Web3 Introduction

Understanding the Blockchain

Web3 and the Metaverse is the next stage of the internet and digital culture. A lot of it is riding on the back of what is called the blockchain and can be utilised in all manner of ways such as creating value for digital content creators such as yourself (otherwise why would you be here :) )

So let's get into some basics of of Web3, blockchain, and NFTs

Web3

Web1 was the very early internet which was mostly static and one directional. The user read information that was provided on a website that could not be interacted with. Web2 was that and more, adding two way interaction, where users could interact with websites and create content themselves. Web3 is the next evolution of the Internet that is decentralized and based on public blockchains.

Decentralized vs. Centralized

To put it simple, a decentralised internet is one that removes the middle man of many interactions on the internet. Instead of users interacting online through a third party like amazon or a bank, the security of that information is governed by the blockchain itself. In a centralized system, the interactions are basically governed by that third party, for better or worse. Both systems have their uses, but the introduction of the blockchain has started to change the way many industries do things.

Blockchain

Blockchain is a system that uses a network of databases on computers to, in very simple terms, compare data against data so that no one can tamper with the information. So we can connect, store, and network information in a way that everything watches everything…therefore no one person has control of the information, creating a decentralised system of maintaining data. So instead of a company controlling information, at the whims of it’s Upper Management and shareholders, the information controls itself. And the ‘value’ is created mostly by its users, for better or worse. :) There are many blockchains and they all behave differently with different pros and cons. Some of the most common is Ethereum, Ripple and Quorum. Some are faster, some a less expensive, some are more eco friendly, some are more popular and readily accessible to name just a few. There are many resources out there for comparing them, but today I’m keeping the focus simple. I’ll be focusing on Ethereum (blockchain) and Polygon/Matic as these are the ones I have used in this process. To do things on the blockchain you will probably need some funds to work with it. And for that we need to start with Fiat, or real, money.

Fiat money

Fiat money is standard currency such as the US dollar. In technical terms it is government-issued currency that is not backed by a commodity such as gold. You will probably need some of this if you want to buy cryptocurrency. It comes up a lot in the space, but basically means the money in your real world wallet right now. You generally can’t buy much on the blockchain with real money, you need some cryptocurrency for that.

Cryptocurrency

Cryptocurrency is very similar to digital currency in popular video games like V Bucks from Fortnite, Robux from Roblox, and Minecoins from Minecraft. The only difference is that they use the blockchain to function, rather than be controlled in a centralized way by the company behind the game. Cryptocurrency is not (usually) government issued. Like fiat money, it has value because people agree it has value. There are many cryptocurrencies like Bitcoin, Ethereum, Ripple, etc.. and a bunch of alternate coins built on the back of the main currencies called Altcoins. All similar to the many kinds of government issued, and digital currencies out there. Some currencies have utility, such as filecoin and IOTA, which is paid to maintain the storage of information or networking devices respectively using the blockchain. And some just have value because it takes resources to maintain, where people who ‘mine’ the data get paid in that cryptocurrency.

Mining/Miners

Mining for cryptocurrency is where people, or ‘miners’, use their computer hardware to maintain the blockchain and therefore get paid for doing so in a designated currency such as Bitcoin. Miners can then use this cryptocurrency to purchase things booth real (where its available, and the options are growing regularly), digital (such as digital assets or part of the metaverse), or they can trade this cryptocurrency on a Crypto Exchange for other currencies, real or otherwise.

Crypto Exchange

A crypto exchange is basically your international Money exchange for normal currencies but with the added ability to buy, trade, and sell cryptocurrencies. This is important as you will need to exchange fiat money for digital currency like Bitcoin or ethereum (or others, depending on where and what you want to buy).

As a creator, the first step is to sign up to a crypto currency such as Coinbase, Binance, or Bisq. Each Crypto exchange only accepts certain types of cryptocurrency, so make sure you do some research to compare the crypto exchange you decide to sign up with. Send them some of your cold hard fiat money, and exchange it for crypto such as ethereum (or whatever your target application uses).

Some Cryptocurrencies allow you to keep your coins on the exchange itself, but many people prefer to keep their crypto in a wallet.

Wallet

A Wallet is a place where you can securely store all your digital assets. There are many wallets, and each wallet allows different types of digital assets. Examples include Metamask, Ledger, Exodus, Electrum, Mycelium, etc. Different wallets have different pros and cons, just like any real world wallet. Do you know how hard it can be to find the exact right wallet?

Next on the creator task list is to setup a software wallet like Metamask, or a hardware wallet (that comes with a physical key so that it is more secure) like Ledger. This will keep all your resources in one place, and make things easier down the line as wallets are more accepted to make transactions with other tools than a crypto exchange.

