Unlock Your Digital Future with Cryptocurrency
Web3 Rescued You From
- Centralized Control: The current internet is controlled by a handful of entities, limiting potential for individual freedom.
- Financial Barriers: Traditional financial systems can gatekeep access to digital services and innovations.
- Lack of Digital Ownership: Without proper understanding, you might not fully own or control your digital assets.
Web3 Rescued Delivered
- The pivotal role cryptocurrency plays in decentralizing the web.
- How to navigate through buying and managing digital currencies.
- Insights into blockchain’s security and privacy benefits.
- The practical applications of Web3 like NFTs, DeFi, and DAOs.
Coinbase – An easy-to-use platform for beginners to buy and manage cryptocurrencies.
Begin Your Web3 Journey – Start with Coinbase!
The Essential Role Of Crypto Currency In Web3
Imagine a world where you control your digital life, where your online identity isn’t held hostage by tech giants. This is the promise of Web3, the decentralized internet. With Web3, you gain ownership of your data, enhanced privacy, and new financial opportunities through digital money called cryptocurrency
To interact with Web3, you’ll use tools and technologies that will be new to you. You will still require a browser, keyboard, and a mouse. For your browser, I recommend Brave, as it offers enhanced privacy and security features that are essential for navigating the Web3 world. Web3 doesn’t want your credit cards. Keep them to yourself. What you will need is digital money. Cryptocurrencies are designed specifically for the digital world. There are no banks to get in the way; payments are made directly between people. You are digitally paying cash for things like ownership of digital items and participation in online communities. It is all built around ‘crypto’ and blockchains.
Before we get started on our Web3 journey, I will give you a crash course on cryptocurrencies. I will show you how to obtain your first cryptocurrency. You purchase crypto at an exchange, just as you would purchase Euros for going to Europe. You are purchasing crypto to go digital. The exchange rates will vary depending on the level of service that you want and the exchange service that you use. Navigating the buying process is simple; dollars are accepted at the exchange window. Once you get your crypto, you will securely store it in your crypto wallet.
I’ll also briefly touch on the exciting possibilities that this technology unlocks, from decentralized finance (DeFi) and unique digital collectibles (NFTs) to community-driven organizations (DAOs). Any time you use a blockchain service, you will incur a transaction fee, called a “gas fee.”
These fees will be paid under the following circumstances:
1. Sending Cryptocurrency:
- Whenever you send cryptocurrency from your wallet to another wallet (whether it’s ETH, BTC, or any other cryptocurrency on a blockchain that uses fees), you’ll pay a gas fee. This fee compensates the network for processing and validating the transaction.
2. Interacting with dApps:
- Making a trade on a Decentralized Exchange (DEX): When you swap one cryptocurrency for another on a DEX like Uniswap, you’ll pay a gas fee.
- Buying, selling, or transferring an NFT: Any action that involves changing the ownership or location of an NFT on the blockchain will require a gas fee.
- Using DeFi protocols: Lending, borrowing, staking, or providing liquidity on DeFi platforms all involve on-chain transactions and thus require gas fees.
- Participating in DAO governance: Voting on proposals or other actions within a DAO that require recording on the blockchain will typically incur a gas fee.
3. Deploying Smart Contracts:
- If you’re a developer deploying a new smart contract to the blockchain, you’ll pay a gas fee to have it recorded and executed on the network.
General Rule of Thumb
Anytime you’re doing something that requires the blockchain to “do work” (process a transaction, update a record, execute code), you’ll likely pay a gas fee.
You generally don’t pay gas fees when
- Holding cryptocurrency in your wallet: Simply storing your cryptocurrency in your wallet does not incur gas fees.
- Viewing information on the blockchain: Reading data from the blockchain (e.g., checking transaction history, NFT ownership) is typically free.
- Interacting with off-chain elements of dApps: Some parts of dApps operate off-chain and don’t require gas fees. For example, browsing an NFT marketplace or viewing details about a dApp might not involve any fees.
