Thread by @petergyang

New to web 3 and want someone to "explain like I'm five" how crypto works?

I've written a single post that breaks down:

1. Web 3
2. Blockchain (wallets and keys, proof of work vs. stake)
3. Tokens
4. Bitcoin
5. Ethereum
6. NFTs
7. DAOs

Let's dive in...
creatoreconomy.so/p/curious-begi…

1/ What is web 3?

Let's compare web 2 to web 3:

Web 2 is the internet today. It's dominated by middlemen that extract value from creators and users by sitting in the middle.

Web 3 is built off a peer-to-peer network of computers that talk to each other without middlemen.

2/ Learn more about web 3:

@cdixon on why web 3 matters:

https://twitter.com/cdixon/status/1442201621266534402?s=20

@patrickxrivera on crypto fundamentals:
docs.google.com/presentation/d…

3/ What is blockchain?

A blockchain is a linked list of transactions stored on a network of computers (nodes).

Blockchains are:
1. Decentralized
2. Immutable
3. Open

Each block has a list of transactions, a hash, and the previous block's hash (that's how blocks are linked).

4/ What are wallets and keys?

Crypto wallets don't actually store funds. Instead, they store two keys:

1. A public key that links to an address that lets you send and receive transactions.

2. A private key and seed phrase that proves that you own the tokens from your address.

5/ Wallets can be:

Software:
@CoinbaseWallet
@MetaMask
@rainbowdotme

Hardware:
@Ledger
@Trezor

Whatever wallet you use, never share your private key or seed phrase with anyone.

6/ What is proof of work and proof of stake?

They are two popular methods used by nodes on the blockchain to reach consensus to add a block without relying on middlemen.

7/ In proof of work:

1. Nodes called miners compete to solve a math problem using brute force.

2. The first miner to solve the problem gets to create the block.

3. Other nodes validate the block and the miner gets a token reward if the block is valid.

8/ In proof of stake:

1. Nodes called validators stake some crypto. e.g., "I'll commit this to win the right to create the block."

2. Validators with more stake are more likely to be selected to create a block.

3. Other nodes validate the block and everyone earns a tx fee.

9/ Learn more about blockchain:

@anders94 on blockchain:


How to setup a wallet:
coinbase.com/learn/tips-and…

Proof of work vs. stake:
ethereum.org/en/developers/…

10/ What is a token?

A token is a record of ownership of an asset.

Tokens can be fungible or non-fungible:

Fungible tokens are interchangeable (e.g., Bitcoin, Ether).

Non-fungible tokens (NFTs) are unique (e.g., a piece of art).

11/ As an example, consider games like Fortnite and Roblox:

Fungible tokens are the game’s virtual currency (e.g., VBucks, Robux).

Non-fungible tokens (NFTs) are the game’s character skins, emotes, and more.

12/ Learn more about tokens:

@cdixon on tokens as the new digital primitive:
cdixon.mirror.xyz/0veLm9KKWae4T6…

@patrickxrivera's token guide:
future.a16z.com/a-taxonomy-of-…

13/ What is bitcoin?

Bitcoin was created in 2009 by Satoshi Nakamoto (a pseudonym) to be a “peer-to-peer electronic cash system.”

There will only ever be 21M bitcoin in existence.

14/ Bitcoin has all the properties of blockchain and it can be used to store value (think digital gold) or to send money around the world.

Projects like @lightning and @stacks are also working to expand Bitcoin's use cases but most development in crypto is happening in ethereum.

15/ What is ethereum?

Ethereum was created in 2013 by @VitalikButerin to let anyone “write smart contracts and decentralized applications (dapps).”

What does that even mean though...

16/ Ethereum definitions:

1. Ether: Ethereum's token.

2. Gas: Amount of Ether for a node to process a transaction.

3. Smart contracts: Code that runs on the blockchain.

4. Dapps: Apps that combine a backend smart contract with frontend UI.

17/ Today, the majority of dapps are built on ethereum.

