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Unicorns, complex acronyms, and language changes faster than a well-executed rug pull abound in the web3 world.
The internet as we know it is evolving in our eyes. It's all over the news and Twitter feeds and starting to creep into ordinary conversation. A new era necessitates a new lexicon, and Web3 has its terminology.
This post will go through common web3 terminology and its usage.
Blockchain is a decentralized digital ledger that anyone can access and can be used to store and transfer data without the need for a central authority. Blockchains are the underlying technology that allows cryptocurrency systems like Bitcoin and Ethereum to function.
Satoshi Nakamoto, a pseudonym, developed the first decentralized, peer-to-peer digital money in 2009. The person or people responsible for the technology are still unknown.
Unlike government-issued currencies, Bitcoin boasts lower transaction fees than existing online payment options and is managed by a decentralized authority.
A block is a group of transactions that have been recorded on the blockchain. Every block has information about the preceding block, allowing them to communicate with one another.
Airdrop is a marketing strategy in which crypto projects send native tokens directly to their users' wallets to enhance adoption and awareness.
Block Explorer is a tool for browsing blockchain data, including transactions, wallet addresses, market capitalizations, and hash rates.
A protocol allows different blockchains to interact, transferring data, coins, and other information between systems.
Burning entails withdrawing several tokens from circulation for good. The burning process is accomplished by moving the tokens in question to a burn address, a wallet from which they cannot be retrieved. However, It is often referred to as token destruction.
Decentralized Autonomous Organization (DAO)
DAO is an open-source organization that its users manage. DAOs are focused on a single project or objective, substituting legacy organisations' traditional hierarchical processes for blockchain-based principles.
Decentralized Application (Dapp)
A Dapp is a blockchain-based application built with open-source technology. Dapps live independently of centralized groups or figures, and they frequently use awarded tokens to incentivize users to keep them up to date.
"We're All Gonna Make It," a famous phrase in crypto and trading circles, denotes friendship and optimism.
Web1 is the earliest version of the internet, also known as the "read-only web." Information-based static websites defined web1. User interaction and user-generated material were minimal.
The "read-write web," which began in the 1990s, is distinguished by user-generated content and enhanced user interfaces. As a result, blogs, social media platforms, Wikipedia, and YouTube were born.
Web2 emphasizes user experience and interoperability across different applications and websites, resulting in the extensive network of linked websites and resources we are acquainted with today.
Ethereum is a decentralized application platform built on a public blockchain for digital money, international payments, and applications. The community has created a thriving digital economy and innovative new ways for creators to make money online.
A coin, such as BTC, ETH, etc., is a cryptocurrency developed on a native blockchain and meant to be used as a store of value and medium of exchange inside that ecosystem.
Collateral can be a tangible asset like real estate or a digital investment like an NFT, and it can be used as collateral for a loan. In traditional banking, a typical example of collateral is a mortgage.
Decentralized Finance (DeFi)
Decentralized Finance (DeFi) is an ecosystem of borderless, trustless, peer-to-peer financial instruments developed on public blockchains without banks. DeFi applications are designed to be open and networked, allowing them to work together.
Learn more about DeFI
A smart contract is a self-executing code that is deployed on a blockchain. Smart contracts eliminate the requirement for a central authority, legal system, or external enforcement mechanism to carry out trustworthy transactions and agreements between distant, anonymous participants.
This software application or hardware device holds the private keys to blockchain assets and accounts. Unlike a typical wallet, a blockchain wallet does not contain the currencies or tokens themselves. Instead, they save the private key that certifies a digital asset's ownership. Metamask, Coinbase Wallet, Ledger, and Trezor are just a few examples.
DEX (Decentralized Exchange)
DEX (Decentralized Exchange) is a blockchain-based peer-to-peer cryptocurrency exchange. Instead of an intermediary person or centralized institution, a DEX is run by its users and smart contracts.
It's a system that runs without the supervision of a central authority figure instead of relying on a distributed peer-to-peer network.
DYOR (Do Your Own Research)
This phrase reminds people to do their research before investing in a specific asset.
Slippage is the difference between the listed price of a cryptocurrency and the price at which a deal executes.
A fork is a modification to the protocol of a blockchain. It results in a soft fork when the changes are minor. When the improvements are more fundamental, a hard fork may occur, resulting in the developing of a second chain with its own set of rules.
A fork is a significant alteration to a blockchain incompatible with the current protocol and necessitates the creation of a new chain.
A soft fork is a backward-compatible blockchain upgrade. These changes do not necessitate the formation of a new chain, unlike a hard fork.
Transaction Hash (Txn Hash)
Transaction Hash (Txn Hash) is a long string of letters and digits unique identifier for a given transaction. You may find the specifics of a transaction by pasting a txn hash into a block explorer like Etherscan.
Stablecoin is a token whose value is linked to a different asset. A fiat currency, such as the US dollar, usually back these coins. Still, they can also be supported by tangible assets such as precious metals or even other cryptocurrencies, such as Bitcoin.
This blockchain node verifies and relays transactions while also storing the blockchain's entire history.
Fractionalization encodes an NFT in a smart contract and breaks it into smaller pieces distributed as fungible tokens. It decreases ownership costs and allows a community to own artwork and other digital assets.
Slashing is the process of a validator's staked bitcoin being burned or redistributed as a penalty for allowing fraudulent charges or otherwise damaging the network.
A token is a digital asset established on a blockchain that already exists. Tokens represent digital and physical assets and interact with decentralized applications (Dapps).
A transaction is data that has been added to a blockchain. Nodes on the network verify new transactions before broadcasting them to other nodes. The transaction is considered genuine and added to a block if enough nodes have validated it.
P2P is a network of two or more computers communicating directly without a central server or entity.
