As a newcomer, the first thing you need to know is that Bitcoin is a decentralized digital asset, meaning that it is "trustless". In other words, traditional trusted third parties (middlemen, like banks) aren't necessary with Bitcoin. Cryptocurrency, which is the umbrella term used for Bitcoin, Ethereum, Solana, Tether and Dogecoin, among others, is said to be a new type of asset that joins the ranks of traditional assets such as cash, gold and real estate. However, the big difference is the volatility of the market, as it's not nearly regulated enough, or even at all, making it subject to a mix of individual and institutional investors, each bringing different behaviors and impacts on price. What happens when there are various investment platforms is that the currency does become more accessible, adding to market liquidity, but consequently it becomes much more volatile, so you have to stay up to date at all times today, in order to know the Ethereum price tomorrow. It sounds more complicated than it actually is.

What Cryptocurrency has to do with Web3

Now that you somewhat understand the basics of cryptocurrency, the umbrella term as described above, one has to look at the underlying technology enabling the purchase and trading of these currencies: blockchain. In contrast to a traditional, typical database, blockchain is a type of shared database that differs from the former in terms of how it stores information; Blockchains store data in blocks linked together via cryptography, and different types of information can be stored on a blockchain, but the most common use for transactions has been as a ledger, giving it the common name of "distributed ledger", which is essentially a database hosted by a network of computers instead of one single server. So, while people can purchase a cryptocurrency of their choice for whatever the price is on that particular day, moving the world toward a token-based economy, the beauty behind it is actually the technology. People should also beware of scams relating to Bitcoin as this has been on the increase lately, perhaps because it doesn't feel like real money.

Now, the totality of these efforts, namely decentralization, blockchain technologies and token-based economies, among others, is called "Web3". The core of Web3 is formed by the fact that technologies will hopefully in future be community-driven projects where end users control data, determine pricing, directly contribute to technical development and ultimately have a more significant say in what direction a project goes.

Currently, most internet applications that you use are controlled by centralized entities that determine both how they save and use end-user data. Instead of centralized management structures, Web3 or Web 3.0, has mechanisms that automatically regulate how users interact with one another, meaning that there's no longer a requirement for a centralized entity to govern interactions. While the thought and idea behind it is a good one, namely that a blockchain-based web could shatter the monopolies on who controls information, who makes money, and even how networks and corporations work, the process of putting this into practice is a challenging and time-consuming one. Furthermore, it's not easy or even possible to determine which direction the world is going in and what effect Web3 and the underlying blockchain technology will have on the average person. The idea is to purchase Bitcoin on a low and use it on a high, for example if gas prices rise, you will be paying much less as you hopefully bought the cryptocurrency on a low and are paying directly at the gas station at the increased value. However, this is the ideal case, the crypto world also has a dark side, which anyone interested in it should be aware of and take seriously.

Tread with Caution

While humans have historically used everything from seashells to bottle caps as money, these things have always been tangible, meaning that you can see and touch them. What makes something valuable is essentially based on three key features: rarity, durability and divisibility. And while there is a limit of Bitcoins, namely that there will only ever be 21 million available, thus speaking to the first of the three key features, rarity, who is to say that tech-savvy folks won't come up with more types of cryptocurrency or that blockchain technology can't be hacked? Whether you enjoy the thrill of risky investments or prefer more concrete assets, it's vital to always tread with caution and think before you click on a button. Put aside an amount that you'd be willing to lose if things turn sour, and never invest your entire life savings. As with most things in life, nothing is certain.