Web3 for Beginners: What is Blockchain, Smart Contracts, and Wallets
Key Takeaways
- Web3 is revolutionizing the internet by shifting control from centralized platforms to decentralized networks, giving users greater ownership over their assets and data.
- Blockchain, smart contracts, and crypto wallets form the foundation of Web3, enabling secure transactions, automated agreements, and seamless interactions with decentralized applications (dApps).
- From staking and DeFi to stablecoins and DAOs, Web3 offers new financial and governance opportunities, making it essential to understand how these technologies work and how to use them effectively.
Thanks to Tonstakers, you can join Web3 and start receiving regular rewards with no prior experience with blockchains and decentralized finance. Make your TON generate rewards with liquid staking.
The internet is evolving, and Web3 is leading this transformation. Unlike Web2, which relies on centralized platforms, Web3 is built on decentralized technologies that give users greater control over their assets and data. But what exactly is Web3, and how does it work?
This guide breaks down the core components of Web3: blockchain, smart contracts, and crypto-wallets. It also explores Web3 applications, including stablecoins, decentralized applications (dApps), liquid staking, and decentralized autonomous organizations (DAOs).
What is Blockchain?
At the foundation of Web3 is blockchain technology, a decentralized and tamper-proof ledger that records transactions across a distributed network of computers (nodes). Unlike traditional databases, which are controlled by a single entity, blockchains operate on network nodes that store copies of the data and collectively validate transactions.
This decentralized system enables secure value transfer without reliance on traditional financial authorities. The security and transparency of blockchain are ensured by advanced cryptography, automated consensus mechanisms, and immutable records.
Examples of Major Blockchains
- Bitcoin (BTC) — Created in 2009 by Satoshi Nakamoto, Bitcoin was the first blockchain. It is primarily used as a store of value and is often referred to as digital gold.
- Ethereum (ETH) — Launched in 2015 by Vitalik Buterin, Ethereum introduced smart contracts, enabling developers to build decentralized applications (dApps) and fueling much of the Web3 ecosystem.
- The Open Network (TON) — Originally developed by Telegram, TON is designed for high-speed, low-cost transactions and mass adoption. It is integrated within Telegram’s ecosystem, which has 900 million users.
Blockchain alone isn’t enough to power decentralized applications. Developers build smart contracts on top of blockchain networks to enable complex interactions and automate transactions.
What Are Smart Contracts?
Smart contracts are self-executing agreements stored on a blockchain. They operate based on predefined conditions and automatically execute transactions when conditions are met. This eliminates the need for intermediaries, making transactions faster, more secure, and more cost-effective.
How Do Smart Contracts Work?
- A developer writes the contract using a programming language such as Solidity (Ethereum) or FunC (TON).
- The contract is deployed on the blockchain, allowing users to interact with it.
- Once triggered, the contract executes its programmed function, such as transferring tokens, issuing loans, or processing payments.
Benefits of Smart Contracts
- Automation – Transactions execute automatically, reducing manual intervention.
- Transparency – The contract code and transaction history are visible on the blockchain.
- Security – Once deployed, contracts cannot be altered, minimizing fraud risks.
- Efficiency – Reduces reliance on intermediaries, lowering costs and improving transaction speed.
Smart contracts form the backbone of decentralized applications, enabling users to interact with blockchain networks seamlessly.
What Are Crypto Wallets?
To access blockchain networks and Web3 applications, users need crypto wallets. These digital wallets store private keys, allowing users to manage cryptocurrencies securely and interact with dApps and smart contracts.
Custodial vs. Non-Custodial Wallets
- Custodial Wallets – Managed by third-party services like Crypto.com Wallet. While convenient, users must trust the provider to secure their assets.
- Non-Custodial Wallets – Users maintain full control of their private keys. Examples include MetaMask, Tonkeeper, and Ledger (hardware wallets), which offer greater security but require responsible key management.
Why Crypto Wallets Matter
- Self-Custody – Non-custodial wallets give users full control over their funds.