Important Note
Gas fees can vary depending on network congestion. When the network is busy (many people are trying to make transactions), gas fees tend to be higher. When the network is less busy, gas fees are usually lower.
Before making a transaction on the Ethereum network, it’s a good idea to check current gas prices to avoid paying more than necessary. You can use websites like Etherscan to monitor gas prices in real-time. Many wallets, like MetaMask, also provide gas price estimates before you confirm a transaction.
Understanding Gas Fees and Gwei
You will see the term Gwei (pronounced “gway”) listed as the gas fee. Gwei is a unit of measurement for Ethereum’s cryptocurrency, Ether (ETH). 1 Ether (ETH) = 1 Billion Gwei. At the time of this writing, 1 ETH = $3615. The “Gas Fee” was 6.64 Gwei. A little math if you please
If a gas price is 6.64 Gwei, and assuming 1 ETH = $3615, here’s how to calculate the dollar cost:
- Calculate the value of 1 Gwei in USD:
- 1 Gwei = 0.000000001 ETH
- 1 Gwei = 0.000000001 ETH * $3615/ETH = $0.000003615
- Calculate the cost of gas in USD:
- Gas price = 6.64 Gwei
- Gas cost = 6.64 Gwei * $0.000003615/Gwei = $0.0000240056
Therefore, if the gas price is 6.64 Gwei, it would cost approximately $0.000024 (or about 0.0024 cents).
You are essentially multiplying the dollar value of one Gwei by the current gas price (in Gwei) to find the cost of gas in USD.
With the digital currency crash course over, let’s go get some crypto!
The Doorway to Web3 Starts by Purchasing Crypto
While there are many different cryptocurrencies, two of the most established and widely used are Bitcoin (BTC) and Ethereum (ETH). I know the tendency will be to purchase Bitcoin (BTC). But don’t do it today!
Bitcoin is the original and most well-known cryptocurrency. BTC is primarily used as an investment vehicle and a digital currency for peer-to-peer transactions. I work for you, you pay me in Bitcoin.
If I want to
- Play a Game (for money): Most blockchain games are built on blockchains other than BTC, primarily Ethereum (ETH) and newer, faster chains like Polygon (MATIC) or Solana (SOL). In-game transactions, rewards, and marketplace activities use ETH or MATIC. While there are some Bitcoin-based games, they are less common.
- Purchase an NFT: The vast majority of NFTs are on the Ethereum blockchain and are bought and sold using ETH. While some NFT projects exist on other blockchains (and a very small number on Bitcoin), the Ethereum NFT ecosystem is by far the largest and most established.
- Purchasing from a dApp: Most dApps, especially in Decentralized Finance (DeFi), are built on Ethereum or other smart contract-enabled blockchains. These dApps use those blockchains’ native cryptocurrencies for transactions, governance, and other functions.
If I paid you in Bitcoin and you wanted to:
- Play a typical blockchain game: You would likely need to exchange your Bitcoin for the game’s supported cryptocurrency (e.g., ETH, MATIC).
- Buy a typical NFT: You would almost certainly need to exchange your Bitcoin for ETH.
- Use a typical dApp: You would likely need to exchange your Bitcoin for the dApp’s supported cryptocurrency (often ETH).
Why is This?
- Smart Contracts: Ethereum was the first blockchain to popularize smart contracts, which are self-executing contracts with the terms of the agreement directly written into code. These smart contracts are essential for building dApps, DeFi protocols, and NFT marketplaces. Bitcoin’s scripting capabilities are more limited.
- Ecosystem and Network Effects: Because Ethereum was the first major platform for dApps and NFTs, it has developed a large and thriving ecosystem. This network effect makes it the preferred choice for many developers and users.
The Polygon Wrinkle
Ethereum, while being the most popular blockchain for dApps and NFTs, has limitations in terms of transaction speed and cost. As the network gets busier, transactions become slower and more expensive (higher gas fees).