Examples:

@OpenSea for buying and selling digital assets.

@Uniswap for swapping tokens.

@Decentraland for owning land in a 3D digital world.

18/ Learn more about Bitcoin and Ethereum:

Bitcoin whitepaper:
bitcoin.org/bitcoin.pdf

Ethereum whitepaper:
ethereum.org/en/whitepaper/

Ethereum.org intro:
ethereum.org/en/developers/…

19/ What are other cryptocurrencies?

Ethereum and Bitcoin together have 60% market share, but other cryptocurrencies like @Solana are also on the rise.

Here's a market cap breakdown: coinmarketcap.com/crypto-heatmap/

20/ Which cryptocurrency is better?

That's not what this thread is about! But it's useful to know about the blockchain trilemma, which states that:

There’s usually a trade-off between scalability, security, and decentralization.

More details here:
coinmarketcap.com/alexandria/glo…

21/ What is an NFT?

An NFT is a record of ownership of a unique asset.

This record lives on the blockchain and is:

1. Decentralized: Stored on a network of computers.

2. Immutable: Cannot be changed once committed.

3. Open: Anyone can see the transaction history.

22/ What are examples of NFTs?

1/1s are single assets

Collectibles are sets: e.g,.
- Sports @nbatopshots
- PFP (profile pic) cryptopunks @BoredApeYC
- Generative art @artblocks_io
- "Lego blocks" @lootproject

Play to earn games (purchase and own in-game assets):
@AxieInfinity

23/ Art, collectibles, and gaming are the first categories to embrace NFTs, but we’re just scratching the surface.

Many more categories will tip in the future.

24/ Why do people buy NFTs?

Many reasons, including to:

1. Join a community
2. Signal status
3. Make a profit
4. Appreciate the art

I wrote about @BoredApeYC here:
creatoreconomy.so/p/bored-ape-ya…

25/ What does the gm, gn, wgmi stuff all mean?

Check out @punk6529's thread:

https://twitter.com/punk6529/status/1433002033242595338

26/ Learn more about NFTs:

NFT Canon from @a16z:
a16z.com/2021/04/02/nft…

Step by step guide for creators:
creatoreconomy.so/p/guide-to-nft…

Status Monkeys from @packym:
notboring.co/p/status-monke…

27/ What is a DAO?

A DAO is a community with a treasury owned by its contributing members.

The simplest way to describe how a DAO works is to compare it to a company.

It's early days for DAOs.

28/ Examples of DAOs:

@FWBtweets: Private social club "where crypto meets culture". Needs 75 FWB tokens to join.

@FLAMINGODAO: Invests in NFTs and lets the community co-own them.

@Uniswap: Members can vote on how to evolve the Uniswap protocol using UNI tokens.

29/ I went this far without explaining that DAO stands for a decentralized autonomous organization because I don’t think it’s the most accurate definition:

https://twitter.com/petergyang/status/1441521919128264706?s=20

30/ Still learning about DAOs, but to me the bottom line is:

1. Proposals need approval from other token holders vs. a hierarchical management chain.

2. People can earn tokens by putting in the work to help the DAO.

31/ Learn more about DAOs:

DAO landscape from @Cooopahtroopa:
coopahtroopa.mirror.xyz/_EDyn4cs9tDoOx…

A beginner's guide from @ljxie:
linda.mirror.xyz/Vh8K4leCGEO06_…

Or just join one :)

32/ To wrap up, crypto will let us build an economy where creators and fans - not middlemen - can own the upside from their work.

To put it simply, I believe that this is the future of the creator economy.

I love this table from @patrickxrivera:

33/ Thanks to these folks for their feedback on the post:

@patrickxrivera
@jakeywan
@Cooopahtroopa
@davegoldblatt
@JO7eth
@osamakhn
@ddudchock3

34/ If you made it this far, then congrats - you’re a curious beginner in crypto like me.

Follow me at @petergyang and subscribe to my newsletter - let's explore web 3 together.
creatoreconomy.so/p/curious-begi…