Web3 encompasses a new technology where every transaction is auditable and viewable - the blockchain; however, a huge caveat is that these transactions are anonymous (and therefore have a huge impact on accountability). Cryptocurrency like bitcoin has been the first application of the blockchain technology in 2009. Since then many people have been trying to apply this new technology.
For a while, people would launch their own cryptocurrency (aka token), with rules attached to it. But there were no exchanges for these tokens to be of value. People have also combined the concept of tokens as a way to manage and incentivize communities in the form of DAOs (Decentralized Autonomous Organizations).
Open source communities would stand the best to benefit from a DAO so now their contributions can be recognized and compensated. The members of the DAO, depending on how the bylaws are written, can vote on these policies, people, and even how money (the treasury) is spent. Traditionally open-source communities have been resource strapped and most have done this out of the goodness of their heart, but with no resources many of these technologies die. DAOs can now tie the members of the community to a sustainability stream.
As short as 2 years ago, building on the blockchain seemed pointless. Founders were asked why should you build on the blockchain? Now, many founders are asked, why isn’t this being built on the blockchain?
A fundamental change has happened.
Two years ago, there was an immense amount of buzz around ICOs (Initial Coin Offerings), many of us bought these altcoins waiting to liquidate them, but there were not as many exchanges to support the coin. There were only a few where you would need permission to get listed as an exchange (e.g. Huobi, Binance, Coinbase, etc…), which was laborious and expensive.
Summer of 2020 everything changed.
People created a decentralized exchange; now you didn’t need permission to list on an exchange, if you as a token holder could find someone who was willing to exchange with you could sell your token you were holding easily. These private assets become “public” to where anyone can buy them.
There is another form of token called a Non-fungible Token (NFTs), these currently are literal JPGs that you mint (put on) the blockchain. In early 2021, someone bought an NFT for $69M through Christie’s auction house. Then the NBA decided to release moments of their games as an NFT - NBA TopShots. Both were wildly successful. Since then, NFTs have also gained more and more exposure and has into a primary way for people to gain access to these communities and games.
The Game that Brings It All Together - Axie Infinity
The best example of how many of these all come together is through the game Axie Infinity. Axie Infinity takes monsters called Axie (an NFT) and you can use them to fight and breed in their game. By playing your Axie you can earn a token called SLP and use that token to sell on the open exchange for their local currency. Grandmas, aunties and uncles in the Phillippines and Vietnam have quit their job to play this game all day. The Axie community is also governed by a DAO structure enabling the community to dictate many policies as well as how to spend the treasury. I highly recommend this article to understand more.