NFTs
The latest trend that has been sweeping the internet. You see headlines of interesting digital art that has sold for huge sums of money, and it makes you wonder, why does this have value? And what is the use? Well, my friend, it’s time to get familiar with three letters N – F – Ts, known as Non-Fungible Tokens.
The distinct word here that trips people up is `Fungible`, what does it mean? If you do a quick google, you will see that a synonym of this word is Replaceable. So if we were to attach this to NFTs, we can describe them as Non-Replaceable Tokens – meaning it’s unique. You can’t replace it. So if you own one of these tokens it means you are the only one that owns that token; it can’t be replaced or duplicated. It’s scarce!
A general rule in Economics is when a commodity is scarce (non-fungible) it holds more value than commodities (fungible) that are easily accessible or duplicated. Now, why does this have any value? Take, for example, paintings: sometimes you go to an art gallery and see a painting worth thousands, and you are thinking why is that expensive? The reason is that, a bunch of people have validated the value of that painting and therefore pushed this notion out. It’s more psychological than anything else! The ultimate marketing strategy. The same applies to this digital artwork. Nyan Cat sold for $789,126.00
Now let’s talk about the tokens. These are built on the blockchain; which can be described as a distributed database that is shared amongst a network of computers. Transactions are valid because the records stored on the blockchain are public, and immutable and anyone in the network can validate the authenticity of the transactions. So because of this technology, we can make unique pieces of digital art and buy/sell them online.
NFTs are stored on a blockchain called Ethereum. Any digital file can become an NFT, and it’s valuable because blockchain technology provides public certification and proof of ownership. Reasons, why people own one, might range from:
- To make some profit (buying and selling)
- To attain status (buying unique items, like if Monalisa was an NFT)
- A true passion and love for digital artwork.
WEB 3.0
In the beginning, Berners-Lee created Web 1.0. The World Wide Web back in 1989 was considered to be read-only. Where people went online to search, purchase, and consume products/services but had no way to interact with the information online or add to it.
Then came along Web 2.0 in 2004, which focused on the ability of people to collaborate and share information online. You can also refer to this era as the “Social Media” era. This led to massive dominance of how this version of the internet works by large corporations like Facebook, Google, and Amazon.
However, we are living in interesting times. The emergence of Web 3.0. In this era, the Internet is described as decentralized and secure. How the internet works will no longer be dictated by a select few, but instead will be distributed amongst consumers. Where people do not need a middle-man to exchange information or money online. No firewalls, or government regulations. This version is currently built on smart contracts & crypto.
So why is this important? The whole idea of having a Decentralized Internet (Web 3.0) is so that no one can monetize your data. All profits made on information about you on the internet goes to you or is distributed to all participating parties of a platform/company (DAO).
Take for example these DApps (Decentralized Apps):
- Unlike YouTube where only creators, advertisers, and the platform gets paid for the time you spend to consume their content. This platform pays you for watching (DTube).
- Gaming platforms, that pay you in NTFs you can sell (DapperLabs, Mythical Games)
- Earn crypto tokens by using a browser that values your privacy (Brave)
In summary, Web 3.0 aims to place the autonomy of your data back in your hands. You decide what to do with your time and data.
The MetaVerse
Whenever I think of The Metaverse, it reminds me of the film Ready Player One. Where the Oasis in this case was their virtual world, and you could create your avatar, interact with other avatars, accumulate assets, buy or sell digital assets with digital coins etc.
The Metaverse is a 3D world built on the Blockchain, the whole idea is to take the interaction of humans into another space, a digital space, cyberspace. Where you can socialize, learn, and collaborate in a way that ties to your real life. It aims to mimic the dynamics of the real world.
To have an experience of what the Metaverse will be like, you can create your avatar on Decentraland and interact with different worlds. However, you will also need a MetaMask crypto-wallet to authenticate you. So if you would like to experiment, you can sign up for those and play around with it. Here is a picture of me dancing!
To use Decentraland in your web browser, it needs to enable WEB2GL. I used a Chrome browser. Have fun!
Could this be the next iteration of how humans will interact online? The idea of the Metaverse is pretty cool because it sells an illusion of stepping into the internet. Unlike games like Fornite, all digital assets purchased belong to you. What do you think? Is this something exciting to you?
DeFi
Is Decentralized Finance (DeFi) the future of the Finance System? Or is it just another hype? or neither? In this section, I will be breaking down this concept for you so you can understand it enough to make your own conclusions.
Now, before we get into it, we have to understand how CeFi (Centralized Finance) works. At the moment all our financial services are handled by the bank or some kind of authority/middleman that ensures our money is kept safe, we can process transactions, acquire loans, buy and sell stocks and get insurance. However, this comes with some risks like fraud, corruption, or even mismanagement. This is where the idea of DeFi comes into play, access to financial services with no authority. To encourage accessibility and minimize risks.
The component that makes DeFi work is a Blockchain Network like Ethereum (As mentioned before, we can build DApps on this network). Through Ethereum, we can write automated code called smart contracts that will manage any financial service we would like to create in a decentralized manner. Meaning, we determine the rules of how our financial service works and once the smart contract is deployed to the network, it can never be changed because it’s immutable
The second component that’s needed for DeFi to work is money. You may be thinking it could use Ether, the token for Ethereum. A good guess, but the coin is highly volatile. Instead, we would want to base the currency on something more stable like Pounds, Dollars, and Euros. Which defeats the purpose because these rely on a central authority. This is where DAI comes into play, a decentralized stable coin that is pegged against the Dollars and backed up by cryptocurrency collateral. Hence, it’s a perfect source of money for decentralized services.
Now that we have explained the components that make DeFi work, we can look at some financial services and their use cases in summary;
- DEX – A Decentralized Exchange where users can buy/sell or trade cryptocurrencies
- Compound – This is another platform that connects lenders to borrowers
The use of DeFi still poses some risk; it’s still in its early infancy, and if smart contracts are not written well, it gives room for hackers to steal money through loopholes in the set rules. That is why it is important to do some more research into any DeFi services and only invest money you can afford to lose. This doesn’t counter the fact that if DeFi were to go mainstream it will solve a lot of problems concerning financial discrimination, mismanagement of funds and high fees. This could benefit a large portion of our population.
In conclusion, something that you may have noticed all these new trends have in common is Blockchain Technology. If that fails, all these innovative products will not reach their full potential. As our world evolves, we hope that we are making better decisions for a more sustainable earth. As companies foster the growth of technology, it’s good we also educate ourselves, so we make well-informed decisions.
If you made it this far, hope you found this article insightful. Don’t forget to share and tag us on any social media platform with your thoughts and opinions.
More Resources
https://ethereum.org/en/developers/docs/web2-vs-web3/
https://www.coinbase.com/learn/crypto-basics/what-is-a-dex