People inhabit the metaverse as avatars in a speculative or emergent networked online universe with digitally permanent environments.
Virtual reality, augmented reality, game consoles, mobile devices, and traditional PCs are utilized to access the shared virtual area for synchronous interactions and experiences.
Testnet is a software environment that resembles the mainnet blockchain and is used to test network upgrades and smart contracts before they are deployed to the mainnet.
Like a bank account number, a wallet address is an alphanumeric identifier that serves as the address for a blockchain wallet.
Other users can send digital assets to your wallet using your public key, but the contents of your wallet are only accessible using your private key.
Wei is the smallest ether denomination, named after Wei Dai, a cypherpunk and cryptocurrency pioneer. One ether = 10^18 gwei
The Secure Hashing Algorithm (SHA) is a set of cryptographic hashing functions developed by the National Security Agency (NSA). SHA-256 takes an input of data and generates a hash, which is a long series of letters and numbers. This hash is then used to represent the data securely.
Sharding is a technique for breaking down a network's nodes into smaller groups (shards) to improve scalability. These shards can then reach a consensus on behalf of the entire network, eliminating the requirement for each node to execute each transaction.
Rug pulling is a scam technique in which a crypto enterprise takes the monies invested in its protocol and runs with them. Pump-and-dump work on the inside, if you will. Rug pulls can also happen in assets with a centralized ownership structure. If someone can sell a significant amount of the circulating supply, the supply will rapidly expand, causing the asset's price to drop.
A program's basic software layer is called a protocol. A protocol has become a catch-all phrase for both layer one blockchain networks and layer two applications developed on top of them. Protocols include Bitcoin, Ethereum, Uniswap, and Lightning Network.
Consensus is an algorithm that aims to make decentralized record-keeping more centralized and database-like.
The state of agreement among the nodes on a blockchain is often called consensus. A consensus is required to confirm new transactions and add new blocks to the blockchain.
Mechanism of Consensus
The consensus mechanism is how nodes on a blockchain agree on a transaction or the network's current state.
Minting confirms and registers information on the blockchain, such as domain ownership.
The public key points to your wallet address, an alphanumeric code similar to a bank account number that acts as the address for a blockchain wallet. Other users can send digital assets to your wallet using your public key, but only you have access to the contents of your wallet using the private key.
A private key is an alphanumeric passcode that may be used to withdraw funds from a blockchain wallet and approve digital transactions. Because these private keys are long and difficult to recall, wallets usually associate them with a seed or recovery phrase.
Oracle is a service that provides data from the outside world to smart contracts. Smart contracts can't access data off-chain; thus, they rely on oracles like Chainlink and Band Protocol to retrieve, verify, and distribute external data.
Mining is a Proof of Work (PoW) system. Confirming transactions, grouping them into blocks, and adding blocks to the blockchain is block verification. Miners are those who participate in this procedure.
PoW (Proof of Work )
PoW is a consensus process in which miners must solve complicated mathematical problems to verify transactions and mint blocks. When miners solve a challenge correctly, they acquire permission to mint the next block and receive the block reward and transaction fees.
Any device connecting to a blockchain network is referred to as a node. Different nodes have different levels of responsibility and may be used to validate transactions, maintain the blockchain's history, transmit data, and perform other tasks.
Since blockchains are dispersed peer-to-peer networks, nodes come together to construct the network's infrastructure.
NFT (Non-fungible token)
A digital certificate of authenticity, or NFT, assigns and verifies a single digital or physical item ownership. NFTs are not convertible to each other, unlike fungible tokens.
To the moon
This term suggests that the value of an asset will rise to the point where it will reach the moon. This is utilized by shills, bulls, and virtually everyone during a bull market.
In contrast to a testnet or layer two solutions, the mainnet is a main layer one blockchain.
The entire worth of an asset is determined by its current market price. The market capitalization of a cryptocurrency is calculated by multiplying the price of a single coin by its circulating supply.
The Liquidity Pool collects user-provided funds locked into a smart contract to make trading on a DeFi platform easier. Users must offer liquidity on decentralized exchanges and lending protocols because there is no central bank or figure to do so.
Liquidity refers to how easily an item can be bought, sold, or traded in a given market. Market liquidity and accounting liquidity are the two most common forms of liquidity. Cash is the most liquid asset, whereas tangible assets are less so.
ERC-1155 is an Ethereum token standard that allows a single, smart contract to manage fungible, non-fungible simultaneously, and semi-fungible tokens. These are often employed in gaming and collector trading to reduce the number of transactions required.
Tokens represent many digital assets in the Ethereum system, including vouchers, IOUs, and even real-world, actual objects. ERC-20 is the Ethereum token standard, which provides fungible tokens with a standardized innovative contract structure.
ERC-721 is an Ethereum token standard that enables the creation of non-fungible tokens, sometimes known as NFTs. ERC-721 tokens, unlike the ERC-20 standard, have distinct attributes that allow them to be identified and priced independently of one another.
FOMO (Fear Of Missing Out )
FOMO is a sensation of worry caused by missing out on a chance. It usually occurs when investors acquire an asset after it has already experienced a significant price increase, hoping to get in and out before a pullback occurs.
Genesis Block is the first block of a blockchain network.
We might have noticed it's not up to 100 :( I will be updating this post as I come across more web3.0 terms.
In conclusion, the web3 world is rapidly evolving, and a new set of terminologies comes with it. This article has covered some of the most common web3 terminologies and their definitions. As the web3 space continues to grow and evolve, staying up-to-date with the latest terminologies is essential to keep up with the conversation. By understanding these terminologies, you'll be better equipped to navigate the web3 space and engage in meaningful discussions.
Don't forget to watch for future updates to this article as more web3 terminologies emerge. Thank you for reading, and I hope you found this article informative!
See you in my next blog article. Take care!!!