Web3 Technology Overview: Decentralization and Blockchain

However, Web3 Technology introduces a decentralized approach, particularly when it comes to servers and online access. Today, the majority of websites, apps, and online services find their home on servers leased from large corporations. A server acts as the physical location where a website or app resides. When a website relies on its own servers, this is known as a “centralize” setup.

For instance, consider Netflix, which operates servers in data centers. When you log in to Netflix to stream a show, your device, whether it’s a phone, tablet, or computer, communicates with these servers, exchanging data. Netflix has full control over these servers, determining what content is available, the streaming speeds it supports, and who can access the servers and in what manner. This setup is quite common and represents the current state of the Internet, often referred to as “Web 2.0.”

In Web 2.0, you typically need separate usernames and passwords for each service, or you use a third-party authentication service like “Sign in with Google.” In contrast, Web3 simplifies this by requiring only one username and password for all online interactions—a more convenient approach.The decentraliez Web is made possible by several innovative technologies that replace older Web 2.0 technologies, including centralize servers and logins. These new technologies include:

  1. Blockchains
  2. Nodes
  3. Cryptocurrency
  4. Crypto wallets

If this seems unfamiliar, don’t worry. In this article, we will define these key terms and provide an overview of decentralized Web3 technology.

What is blockchain technology?

At its core, a blockchain comprises multiple individual computers or servers scattered across the globe, all maintaining a shared data record known as a “ledger.” This ledger functions similarly to a traditional accounting ledger. While the data on these share ledges can vary, it often records cryptocurrency transactions, but it can be used for various other purposes.

What are blocks in a blockchain?

Data is grouped into “blocks” and linked together sequentially, forming a chain. New data blocks are continually added to the end of the chain. Each block is vital to the integrity of the entire chain.

Transactions within a block go through a cryptographic process called “hashing,” where all inputs produce a unique output, known as the transaction ID hash. This hash serves as a verification tool. If someone tries to manipulate even a small part of a block’s transaction data, the transaction ID hash would change, alerting network participants to the tampering, and the block would be rejected.

Where do new blocks come from in a blockchain?

New blocks are generated as users interact with a blockchain network. This can involve trading cryptocurrencies, purchasing NFTs (Non-Fungible Tokens), or engaging in Web3 games. What matters is not the specific activity but the underlying process: user transactions trigger the creation of new blocks on the ledger.

Crucially, there’s no central authority in control of a blockchain. Instead, individual network participants (known as “nodes”) work collectively to achieve consensus regarding the network’s state. This state includes ownership of assets and the transfer of cryptocurrencies.

How do nodes add new blocks to the blockchain?

Because each node in a blockchain network is independently operated by an individual, reaching consensus is a complex task. To maintain integrity, blockchains rely on “consensus mechanisms.” These are well-defined frameworks and rules for resolving disputes and ensuring the approval of only valid transactions. The original consensus mechanism, Proof of Work (PoW), was introduced by the Bitcoin network.

Under PoW, a node is chosen to compile recent transactions into a block and add it to the chain. Nodes compete by solving a numerical puzzle, with the first to solve it earning the right to “mine” the block. They validate the data and broadcast the block to other nodes for verification. In PoW blockchains like Bitcoin, at least 51% of network nodes must agree on a block’s validity before it’s added to the chain.

Note: While PoW was the first, various other consensus mechanisms exist today, each with distinct designs to enhance speed, reduce transaction fees, and more.

How nodes ensure block authenticity

If a node attempts to broadcast a block with altered transactions, it becomes evident to other nodes, leading to the block’s rejection. The decentralized nature of blockchain, with a large number of nodes, makes it extremely difficult for malicious manipulation. Trusting a central authority, as in traditional finance, pales in comparison to the security offered by blockchain’s shared ledger.

Nodes are also financially motivating to behave honestly. Blockchains reward nodes with cryptocurrency for successfully adding new blocks. Misbehavior, such as including false data, results in lost rewards and potential flagging as a bad actor. Honest nodes may reject or ignore data from potentially malicious nodes.

With its robust network structure, consensus mechanisms, and high participation, blockchain technology enables the creation of transparent decentralized networks—a significant departure from traditional centralized systems. Any user with internet access and a computer can audit the entire transaction history. Instead of relying on a single opaque authority, blockchains foster trust in a trustless decentralized network.

What does blockchain have to do with Web3?

Blockchain plays a pivotal role in enabling the decentralization central to Web3’s vision. In Web 2.0, every user’s computer connects to a company’s central servers, such as Wells Fargo or Facebook, for access and functionality. Web3, blockchain networks replace traditional centralized databases and applications that control user access, content availability, and data management.

In Web3, users no longer create separate usernames and passwords on centralized servers that a single authority can control or restrict. Instead, users connect to websites and applications with components hosted on blockchain networks, making them partially or fully decentralized. These decentralized applications and sites on Web3 are often referred to as “DApps.”

To interact with DApps and conduct transactions on Web3, users rely on crypto wallets, which we’ll explain shortly. Blockchain technology is the backbone that makes all of this possible.

What is cryptocurrency, and how is it used in Web3?

As mentioned earlier, blockchain networks use cryptocurrencies, digital assets linked to specific blockchains. Each blockchain typically has its native cryptocurrency integrated with its network and consensus mechanism. For instance, Bitcoin operates on the bitcoin (BTC) network, while Ethereum uses ether (ETH).

These cryptocurrencies are the “block rewards” provided to nodes for adding or validating new blocks, serving as financial incentives for node operators to maintain the network. When transferring assets or validating new blocks, users pay transaction fees, often referred to as “gas fees,” which cover network resource usage like electricity and computing power.

Crypto wallets: Store assets and connect to Web3

Crypto wallets are essential tools for Web3 users, allowing them to store, transfer, and manage cryptocurrencies, pay transaction fees, and more. They serve as a gateway to interact with Web3, and unlike traditional passports, they lack a central authority, providing users with greater control and privacy.

How do crypto wallets enable access to Web3 services?

Crypto wallets use private keys to access public addresses, replacing traditional login credentials. A blockchain public address is akin to a username. When accessing a Web3 app or website, users connect their wallets, requiring both their wallet address and private key, similar to a password, to authorize the connection.

What sets this apart from Web 2.0 is that a wallet address and private key grant access to any Web3 app or site integrated with blockchain, cryptocurrency, and crypto wallets. This approach enhances user privacy, enabling pseudonymous interactions with service providers.

The beauty of decentralization lies at the heart of Web3, transforming how people engage with the internet.

The Foundations of Web3

Blockchain and cryptocurrency are not peripheral to the Web3 movement; they are integral components that enable decentralization. They form the core of this new paradigm.

Without cryptocurrency, blockchains lack the incentive mechanism for network participation. And crypto wallets, users have no place to store their digital assets and no means to access Web3 services. Without blockchain networks, Web3 itself could not exist.

These technologies combine to usher in the decentralized internet, known as Web3. The Brave Browser, with its built-in crypto wallet and integration with the Basic Attention Token (BAT), offers a secure and efficient gateway to Web3, enabling users to explore this new frontier.

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