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Understanding Blockchain, Web3, virtual reality, and augmented reality can be a challenge, especially if you’re not familiar with these concepts.
The reality is that for so many they are either completely unfamiliar or associated with partially or totally wrong concepts. Here at EXM, technology is our bread and butter, and we strive to explain complicated topics in a way that everyone can understand.
Blockchain, so many people talk about it but then you find out they think it’s that thing that makes Bitcoins, that fake money used by criminals.
Web3, wait, why is there an Internet sequel like Hollywood movies?
Then there’s a certain Zuckerberg trying, in vain, to sell his virtual reality visor in the metaverse that looks like an old version of the video game Zelda where the characters don’t have legs, though. So the metaverse is a slightly lame retro video game?
Don’t be scared, wait, read on…
It may sound like a very technical and futuristic topic but blockchain, Web3 and virtual reality/ metaverse or augmented reality, for better or worse are likely to be the technological foundation of the coming decades and if you want to survive in the world to come, even if your dream is to make chocolate cakes, you will need to be aware of them and at least know what they are and how they work in broad strokes. I promise we will keep the technicalities to a minimum to follow.
The three words are often used together because each has points in common with the others but they are not the same thing, that is the first point to remember. The fact is that lately it is very “cool” for a company to use them regardless of whether they are then really doing something in this field or just blowing smoke.
The second point is that these technologies are still in an early stage of development (even though blockchain and virtual and augmented reality have been around for many years) and no one really knows how they will be used in 5, 10, or 20 years. In the beginning, every innovation uses solutions that build on the existing, but over time, new uses emerge that are unrelated to the past.
Let’s explore the meaning of each term and how they interact with one another, starting with the difference between centralization and decentralization of data and transactions.
What is centralization?
Today, most of what we do on our smartphones or computers relies on internet services provided by large technology companies such as Google, Apple, and Amazon. These companies have total control over the services we use and our data, which are stored only on their computers. This can be problematic because we must go through intermediaries to access our data and because these services can fail and stop working. Remember when WhatsApp went down? That’s what we’re talking about. The same thing happens with money, which is issued by the central banks of each country (or the European Union), giving them centralized control over it. This centralized control gives them the power to decide the exchange rate, bank interest, and many other even more complicated things. Even when paying by credit card, we use a centralized system, where Mastercard/Visa checks if we have funds on the card and authorizes the payment. In all cases, we now need their consent for any transaction.
Decentralization, on the other hand, does not require the permission or involvement of large multinational technology and financial corporations because it is based on a network of computers that communicate with each other, distribute tasks, and store data automatically, without central control. These are the public networks used, for example, with cryptocurrencies. Anyone can activate these computers by setting up a “node” (although this requires powerful computers and a lot of electricity to run). Even if one node stops working, the others will continue to work smoothly.
You may be wondering why anyone would spend money to create a node. The reason is simple: because they get rewarded with cryptocurrencies. This is the most obvious and well-known aspect of blockchain, which is the technological basis for this kind of decentralization (we will explain it more in a moment).
There are also other configurations of private blockchain networks that can be used by a specific community or organization to manage their transactions confidentially. This allows for a form of decentralization limited to their own business perimeter without having to show their content and transactions in the clear for all to see.
The advantage of this approach is that it is a system that theoretically cannot be controlled by large corporations and governments, and it allows you to have ownership of your data. However, it is important to be realistic: this is the initial utopia of those who invented Bitcoin, and even now it is being peddled as a promise. In the future, it is likely that this decentralization will be much less pronounced because history teaches us that where there is money, big corporations and governments step in to take back control. For example, in China, cryptocurrencies are already illegal. If you can’t control it, you ban it or change it to work in your favor.
What is blockchain
The blockchain owes its name to the way it stores transaction data, which can be of different types, for example: sales, purchases, contracts, authentication, data storage. Each “block” contains a variable number of transactions and is connected with the previous and next one forming a chain, hence the name block > block — chain > chain. As the number of blocks grows, so does the blockchain in memory.
Each block is like the numbered page of a notarized ledger that sits in a well-defined location between two adjacent blocks and contains, like all other blocks, a certain set of transactions each digitally signed with its author’s private key. The relationship between transactions and blocks is many-to-one. The blocks then form the famous “chain.” And the whole chain is replicated at every node in the network realizing de-centralization. Updating the “blockchain” is done by a cooperative process involving all nodes in the network.
Each block contains a hash (a fingerprint or unique identifier, which is a seemingly random sequence of numbers and letters), the date and time of the most recent valid transactions, and the hash of the previous block. The hash of the previous block links the blocks together and prevents a block from being altered or a block from being inserted between two existing blocks. In theory, this method makes the blockchain tamper-proof, then all you have to do is look back and see that everything that was considered ‘unsinkable’ in the past eventually sank, like the Titanic.
What can be done with blockchain
A great many services are already based on the blockchain, and in the coming years it promises to become the most widely used technological basis for transaction management and data storage, assuming it is not opposed or banned at the government level. For example, if it were banned in the future to create a node, the base of the blockchain would be at risk because without nodes, the blockchain would shut down.
Blockchain for payment processing and money transfers. Transactions processed on a blockchain can reduce (or eliminate) bank transfer fees.
Blockchain for buying and selling NFTs. Non-fungible tokens (NFTs) are digital files (usually images but can also be audio files, video files, and more) with unique identification codes and metadata that distinguish them from one another that can be bought and sold with the certainty of tracking the original owners and creators.
Blockchain for supply chain monitoring. Using blockchain, companies can quickly identify inefficiencies within their supply chains, as well as locate items in real time and see how products perform from a quality control perspective as they travel from manufacturers to retailers.
Blockchain for digital IDs. People can control their digital identities, while also giving users control over who accesses that data.
Blockchain for data sharing. Blockchain acts as an intermediary to securely store and move data.
Blockchain for copyright and copyright protection. The blockchain can be used to create a decentralized database to ensure that artists retain music rights and provide musicians with transparent, real-time distribution of royalties. The same can apply to software developers.
Blockchain for Internet of Things network management. Blockchain can become a regulator of networks of home devices (e.g., TV, heating, digital assistants) to monitor activity and determine the reliability of those that are added to the network.
Blockchain for healthcare. Blockchain can also play an important role in health care. Healthcare providers are using blockchain to manage clinical trial data and electronic health records while maintaining regulatory compliance.
Blockchain for freedom of opinion and information retention. Blockchain is already being used now by activists to leave their testimonies and ideas that cannot be censored by authoritarian governments or changed in the future. For example, the government of Estonia has written its history on Blockchain so that it cannot be changed and deleted in case Russia invades it again.
How to use blockchain
Don’t worry, you generally don’t have to know any technical stuff. Even now, you probably don’t know what’s behind it when you pay by credit card. With blockchain, almost nothing changes in everyday use. You will still click ‘Buy,’ ‘Sell,’ ‘Register,’ and what happens next will be invisible to you.
We wrote ‘almost’ because there is one difference from now: the need to have a wallet. But don’t imagine it as a traditional wallet that holds your bills. In fact, this ‘wallet’ is just a pair of cryptographic keys (private/public) assigned to you and used to sign your own transactions, making them verifiable by all other users (through the public key). Okay, things are a bit complicated here, so let’s try to simplify it: imagine two keys of the traditional kind. To open your safe deposit box in the bank, you usually have your key and the bank has its key. They have to be used together, otherwise, you cannot open it. Here it is the same, but in a digital environment rather than a physical one. Is this a little better?
To create your own ‘wallet,’ you can do it yourself, but it is complicated. Alternatively, you can rely on companies that provide this service and store our private keys on our behalf. We always remain the ‘masters’ of the transactions (things we have purchased or registered) that we entrust to the ‘notarized ledger’ of the blockchain and therefore out of the control of a single organization.
There are attempts to eliminate this wallet step, which is a significant obstacle for many. You know when you want to buy something and they make you fill in ten different pages of data and it makes you impatient?
Now that we have talked about blockchain-based decentralization of transactions and data storage, we can add another layer: Web3.
What is Web3?
We have already talked about Web3 and Web 3.0 being conceptually two different things (article on the Ex Machina Blog) where we pointed out that there is no unified view of the third version of the Web, even among those in the industry. So anything we can write here now could be different in 1–5–10 years. Actually, Web3 already exists and is currently somewhat mixed with Web2, which is what we know and use now. Let’s say Web3 is an evolution of Web 2, not a totally different thing. To define a Web3 site, it must be based on at least one technology component such as blockchain, artificial intelligence, or virtual reality/ metaverse and augmented reality. Basically, Web3, simplifying to the maximum, is a container as it already happens with Web2, where inside it “runs” technologies like social networks that use the web but with their own specific protocols. In “version 3,” instead of centralized sites and payments, there are the same things but decentralized with blockchain, and the current social will gradually migrate into virtual reality/ metaverse and augmented reality with many other uses now unimaginable.
For example, if you go to a site that sells those digital images that are called NFT or where you buy and sell cryptocurrencies, you are already on the Web3. This is because NFTs and cryptocurrencies are based on the blockchain. There are many applications that currently “run” on the cloud (e.g., Google Docs), that is, they are based on a program that is not installed on your computer but runs over the Web because they actually run on an Amazon or Google computer. Even for apps, there is now the possibility of decentralizing them with the blockchain. In this case, they are called “dApps” or “dapps” (decentralized apps) and run on a network of computers instead of on a single computer. So they are free from the control and interference of a single authority.
Many of these dApps are based on artificial intelligence, which is another component of Web3. AI (short for Artificial Intelligence) can span a huge variety of functions, from correcting spelling as you type (as it is doing as we are writing these lines), doing translations into different languages, generating text based on a topic, verifying the veracity of articles or reviews to creating images and music.
Finally, within the Web3 container, we also find traditional apps or dApps to enter virtual reality/metaverse or augmented reality.
What is virtual reality / metaverse
The term “metaverse” was first coined by Neal Stephenson in his 1992 Cyberpunk novel “Snow Crash.” Facebook later appropriated the term, rebranding itself as Meta to promote its virtual reality project.
Meta aims to establish itself as the standard for the protocols that enable interaction between various virtual worlds. However, virtual reality represents the epitome of centralization as hardware and software must closely coordinate with each other. Nevertheless, blockchain-based services can also operate within virtual environments, illustrating how the two can coexist, especially when making purchases.
Virtual reality is analogous to the current web but in three dimensions. You no longer view the web through a screen, but instead become fully immersed in the artificial environment with the use of a visor. This allows you to navigate a 3-dimensional world and move through different environments like you would when browsing web pages. Your movements are no longer limited to the mouse or fingers, but you have a physical representation that moves in three dimensions, whether it be an avatar or a completely original character. For example, if you want to buy shoes, you can enter a virtual store, browse through the display, and try on the shoes based on the exact measurements of your feet. Alternatively, you can visit a virtual museum or art gallery and stroll through the exhibits just as you would in person.
In the Meta video above, you may notice that the phrase “in the future” is frequently repeated. This is because the technology is not yet capable of performing all the tasks shown in the video. The biggest challenge is that the technology is still in its early stages and currently does not allow you to switch between environments seamlessly. At the moment, the virtual worlds are disconnected, similar to the early days of Web1. Meta, along with a consortium of large multinational technology companies (excluding Apple), is working on creating common protocols and technologies to connect these virtual environments, similar to the way the World Wide Web was created. However, there is still a significant obstacle to overcome in terms of the quality of the virtual environments and characters. As we joked at the beginning, the technology is currently at least 20 years behind what people are accustomed to on the Playstation 5. This is because current viewers are unable to handle large amounts of data, which is a limitation of today’s technology.
It’s not a video game
Be careful not to confuse the metaverse with a video game. It is not just a game; it can reproduce the whole human experience in an artificial environment, including sex. It’s understandable if you think it’s silly to reproduce an environment artificially when you can go outside and enjoy the real thing. However, we are moving in this direction despite the missteps so far. Virtual reality and the metaverse will have many applications that we cannot even imagine yet, just like how people initially thought the internet was a passing fad.
While the metaverse is still being built, augmented reality has been around for years, but only on smartphones and tablets. In the near future, we can expect devices that are more suitable for augmented reality to emerge. Let’s see how this technology progresses.
What is augmented reality
AR (Augmented Reality) has been around for several years, but we are still only scratching the surface of its enormous untapped potential. Decentralization does not apply to this technology, and as previously mentioned, the major sponsor is Apple, but many other companies are also moving quickly. Essentially, AR superimposes a virtual layer on the environment around you, which you can only view on the screen of your phone or tablet (for now). However, the virtual layer is consistent in perspective and proportions because a three-dimensional map of your surroundings is created.
You’ve probably seen some apps that add elements to the reality around you, such as the one from Ikea. This app uses the camera on your phone or tablet to place sofas, beds, and closets in your room, giving you a faithful idea of what they would look like in reality in terms of style and size. Video games are also using AR to create gameplay by placing characters on your table that descend to the floor and climb onto your bookshelf. Other applications are being developed in the architectural and medical fields, with countless other possibilities on the horizon.
Starting in 2023, relatively inexpensive glasses will be introduced, gradually replacing the phone as an intermediary for displaying the virtual layer. This will allow the virtual layer to be superimposed directly onto our sight, making it more immersive. Large-scale deployment of this technology is expected between 2025 and 2026, when even Apple and other large companies will have cheaper products that can be purchased by more people.
The ultimate goal may be contact lenses that can provide this level of augmented reality directly in front of our eyes, eliminating any physical element on the face. Researchers have been working on this technology for years, but there are currently no products available for sale. There are still many challenges to overcome and a lot of research to be done, so it may be a few more years before we can actually use this type of contact lens.
Which would you choose: a visor that totally covers your face, isolating you from your surroundings, or a pair of glasses, or even contact lenses? Some of you may answer, “nothing, these things make no sense.” It’s a legitimate point of view, but for many digital natives, the appeal of wearable devices will be irresistible, and they will soon be as ubiquitous as smartphones are today.
In just a few years, smartphones will be a thing of the past, although they will still serve as a “bridge” to wearable devices for data processing. That’s why even if you’re not a techie type, blockchain, web3, and virtual/augmented reality will soon be part of your life, just like the phone in your pocket now. Remember when you or a friend of yours were reluctant to have a smartphone, saying, “What do I do with it? I only need to make phone calls…”? Now, what happens to you if you leave the house and forget your smartphone?