essential
WEB3 Terms + Concepts
introductory
Web 1 - Web of Information
The first version of the internet was primarily for observing static content.
Web 2 - Web of Interaction
As it has existed for many years, this era of the internet focuses on user-generated content, social media, and platforms owned & controlled by centralized entities.
Web 3 - Web of Ownership
The next generation of the internet, built on decentralized technologies like blockchains, enables & encourages personal ownership of data, assets, and identity.
Decentralization
The shift of control and decision-making from a central authority to a distributed network.
Blockchain
A decentralized and distributed digital ledger that records transactions securely across multiple nodes.
Immutable
Something that cannot be changed or deleted once recorded.
Self-Sovereignty
Full ownership and control over one’s data, digital identity, and assets.
Permissionless
A system where anyone can participate without needing approval from a central authority.
Trustless
A system where security and verification are enforced through code rather than relying on trust between parties.
blockchain
Block
A data structure that records transactions, links to the previous block, and contains a unique cryptographic hash.
Genesis Block
The first block of a blockchain, establishing its foundation.
Node
A computer that participates in a blockchain network, storing and verifying transactions.
Consensus Mechanism
A protocol that ensures all nodes in a blockchain network agree on the validity of transactions.
Fork
A split in a blockchain that creates two separate paths, often due to upgrades or disagreements in governance.
Hard Fork
A permanent divergence in a blockchain that creates an entirely new protocol.
Soft Fork
A blockchain update that remains compatible with previous versions.
Smart Contract
A self-executing contract with predefined terms written in code, operating on a blockchain.
Proof of Work (PoW)
A consensus mechanism that requires computational power to validate transactions and secure the network.
Proof of Stake (PoS)
A consensus mechanism where validators are chosen based on the amount of cryptocurrency they hold and stake in the network.
Mining
The process of validating transactions and adding them to a blockchain using computational power (PoW networks).
Finality
The assurance that a blockchain transaction is irreversible.
Cross-Chain Technology
Technology enabling communication, transactions, and interoperability between different blockchains.
Scalability
The ability of a blockchain to handle increased transaction volume efficiently.
Distributed File Storage
Storing data across multiple nodes in a network to enhance security and redundancy.
On-Chain Data
Information that is permanently recorded on the blockchain.
Off-Chain Data
Information that is stored outside the blockchain and referenced when needed.
Web3 Wallet
A digital wallet that enables interaction with blockchain applications, beyond just storing assets.
Pseudonymous
The characteristic of using blockchain addresses rather than real-world identities.
cryptocurrency
Fiat Currency
Government-issued currency that is not backed by a physical commodity like gold (e.g., USD, EUR).
Cryptocurrency
A digital or virtual currency that uses cryptography for security and operates on a blockchain.
Tokenomics
The economic structure and incentives of a cryptocurrency or token system.
Bitcoin
The first decentralized cryptocurrency, launched in 2009, designed as a peer-to-peer digital alternative to money.
Altcoin
Any cryptocurrency other than Bitcoin, often with unique features or use cases.
Token
A digital asset built on a blockchain that can represent ownership, access, or utility.
Wrapped Token
A tokenized version of a cryptocurrency that is pegged to the value of another asset, enabling to to be used on different blockchains.
Token Economy
An economic system where blockchain-based tokens are used for transactions and incentives.
Wallet
A digital tool used to store, send, and receive cryptocurrencies.
Cold Wallet (Cold Storage)
Offline storage for cryptocurrencies, offering enhanced security but reduced accessibility.
Hot Wallet
A cryptocurrency wallet connected to the internet, providing convenience at the cost of increased security risks.
Public Key
A cryptographic address used to receive digital assets.
Digital Signature
A cryptographic method that verifies the authenticity of a transaction or message.
Gas Fee
A transaction fee paid to blockchain validators for processing transactions and executing smart contracts.
Dust
A very small amount of cryptocurrency that is often too small to be traded.
Slippage
The difference between the expected price of a trade and the actual executed price, often due to market fluctuations.
Stablecoin
A cryptocurrency designed to maintain a stable value, often pegged to fiat currency or commodities.
CBDC (Central Bank Digital Currency)
A digital currency issued and controlled by a central bank, incorporating blockchain technology for efficiency but remaining centralized.
decentralized applications (DApps)
DApp (Decentralized Application)
An application that runs on a blockchain, removing the need for centralized control.
Interoperability
The ability of different blockchain networks to communicate and share data seamlessly.
Layer 1 (L1)
The foundational blockchain layer, responsible for transaction validation and security (e.g., Bitcoin, Ethereum).
Layer 2 (L2)
A secondary protocol built on top of a Layer 1 blockchain to improve scalability and reduce fees.
Rollups
A Layer 2 scaling solution that batches multiple transactions together before submitting them to the main blockchain.
Bridging
The process of transferring assets between different blockchains.
Sidechain
A separate blockchain connected to a main blockchain via a bridge, enabling faster transactions or additional features.