- Security – Cryptographic encryption protects wallets from unauthorized access.
- Web3 Access – Wallets are essential for interacting with DeFi platforms, NFTs, and blockchain-based applications.
With over 300 million crypto wallets in use globally, choosing the right wallet depends on balancing convenience with security.
What is Staking and Why Is It Important?
Staking is the process of locking up cryptocurrency to support a blockchain network's security and operations. It is a fundamental component of Proof-of-Stake (PoS) blockchains like Ethereum, TON, and Solana.
Why Staking Matters
- Network Security – More staked tokens make the network more resilient to attacks.
- Passive Income – Users earn staking rewards to secure the network.
- Energy Efficiency – PoS staking is significantly less energy-intensive than Bitcoin mining.
However, traditional staking requires locking up assets for extended periods and often has high minimum staking requirements. For example, staking TON directly requires 300,000 TON (over $1 million).
Liquid Staking: A More Flexible Alternative
Liquid staking allows users to stake assets while maintaining liquidity. Staked tokens are pooled and delegated to validators, and in return, users receive a liquid staking token representing their staked assets.
Examples of Liquid Staking Protocols
- Lido (stETH) – The largest liquid staking platform, with over $20 billion in total value locked (TVL), enabling Ethereum staking with liquidity benefits.
- Jito (JITOSOL) – Main liquid staking service on Solana with over $2 billion in total value locked.
- Tonstakers (tsTON) – The leading liquid staking provider on TON, with over $260 million in TVL, allowing users to earn staking rewards without sacrificing liquidity.
Liquid staking lowers the barrier to entry, making it more accessible while providing additional earning opportunities.
What Are dApps and How Do They Work?
Decentralized applications (dApps) run on blockchain networks without a central authority, using smart contracts to facilitate transactions.
Benefits of dApps
- Censorship Resistance – No single entity controls an application.
- Trustless Transactions – Reduces reliance on intermediaries, lowering fees.
- Interoperability – Many dApps interact seamlessly with other DeFi services.
Popular dApps in Web3
- Uniswap (DEX) – A decentralized exchange with over $1 trillion in trading volume.
- Aave (Lending) – A liquidity protocol enabling decentralized lending and borrowing.
- Lido (Liquid Staking) – Allows Ethereum staking while maintaining liquidity.
With thousands of dApps across multiple blockchains, the Web3 ecosystem continues to expand, driving financial inclusion and decentralized innovation.
What Are Stablecoins and Why Are They Essential?
Stablecoins are cryptocurrencies pegged to stable assets like the US dollar, providing price stability and reducing volatility.
Benefits of Stablecoins
- Fixed Value – Helps users avoid price fluctuations.
- Global Payments – Enables fast, low-cost cross-border transactions.
- DeFi Integration – Used in lending, trading, and liquidity pools.
Popular Stablecoins
- USDT (Tether) – The most widely used stablecoin, with a market cap exceeding $90 billion.
- USDC (Circle) – A regulated and audited stablecoin widely used in DeFi and institutional finance.
What Are DAOs and How Do They Work?
A Decentralized Autonomous Organization (DAO) is a blockchain-based governance model where token holders vote on key decisions.
How DAOs Function
- Token-Based Voting – Members vote using governance tokens.
- Smart Contract Execution – Decisions are automatically enforced.
- Transparency – All financial and governance actions are recorded on the blockchain.
Examples of DAOs
- MakerDAO – Governs the DAI stablecoin protocol.
- Uniswap DAO – Manages Uniswap’s liquidity incentives and upgrades.
Getting Started with Web3
To begin exploring Web3, start by understanding blockchain fundamentals and key cryptocurrencies like Bitcoin and Ethereum. Setting up a crypto wallet is the next step, choosing between a custodial or non-custodial wallet based on security needs.
For those looking to earn passive income, liquid staking through platforms like Tonstakers or Lido provides a flexible way to stake assets while maintaining liquidity.