So as an example, you’ll need to get real money to buy Cryptocurrency (like Ethereum) on a crypto exchange (like Coinbase), and then send that to a Wallet (like Metamask).

Some wallets are also capable of holding data assets called NFTs.

NFTs

NFTs (Non-Fungible Tokens) are basically the digital equivalent of a T-shirt, pair of shoes, artwork, song NFTs allow digital artists’ work to be as valuable as more traditional works due to its nature of being a unique item. And this is important with the world increasingly going digital. And when you think about it it’s not like the art world has an accurate depiction of ‘value’ either :). When a creator uploads their data as an NFT onto the blockchain, usually for a fee using cryptocurrency, it is called ‘minting’.

Minting

When a creator of digital content uploads that content onto the blockchain it is said to be minted. As this version of the digital content can be tracked accurately and securely on the blockchain, such as who owns it, if it has been traded etc. you could say that this is the original art with a receipt of authenticity, and anything else is a copy. Much like the Mona Lisa is an original, and photos/forgeries are basically copies.

To mint your digital creation (image, song, digital space etc), you usually need to use an NFT Marketplace such as OpenSea, Rarible or SuperRare.

NFT Marketplace

An NFT Marketplace is basically your eBay or Amazon for unique digital goods. It is where you can sell, auction, or buy NFTs. You can also mint your NFTs on the Marketplace. Each marketplace has pros and cons, but the main thing is their fees for minting and commissions/royalties. Some have the seller pay a fee, some the buyer, and some are mixes of the two. Once again, do your research to find the best for you.

It is wise to go into this process expecting a few fees. They could be large or small, depending on who you mint with and who you sell with and all of the transactions that take place leading up to and after this such as getting your money between exchanges and wallets. A large portion of these fees come down to Gas Fees however.

Gas Fees

Gas fees are basically the fees needed to run the blockchain, any transaction that is made on it in particular. As the blockchain uses considerable computing power to cross check information, this comes at the expense of electricity. This cost is called gas fees, and is charged on many, if not all, of the transactions on the blockchain. As more people use a blockchain, more transactions are maintained, and therefore gas fees generally increase the more a block chain is used and it can vary wildly. Anywhere from less than $1 on some blockchains such as Polygon/Matic, up to $1200+ on the Ethereum blockchain (as of this writing) depending on the time of day, and even the second, that you make the transaction. That said, Ethereum has its benefits, so once again do the research and compare the systems you intend on using.

So taking our crypto (Ethereum) that we have in our wallet (Metamask), we can connect our wallet to an NFT Marketplace (OpenSea). When you upload your files to be minted you will pay the gas fees (depending on where and how you mint) using the crypto in your wallet. Once done, you have officially created an NFT. Welcome to the new digital age!

After that you can either sell directly to someone, or list your NFT for a fixed price or for an Auction. Regardless of which method you use, you will most likely need to pay a one time initialization fee (another gas fee for the going rate of $100+). And then there is the transaction fee of getting you NFT listed on the marketplace (usually much lower at around $20-$30).

In some cases NFT Marketplaces, such as OpenSea, allow creators cross-blockchain support meaning you can use a different blockchain to Ethereum such as the aforementioned Polygon. Polygon is cheaper and faster, but is not as well known as other blockchains.

Using this cross-blockchain system requires ‘bridging’ information between blockchains however.

Bridging

Bridging is when a service such as an NFT Marketplace utilises information across different block chains which is great if a different blockchain is cheaper or faster for example. As this counts as a transaction between the two it incurs gas fees however. That said, if the minting gas fees are lower than the bridging fees, then that is in your favor. It can be a bit of a hassle to work it all out, but the options are there if you want to delve deeper into the pros and cons of each system.

Other Common Terms

Tokens

Tokens are basically a higher label category of any asset that uses the blockchain such as the aforementioned cryptocurrencies, and NFTs as well as things like crypto tokens, and alt coins. Many people use some of these words interchangeably, but there are subtle, and sometimes large, differences between them.

DAO

A DAO is a group of people working together to create the systems and networks to run Web 3.0. In many cases they are volunteers collaborating to make the best system according to their vested interest…whatever they may be.

A DAO is the equivalent of shareholders trying to run the company with the systems (or their own) best interests in mind, without the Upper management getting in the way.

Smart Contract

A smart contract is the ‘rules’ behind any transaction on a blockchain. Usually people understand that when we order and eat at a restaurant, we have to pay before leaving. This is a simple transaction that our society understands the ‘rules’ of. Blockchain transactions have the potential to get very complicated, but smart contracts allow those difficult transactions to happen without middle men to process it such as negotiating the purchase of property or business.

Smart contracts are usually programmed into the transaction with dedicated programming languages for blockchain smart contracts such as Solidity.