Blockchain and Web3 are everywhere these days, but what do they actually mean? If you’ve ever felt overwhelmed by all the jargon, don’t worry—Let’s simplify and explore it.

The Origins of Blockchain

First things first—blockchain didn’t just pop up overnight. It was created to solve a big question:

How can we transfer value or send messages directly, without relying on a middleman like a bank?

Think about it: banks and similar institutions control the entire process when you send money. They’re not always transparent, and you’re forced to trust them. This didn’t sit well with some brilliant minds who spent years trying to solve the problem.

DigiCash, Hashcash, b-money, and Bit Gold were each groundbreaking steps toward creating a decentralized digital currency, contributing critical concepts like cryptographic privacy, proof-of-work systems, and decentralized consensus.

They didn’t fully crack it, but their work paved the way for Satoshi Nakamoto.

In 2008, Nakamoto introduced Bitcoin and shared a revolutionary idea—a peer-to-peer system for digital cash. He explained it all in the famous Bitcoin white paper, which also described blockchain: a secure, decentralized ledger system.

How Does Blockchain Work?

Let’s break it down:

• A blockchain is like a shared database or ledger that anyone can access.
• It’s powered by nodes—computers connected to the network. These nodes validate and record transactions.
• Transactions are grouped into blocks, which are added in chronological order, forming a chain.
  

Here’s the kicker: once a block is added, it can’t be changed without altering every block after it. This makes blockchain incredibly secure.

But how do we trust these nodes to behave honestly? That’s where consensus protocols come in. These are rules the nodes must follow to validate transactions and add new blocks.

Two popular protocols are:

• Proof of Work (PoW): Used by Bitcoin. Miners solve complex puzzles to add blocks, making cheating nearly impossible.
• Proof of Stake (PoS): Validators lock up cryptocurrency as collateral. Misbehaving could cost them their stake.

When Things Go Wrong

Although blockchain is designed to be secure, it’s not immune to challenges. Take Ethereum in 2016. A flaw in a smart contract led to $50 million worth of Ether being stolen. The community decided to fork the blockchain to recover the funds. This created two versions:

1. Ethereum (the forked chain): The one most people use today.
2. Ethereum Classic: The original chain.

This brings up an interesting concept: a fork. A fork happens when a blockchain splits into two separate chains due to disagreements or updates. Each chain shares the same history up to the split but follows different rules afterward.

Blockchain vs Web3: What’s the Difference?

If blockchain is the technology, Web3 is the ecosystem. Web3 builds on blockchain, adding other tools like decentralized storage (think Arweave or IPFS) to create a new kind of internet.

Imagine Web3 as a car:

• The engine is blockchain.
• The design is the front-end, what you interact with.
• Other parts, like the brakes or suspension, are optional back-end technologies.
  

Some Web3 projects skip the back-end entirely, connecting directly to the blockchain through their front-end.

Understanding blockchain as the foundation helps you see how Web3 takes things to the next level. With blockchain, we’ve built a secure, transparent way to exchange value without middlemen. Web3 expands on this, using blockchain to power a decentralized internet where you have more control over your data and how applications work

What’s Next?

Curious whether Web3 is worth diving into? In the next article, I’ll share why I believe learning Web3 in 2024 could be a smart move. In the meantime, you can also watch this article in video form!