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The future of the Internet and finance?
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There are so many new terms coming at us every 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 many eyes on Bitcoin, at least when it first came out and became popular, this new technology promised to change everything, just like people are saying about Web3 right now. If you’re the curious type and don’t want to be left behind, or perhaps you’re simply wondering whether your company should work on a crypto strategy in case it outperforms real 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-term, long-term investments such as property. Let’s take a look.
The basics of Bitcoin
If you live 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 get a piece of the action. But, as sure as the sky is blue, you’ve also heard about the Bitcoin crash and people losing all their “money.” Every year or two, this seems to be the case and the value increases. But what exactly is tanking? As a newcomer, the first thing you need to know is that Bitcoin is a decentralized digital asset, meaning it is “trustless”. In other words, traditional trusted third parties (intermediaries, such as banks) are not needed 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 joining the ranks of traditional assets such as cash, gold, and real estate. However, the big difference is the volatility of the market, as it is not sufficiently regulated, if at all, making it subject to a mix of individual and institutional investors, each with different behaviors and impacts on the price. What happens when there are several investment platforms is that the currency becomes more accessible, adding liquidity to the market, but as a result it becomes much more volatile, so today you have to always stay updated to know the Ethereum price tomorrow. It sounds more complicated than it actually is.
What does cryptocurrency have to do with Web3
Now that you have somewhat of an understanding of the basics of cryptocurrency, the umbrella term as described above, we need to look at the underlying technology that enables the purchase and exchange of these currencies: blockchain. Unlike a traditional and typical database, blockchain is a type of shared database that differs from the first in 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, hence the common name “distributed ledger”, which it is essentially a database hosted by a network of computers rather than a single server. So while people can buy a cryptocurrency of their choice for whatever the price is on that particular day, moving the world towards a token-based economy, the beauty behind it is actually the technology. People should also be careful Bitcoin scams as it’s been on the rise lately, maybe because it doesn’t feel like real money.
Now, the set of these efforts, namely decentralization, blockchain technologies, and token-based economies, among others, is called “Web3”. The core of Web3 is that in the future technologies will hopefully become community-driven projects where end users control the data, determine pricing, contribute directly to technical development, and ultimately have a more significant influence on the direction in which a project is going.
Currently, most Internet applications 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 each other, meaning there is no longer a need for a centralized entity to govern interactions. While the thinking and idea behind it is good—namely, that a blockchain-based web could shatter monopolies over who controls information, who makes money, and even how networks and businesses work—the process of putting practicing all of this is challenging. and it takes a lot of time. Furthermore, it is not easy or even possible to determine what direction the world is going and what effect Web3 and the underlying blockchain technology will have on the average person. The idea is to buy Bitcoin at the minimum and use it to the maximum, i.e. if gas prices rise, you will pay much less since you hopefully purchased the cryptocurrency at a low price and will pay directly at the gas station at the increased value. However, this is the ideal case, the world of cryptocurrencies also has a dark sidewhich anyone interested should be aware of and take seriously.
Proceed with caution
Although humans have historically used everything from seashells to bottle caps as money, these things have always been tangible, meaning you can see and touch them. What makes something valuable is essentially based on three key characteristics: rarity, durability and divisibility. And while there is a limit to Bitcoin, namely that there will only ever be 21 million available, thus speaking of the first of the three key characteristics, rarity, who’s to say that tech-savvy people won’t invent more types of the cryptocurrency or that blockchain technology can’t be hacked? Whether you like the thrill of risky investing or prefer more tangible assets, it’s crucial to always proceed with caution and think before you click a button. Set aside an amount that you would be willing to lose if things get worse and never invest your life savings. As with most things in life, nothing is certain.