Web3

Web3 is the next evolution of the internet, where people have ownership and control over their data, digital identity, and online relationships. Together, these elements form what is often called social capital.

In Web2, companies like Amazon, Google, and Meta store user data on private servers and monetise it by selling to advertisers. While this model created free and easy-to-use applications, it also led to issues such as privacy loss, data manipulation, and limited opportunities for users to benefit directly from their activity.

Web3 addresses these challenges by using blockchain technology, which is designed around user ownership. People can monetise their data on their own terms, move their profiles and assets across platforms, and interact on a more equal footing with applications. The result is a more open and balanced internet, where users have both a stake and a voice.

Blockchain

A blockchain is a decentralised, distributed ledger that records and verifies transactions across a network of computers. Unlike traditional databases controlled by central authorities, a blockchain is maintained collectively by its participants (nodes), each of which stores a complete copy of the ledger.

Transactions are grouped into units called blocks. Once validated by the network through consensus, a block is added sequentially to the chain. Each block references the one before it, creating a chronological record that is tamper-resistant and transparent. Altering past data would require rewriting all subsequent blocks with majority approval, making the system highly secure.

Smart Contracts

Smart contracts are programs that automatically execute predefined actions when conditions are met, such as transferring tokens or updating balances. They eliminate the need for intermediaries, making transactions faster, cheaper, and less prone to error or manipulation.

Smart contracts run on decentralised networks like Ethereum, where their code is executed deterministically by all nodes. This guarantees that contracts run exactly as written, providing both transparency and immutability. As a result, smart contracts are a foundation for decentralised applications in areas like finance, identity, and governance.

DeFi

DeFi uses blockchains and smart contracts to provide financial services without centralised intermediaries such as banks or brokers. The goal is to create a system that is open, transparent, and accessible to anyone with an internet connection.

In DeFi, transactions are validated by decentralised networks instead of middlemen. This reduces costs, lowers barriers to entry, and increases efficiency. DeFi applications first grew on Ethereum and now extend to Layer 2 networks like Arbitrum, Optimism, and zkSync, offering faster and cheaper transactions.

Stablecoins

Stablecoins are digital assets designed to maintain a stable value relative to a reference asset, usually a fiat currency like the US dollar. They are widely used for payments, remittances, trading, and as safe havens during volatility.

Common use cases:

• Remittances: Faster, cheaper cross-border transfers.

• DeFi: Used for supplying, borrowing, and yield strategies.

• Hedging: Moving out of volatile assets without converting to fiat.

• Payments: Merchants can accept them without price risk.

Types of stablecoins:

• Fiat-collateralised: Backed 1:1 by reserves of fiat (e.g., USDT, USDC).

• Decentralised: Issued and managed by smart contracts using on-chain collateral (e.g., GHO).

• Algorithmic: Maintain their peg through supply adjustments like minting and burning.

Stablecoins serve as a bridge between traditional finance and decentralised systems, enabling predictable value transfer inside Web3.