Web3 is the next evolution of the internet where people have control and ownership over their data, the relationships they form online, and their user profile. Together, these make up "social capital": Everyone has it, and it's valuable. In contrast, today when we go on the internet, we visit sites owned by large companies, who own our social capital. These "web2" companies like Amazon, Facebook and Google store user data on privately-held servers and sell it to advertisers in exchange for providing free services. This has led to a good experience for users (free, easy-to-use networks and applications), but it has also caused privacy issues, data manipulation, and limited monetisation options. Web3 addresses these issues by using blockchain technology. This technology is based on user ownership. When people own their data, they can monetise however they want, take their digital information with them (profile, content, data) when they switch networks, and it has the benefit of putting people and apps/networks on an equal footing. Web3 enables a more open and balanced internet, where people have a stake and voice in the future of the internet.

To understand the significant difference between the internet we know today (web2) and web3, take a step back.

When the internet first came about, it was hard to access because there were no easy-to-use applications. Web1 was built on open, public protocols or applications such as TCP, IP, SMTP, and HTTP that builders could develop on top of, plugging into these open protocols to create whatever applications or platforms they wanted. Nobody needed permission to use these foundational protocols or standards to build user-friendly applications like email browsers and marketplaces. These standards are the basic building blocks of the internet. They govern how computers interact with each other and the flow of information. Today, in many senses, we are locked into platforms that own our data.

A blockchain is a decentralised, distributed ledger system designed to record and verify transactions across a network of computers. This compels that no single entity or company controls the entire network, promoting a system of collective agreement and transparency. Unlike traditional databases that rely on central authorities (private servers owned by companies who set all the rules and make all the decisions), blockchains operate on a peer-to-peer network where every participant, known as nodes, has access to the entire ledger (the information is spread across multiple nodes or computers and each has an entire copy of the information). This decentralisation enhances both security and transparency, as each transaction is visible to all participants and cannot be altered without consensus (all nodes agreeing) from the network.

The core of blockchain technology lies in its unique distributed or decentralised structure. Transactions are grouped into units called "blocks." Each block contains a list of transactions that have been validated (consensus) by the network. Once a block is filled with transactions, it is added to the existing chain of blocks in a sequential manner that is time stamped. This process creates a continuous, unalterable chain of blocks, hence the name "blockchain." Each block contains a reference to the previous block, forming a chronological sequence. This structure makes it extremely difficult to alter any information in a block without changing all subsequent blocks, which would require the consensus of the majority of the network.

Smart contracts are self-executing programs that operate deterministically. When an address interacts with a smart contract, the contract executes the agreed-upon actions, such as transferring assets or updating internal accounting. This automation eliminates the need for intermediaries, making transactions more efficient and reducing the potential for human error or manipulation. By relying on code rather than third parties, smart contracts enable trustless and transparent operations, where all parties involved have confidence in the outcome.

Smart contracts are integral to many blockchain applications, as they are executed by blockchain networks like Ethereum, which functions as a global computer network. These networks process and validate the conditions set within each smart contract, updating the state of the contract with every new block added to the chain. This decentralised execution validates that smart contracts run precisely as programmed, without the risk of interference or manipulation. The combination of immutability and public auditability (transparency) in smart contracts provides a high level of trust and security, making them a foundational element in the development of decentralised applications such as identity, finance, and more.

Decentralised Finance, or DeFi, leverages blockchains and smart contracts to create an open, transparent, and decentralised financial ecosystem. At its core, DeFi aims to improve upon traditional financial systems without the reliance on centralised institutions such as banks, brokers, and financial intermediaries. DeFi offers a novel approach to financial applications, marked by increased accessibility, transparency, and control for users.

DeFi operates on blockchain networks, with Ethereum being the first and most prominent platform. Most of these DeFi applications are now also deployed on Layer 2 blockchains, such as Arbitrum, Optimism, and ZKSync. Unlike traditional financial systems that rely on intermediaries to process and verify transactions, DeFi uses decentralised networks to perform these functions. By removing intermediaries, DeFi aims to lower costs, reduce barriers to entry, and enhance the efficiency of financial transactions.

Stablecoins are digital assets that aim to keep their value constant relative to a reference asset, most commonly fiat currencies like the U.S. dollar, euro, or yen. Unlike Bitcoin or Ethereum, whose values can fluctuate significantly, stablecoins are designed to be predictable and stable, making them useful for everyday transactions, remittances, and as a safe haven during market turbulence.

Stablecoins bridge the gap between traditional finance and the crypto world. They allow users to transfer value globally without major price fluctuations. Here are a few key uses:

Stablecoins achieve stability through various mechanisms: