Everything Ecommerce Pros Need to Know About NFTs and Web3

Image courtesy of Pexels. 

If you’re in the eCommerce industry, you’ve probably heard the terms NFT and Web3 floating around, but do you know what they mean? It can be hard to keep up with the ever-changing environment and new buzzwords – but these are two things you’ll want to take note of. 

The internet as we know it is changing with the emergence of blockchains, cryptocurrencies, NFTs, the metaverse, and Web3. In this article, we’ll dive deeper into these new technologies to help you better understand how they all fit together and prepare you for the future of the web. 

Here’s a quick overview of the topics that will be discussed in this article: 

• Let’s set the foundation: what is a blockchain? 
• What is a cryptocurrency, and how does it fit into the blockchain?
• What is the meaning of NFT, and how does it all fit together? 
• What is the Metaverse, and how will it change the digital landscape?  
• How does Web3 fit into the picture? 

Let’s set the foundation: What is a blockchain? 

Today’s businesses run on data, and finding an effective way to process, track, and record this data is essential to stay competitive and drive data-driven decisions. Blockchain networks help improve this process by creating a shared and immutable ledger.

A blockchain is a secure database shared among various computers within a network that stores data without needing a third-party entity. 

While blockchains are most commonly associated with cryptocurrency, they can be used to track and record both tangible and intangible assets. Meaning whether your business is monitoring orders and payments or patents and copyrights – blockchains can help manage and secure the data. 

Blockchains also provide an extra level of security by solidifying data once the block has been completed. Once this process happens, it becomes fixed, and no one can go back and edit or delete data.

This creates an irreversible timeline of data and allows businesses to distribute accurate data that can provide valuable insights without the fear of corrupt data. That being said, using a blockchain network can help to reduce risks and cut costs. 

How does blockchain work? 

It might seem complicated, but the process of how a blockchain works can be broken down into five steps. Each of these steps occurs automatically after a transaction has been initiated and documents the data to ensure accurate tracking and reporting from start to finish. 

Here is an overview of how a blockchain works once a transaction is initiated:

1. A purchase or transaction is entered into the network of powerful computers across the world, known as nodes
2. The network of nodes then confirms the validity of the transaction and checks its hash, a mathematical fingerprint, against the previous block
3. After the transaction has been confirmed and is identified as a valid transaction, it is added to a block on the distributed ledger 
4. That block is then permanently chained to all of the precious blocks to create a permanent history of the transactions 
5. Once all of these steps have occurred, the transaction is completed and has been recorded in the blockchain

A blockchain will provide your business with a secure and transparent way to track, manage, and report on valuable data sets without fear of corrupt or inaccurate figures. 

What is a cryptocurrency, and how does it fit into the blockchain? 

A cryptocurrency is a digital form of currency that is fragile and can be used and exchanged without the need for a centralized authority. Fungible is a term that means interchangeable and is what sets it apart from NFTs – but we’ll get to that shortly. 

Cryptocurrency is a currency used to purchase goods or services and can be an investment opportunity. 

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Bitcoin is one of the most well-known types of cryptocurrency that has become more popular in recent years as interest in cryptocurrencies continues to grow. 

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Owning cryptocurrency is unlike traditional money, where you can touch and feel your dollar bill. You won’t have anything tangible to sell or trade. Instead, there is a digital currency record that can be used. 

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While no physical money is involved in buying and selling cryptocurrency, it still runs on the idea of using tokens or coins. These tokens are created through a complex mining process using powerful hardware to solve mathematical problems.  

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Purchasing cryptocurrency can be done in a few different ways, but the two most common are through traditional brokers and cryptocurrency exchanges.

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Cryptocurrencies are run on blockchains, where all the transactions are centralized and managed. 

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That means that a cryptocurrency is a by-product of blockchains and as the demand for blockchains increases, so does the value of its currency. Cryptocurrencies continue to grow as interest and adoption of decentralization for investments, balance sheets, and legal tender continues to expand. 

What is the difference between cryptocurrency and traditional money? 

One of the most apparent differences between cryptocurrency and traditional money is the digital aspect of cryptocurrencies. 

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You won’t receive any physical coins or dollars when buying and trading with cryptocurrency. Instead, it’s a digital process that is all managed through blockchains. That doesn’t mean that the virtual funds are less usable or profitable. 

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The other big difference between the two types of currency is that cryptocurrency is decentralized and does not have a central authority managing and maintaining its value. All of the transactions are handled and managed through secure blockchains. 

What is the meaning of NFT, and how does it all fit together? 

NFT stands for non-fungible tokens. 

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NFTs are unique digital assets managed on the blockchain, similar to cryptocurrencies. They’re becoming more and more popular and will play a significant role as people start to adopt and interact with one another in a more virtual world. Image courtesy of Intuit Mint Life.

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If you remember from earlier in the article, fungible means interchangeable. Cryptocurrencies are fungible and can be exchanged for something that is the same or of similar value. 

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NFTs, on the other hand, cannot. They are one-of-a-kind, unique assets that are not as quickly traded for something of the same value. 

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A good example of something that would be non-fungible would be if you had a rare trading card. If you were to trade that card, you would receive a different card that may not have the same value as the first card. 

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The rare card is unique and may be one of a limited supply – the same idea works for NFTs. 

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Each NFT has the identifying code that sets it apart and authenticates the asset. That is the allure of NFTs, owning an original, certified item that no one else has. 

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So what types of assets can be considered NFTs? They can be everything from digital artwork and collectibles to land and legal documents. NTFs can be any unique asset, both digital and physical. 

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NTFs are similar to cryptocurrencies because they are created, stored, and owned through the blockchain. 

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Often, NFTs provide the owner access to special communities, events, and people. In recent years, they have become prevalent in the digital art world and will continue to become more popular for various assets as the adoption of virtual worlds grows.

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As we bridge the gap between virtual reality and our everyday lives, NFTs will be a way for people to build their identities and show status through the one-of-a-kind items they own – leading us to the metaverse. 

What is the Metaverse, and how will it change the digital landscape?

The metaverse is the idea of an interactive digital world that exists parallel to the real world. It’s a place where people can play games, customize avatars, go to concerts, and host parties with their friends virtually. 

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It creates an experience that connects the virtual and physical worlds to the point where they almost become inseparable. People can purchase items and take them from one world to the next, visit friends in different countries, and even purchase land in their virtual world.

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Many have framed it as the next big thing in the digital world and refer to it as a 3D model of the internet.  

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In its current state, the metaverse is still primarily an idea of what is to come. The closest thing that exists today is in the video game industry. 

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Many games allow players to build their worlds, create avatars, and purchase equipment and avatar skins. All these things help to make a digital world that the players step into when they start their game. 

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Some games have even taken it a step further to include concerts and exhibits within the game that build additional experiences for the players. 

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But these games have one major limitation, the avatars and items purchased can only be used on that specific platform. They can’t be shared from one game to the next or between different platforms.

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As the metaverse continues to expand, these barriers are expected to be broken down, and it will become an immersive world. The metaverse will become more than just video games, and people will be able to do even more within their virtual worlds. 

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While the true metaverse does not exist yet, it’s expected that when it becomes a full-fledged virtual world, it will likely be recorded on a blockchain, just like cryptocurrencies and NFTs. 

How does Web3 fit into the picture? 

Web3 is the next evolution of the internet that puts the power back into the hands of the users by decentralizing and giving people the ability to read, write, and execute. This allows users to have a financial stake and ownership in the web communities they belong to.

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 There are four core principles that guide the Web3: 

1. It’s decentralized: ownership is distributed among its builders and users, rather than being controlled and owned by centralized entities
2. It’s permissionless: everyone has equal access to participate, and no one will be excluded
3. It has native payments: cryptocurrencies will be used for spending and sending money online
4. It’s trustless: it doesn’t rely on third parties; instead, it operates on incentives and economic mechanisms

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This next phase of the internet gives people direct ownership over digital assets through NFTs. Once this ownership has been established, it cannot be taken away from the user, but they can choose to sell or trade the items for their specified value. 

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The evolution of Web3 is made possible by blockchain technology. The ability to decentralize the data gives people the resources they need to control their digital experiences. 

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Before Web3, there were two previous phases of the web. 

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Since its conception, the web has undergone multiple transition periods, and we’re getting close to the next significant evolution. Web3 will give users more control over their digital experiences and decentralize ownership. Image courtesy of Academy. 

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Web 1 was the early stages of the internet, with static content consumed passively by consumers. It was a read-only environment where users didn’t create their content. 

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Web2 is the digital world we live in now. It’s a read and write environment where users can create their content while also consuming content created by others. 

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While Web3 isn’t here quite yet, it’s coming quickly, and staying ahead of trends will help you prepare for the next era of the internet. 

Stay ahead of the NFT and Web3 trends

Knowing what NFTs are and how the internet will shift with the introduction of Web3 are essential things for any eCommerce company to know. Staying ahead of these trends will allow you to find new ways to reach customers as they move towards a more digital world in the Metaverse.

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