Polygon (MATIC) is a “Layer-2 scaling solution” for Ethereum. Think of Polygon as the Express Lane along the main Ethereum highway. It allows transactions to be processed faster and at a much lower cost than on the main Ethereum network.
MATIC is the cryptocurrency that powers the Polygon network. It has several key functions:
- Paying for Transactions: Just like ETH is used to pay for transactions on the Ethereum network, MATIC is used to pay for transactions on the Polygon Express Network. These transactions are much cheaper than on Ethereum.
- Staking: MATIC holders can “stake” their tokens to help secure the Polygon network and earn rewards. Staking is like earning interest on your crypto.
- Governance: MATIC holders can participate in the governance of the Polygon network, voting on proposals and influencing its future development.
Why is MATIC relevant to beginners?
- Lower Fees: If a beginner wants to try out dApps or NFTs but is concerned about high gas fees on Ethereum, using dApps on Polygon is a much more affordable option.
- Growing Ecosystem: Polygon has a growing ecosystem of dApps, including many popular games and NFT marketplaces. This means there are plenty of opportunities to explore Web3 on Polygon.
While you can’t directly use ETH on the Polygon network, you can ‘bridge’ your ETH over to create a wrapped version called WETH on Polygon. This allows you to take advantage of Polygon’s lower fees and faster transaction speeds while still ultimately being connected to the Ethereum ecosystem.
Did You Purchase ETH or MATIC? ETH was my choice today.
Digital Wallets – Hot or Cold? Software or Hardware?
After buying your cryptocurrency, the next step is choosing a suitable digital wallet to store it. There are mainly two types: hot and cold wallets. Hot wallets are online and connected to the internet, offering convenience and quick access to funds. Cold wallets, being offline, provide enhanced security against online threats. Understanding this distinction is key to keeping your assets safe.
The Exchange
Navigating exchanges can be daunting at first, with so many different platforms offering varying features. Centralized exchanges like Coinbase or Binance make it straightforward for beginners, while decentralized exchanges (DEX) like Uniswap can provide more privacy and control over trades. Consider factors like fees, supported currencies, and user experience when selecting an exchange.
Getting familiar with these core components equips you to engage more deeply with Web3. Cryptography and blockchain might seem complex, yet grasping the basics of cryptocurrency purchase and management sets a solid foundation for participating in the expansive possibilities of the decentralized web.
What Can You Do with Cryptocurrency in Web3?
Now that you have some cryptocurrency, what can you actually do with it in Web3? Here are a few examples of how crypto is used in this new digital world:
- Making Payments and Transactions: Just like using dollars or euros, you can use cryptocurrency to buy digital items, pay for online services, or send money directly to others without needing a bank or credit card.
- Exploring Decentralized Finance (DeFi): DeFi is like a new kind of financial system built on the blockchain. It lets you lend, borrow, and potentially earn interest on your cryptocurrency, cutting out traditional banks. Think of it like a digital peer-to-peer lending platform. For example, platforms like Aave and Compound offer these kinds of services.
- Collecting Digital Items (NFTs): NFTs, or Non-Fungible Tokens, are like unique digital collectibles. They can be digital art, music, in-game items, or even virtual real estate. Think of them like digital trading cards or limited-edition artwork. You can buy, sell, and trade NFTs on marketplaces like OpenSea.
- Participating in Online Communities (DAOs): DAOs, or Decentralized Autonomous Organizations, are like online communities run by their members. By owning certain cryptocurrency tokens, you can often vote on important decisions about the community’s future, similar to a digital cooperative.
What’s Next in Web3?
Web3 is still a relatively new and rapidly evolving space. New technologies and applications are constantly being developed, making it an exciting area to watch. As more people start using Web3, things like making transactions faster and easier are becoming a big focus. This means the experience of using cryptocurrency and Web3 will likely become even smoother and more user-friendly in the future. The best way to stay up-to-date is to keep learning and exploring!
