Web3, a new era of the internet, uses blockchains, tokens, and wallets (tools for storing and managing digital assets) to facilitate a wide range of services and functionalities, including the transfer of assets from person-to-person. It represents a paradigm shift towards a more transparent, secure, and decentralized framework where individuals own, and have greater control and sovereignty over, their digital assets and interactions within the digital realm.

Blocks and Blockchains

The foundational technology of Web3 is the blockchain, a distributed digital ledger that records transactions across multiple computers in a way that ensures security and immutability. A blockchain consists of a series of blocks, each of which contains transaction records and data. The “chain” in the name comes from the fact that each block is linked to the previous one—and the farther back a block is in the chain, the harder it is to alter. Blockchains’ transparent and tamper-proof architecture enables anyone to verify and audit transactions independently without needing to trust a third party.

Tokens

Tokens are digital representations of a unit of value that are issued and managed on the blockchain ledger. They are flexible and programmable, which means they can represent anything from digital or physical assets to credentials, ownership rights, or access to services, products, and communities.

FUNGIBLE TOKENS are tokens in which each unit is interchangeable and indistinguishable from another token of the same type. Just like with units of currency or grains of rice, one unit of a fungible token holds the same value and characteristics as another unit of the same kind of token. For example, one Bitcoin is always equal to one Bitcoin.

NON-FUNGIBLE TOKENS (NFTs) are digital tokens, each of which is individually unique and thus has a distinguishable owner on the blockchain. These are commonly used for establishing ownership over digital art and collectibles, event tickets, data records, or even physical assets. NFTs enable flexible value creation through holder identity and community formation, which has been explored in everything from NFT-based affinity networks to customer rewards programs from companies such as Starbucks.

Ownership

In a Web3 world, tokens enable ownership at the individual level. Individuals have control over their own digital assets typically secured and facilitated by blockchain technology in a decentralized manner. Unlike in traditional centralized systems where ownership is often determined and managed by intermediaries such as large platforms or governments, blockchain enables individuals to have direct ownership and control over their digital assets.

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