Introduction – The Onset of Web3

Web 1.0, the first generation of the internet, was primarily static and read-only, where users could
consume information but had little interaction or content creation ability. Web 2.0 introduced
dynamic, user-generated content, social media, and interactive platforms, enabling greater
collaboration and participation. However, it also led to significant security and privacy concerns—
centralized platforms began collecting vast amounts of user data, often without transparency or user
control. These central authorities became attractive targets for data breaches and manipulation. In
response, Web 3.0 emerged as a decentralized, trust – less internet model powered by blockchain
technology, aiming to return data ownership to users, ensure transparency, and reduce dependency
on centralized intermediaries, thereby addressing the key vulnerabilities of previous web eras.

Blockchain – Inner Workings

• Users generate a pair of public and private keys. They create transactions and sign it, creating
a digital signature
• This is broadcasted to the network of nodes
• The nodes verify these transactions using public key and it is added to Mempool
• Transactions added to a block, which is mined by the miners following a consensus
mechanism
• Block added to blockchain
A blockchain is a distributed digital ledger that records data in a series of blocks that are
cryptographically linked. Each block contains a batch of validated transactions, and every new block
is connected to the previous one, forming a chain of blocks.

This technology is decentralized (no central control), transparent, and tamper-resistant.

Blockchain allows multiple participants to agree without relying on a central authority. It creates
trust in open, peer-to-peer environments like cryptocurrencies.

How Does Blockchain Work?

1. Transaction Creation: A user initiates a transaction

2. Broadcast: The transaction is sent to a network of peer-to-peer nodes.

3. Validation: Nodes check the validity of the transaction using cryptographic functions and
digital signatures.

4. Block Formation: Valid transactions are grouped into a block.

5. Consensus: Nodes agree on the new block using a consensus mechanism like Proof-of-Work
or Proof-of-Stake.

6. Block Added: The validated block is added to the blockchain.

7. Ledger Updated: The updated blockchain is replicated across the entire network.

Key Features of Blockchain which differentiate it are its security and transparency.

Each block in the blockchain typically contains:

• A timestamp

• A list of validated transactions

• A hash of the previous block

• A hash of its own data

• A nonce (used in Proof-of-Work systems)

The linking of blocks using hashes ensures that tampering with one block requires changing all
subsequent blocks, which is computationally infeasible.

Encryption and Decryption:

Encryption is the process of converting plain text into unreadable ciphertext to protect it from
unauthorized access. Decryption is the reverse process—turning ciphertext back into readable data
using a key. It is an integral part of protecting data transmitted across a network from unauthorized
access.

These keys are pseudo – random and generated by algorithms.

Symmetric Encryption

• Same key is used for both encryption and decryption.

 • Fast and efficient, suitable for large data volumes.

• Key must be securely shared between sender and receiver.

Example Algorithms: AES, DES

Use Cases: File encryption, secure backups

Asymmetric Encryption

• Uses a key pair: a public key for encryption and a private key for decryption.

• More secure for communication, since the public key can be shared freely.

• Slower than symmetric encryption, often used to encrypt keys or small data.

Example Algorithms: RSA, ECDSA

Use Cases: Secure emails, digital signatures, SSL/TLS (HTTPS)

Cryptographic Hashes

A cryptographic hash can be thought of as a one – way funnel: a function taking an input and
generating an output known as Hash – a combination of hexadecimal characters of a fixed length.

Some key features:

Deterministic

• The same input will always produce the same hash output.
• Example: SHA-256("hello") will always return the same 256-bit hash.

Fixed Output Length

• No matter how long the input is, the output hash has a fixed size.
• E.g., SHA-256 always outputs 256 bits (64 hexadecimal characters).

Pre-image Resistance

• It should be computationally infeasible to determine the original input just by knowing

its hash.
• This ensures that even if someone has the hash, they cannot guess the original message.

Collision Resistance

• It should be extremely difficult to find two different inputs that produce the same hash.
• Without this property, attackers could substitute a fake message with the same hash.
 Avalanche Effect

• A small change in the input results in a completely different hash output.

• This makes patterns hard to detect and helps secure data

We would understand the immense significance of these hashing functions if we look at the
mechanism by which a blockchain operates. As there is no central entity controlling or verifying
transactions, it becomes really important to devise a solid method to check every transaction and
validate its feasibility before adding it to the memory pool and broadcasting it to the network.

Here, we dive deeper into the concept of digital signatures.

Digital Signature

A digital signature is a cryptographic technique used to verify the authenticity, integrity, and
ownership of a digital message or document. Similar to a handwritten signature on paper, a digital
signature proves that a message or transaction comes from a verified sender and has not been
tampered with.

Digital signatures rely on asymmetric encryption (public-key cryptography), which involves two keys:

• A private key (used to sign the message)

• A public key (used to verify the signature)

The signing and verification process is as follows:

Signing Process:
 1. The sender hashes the original message, a transaction, using a cryptographic hash function.

2. The hash is encrypted using the sender’s private key, producing the digital signature.

3. The message and the signature are sent to the receiver.

Verification Process:

1. The receiver hashes the received message.

2. The receiver decrypts the signature using the sender’s public key to obtain the original hash.

3. If both hashes match, the message is verified as authentic and untampered.