Oracle
A tool that supplies real-world data to smart contracts on a blockchain.
DAO (Decentralized Autonomous Organization)
A community-led organization governed by smart contracts and token-based voting.
Governance Token
A token that grants voting rights in a DAO or decentralized protocol.
Multi-Sig Wallet
A cryptocurrency wallet that requires multiple signatures to authorize transactions.
Zero-Knowledge Proofs
A cryptographic method that allows one party to prove they know something without revealing the information itself.
Decentralized Physical Infrastructure Networks (DePin)
A model where blockchain and token incentives are used to coordinate, fund, and maintain real-world infrastructure such as wireless networks, energy grids, and cloud computing.
decentralized Finance (DeFi)
DeFi (Decentralized Finance)
Financial services built on blockchain technology, eliminating intermediaries like banks.
Impermanent Loss
A temporary loss experienced by liquidity providers due to price fluctuations between deposited assets.
TVL (Total Value Locked)
The total amount of assets locked in DeFi protocols, indicating the protocol’s scale and adoption.
Bonding Curve
A pricing model used in DeFi where token prices adjust dynamically based on supply and demand.
Flash Loan
A loan that is borrowed and repaid within the same blockchain transaction, often used for arbitrage.
Yield Farming
Earning rewards by lending or staking cryptocurrency in DeFi protocols.
Liquidity Pool
A pool of tokens locked in a smart contract to facilitate decentralized trading.
Automated Market Maker (AMM)
A decentralized exchange system that prices assets algorithmically based on supply and demand.
Liquidity Mining
Providing liquidity to a DeFi protocol in exchange for rewards, often in the form of tokens.
Staking
Locking up cryptocurrency to support blockchain network security and earn rewards.
Staking Rewards
Incentives received for staking crypto, similar to earning interest on savings.
Bitcoin Defi
UTXO
The output of a Bitcoin transaction that has not yet been spent, can be used to keep track of Bitcoin’s ownership. Forming the foundation of Bitcoin’s accounting model.
Ordinal Theory
Introduced in 2023 by Casey Rodarmor - A method of numbering individual Satoshis (the smallest unit of Bitcoin) in sequential order, allowing them to be uniquely identified, tracked, and made special.
Ordinals Protocol
A system that enables data (like images, text, or code) to be inscribed directly onto individual satoshis, effectively creating NFTs on Bitcoin.
Inscription
The process of embedding data onto a specific Satoshi using the Ordinals Protocol; Creating NFT-like digital artifacts on Bitcoin.
BRC-20
An experimental token standard built upon the Ordinals Protocol that enables tokens to be created and transferred on Bitcoin using inscriptions, without requiring smart contracts.
Runes Protocol
A new fungible token standard for Bitcoin introduced by Casey Rodarmor in April 2024. Designed to improve upon BRC-20 by leveraging UTXOs for better efficiency and scalability.
Rune
A token made with the Runes system, letting you create and trade digital coins directly on Bitcoin.
Wrapped Bitcoin (WBTC)
A version of Bitcoin that works on other blockchains like Ethereum, letting it seamlessly interact with DeFi projects there in addition to Bitcoin.
Atomic Swaps
A trustless mechanism for exchanging Bitcoin with other assets across different blockchains without intermediaries, using cryptographic proofs.
Lightning Network
A Layer 2 scaling solution for Bitcoin that enables instant and low-cost transactions by conducting transactions off-chain before settling on-chain.
Bitcoin Layer 2 Solutions
Secondary protocols built on top of Bitcoin to enhance functionality, such as the Lightning Network (for payments) and Stacks (for smart contracts).
Stacks
A blockchain tied to Bitcoin that adds smart contracts, making DeFi apps possible with Bitcoin’s security.
tokens & tokenization
Tokenization
The process of converting real-world assets into digital tokens on a blockchain.
Fungible Token
A digital asset that is interchangeable with others of the same type, like cryptocurrencies.
Non-Fungible Token (NFT)
A unique digital asset stored on a blockchain, representing ownership of art, media, or other items.
Soulbound Token (SBT)
A non-transferable NFT representing credentials or achievements, often tied to an individual’s digital identity.
Fractionalized NFT
An NFT that is split into smaller, tradable tokens to allow shared ownership.
Dynamic NFT
An NFT that can change over time based on external conditions or inputs.
Real World Asset (RWA)
The tokenization of physical assets like real estate, commodities, or financial instruments on a blockchain, enabling digital ownership, trading, and fractionalization.
Minting
The process of creating and recording a new NFT on a blockchain.
Burning
The process of permanently removing tokens from circulation to reduce supply.
Metadata
Information stored with an NFT that provides context, such as artist details or asset descriptions.
Digital Art
Art created, stored, and owned digitally, often tokenized as NFTs to verify ownership and provenance.
Digital Collectibles
NFT-based assets that function as limited-edition collectibles, such as trading cards or virtual items.
Royalties
A feature in NFTs where creators receive a percentage of resale transactions.
Composability
The ability for blockchain-based assets and applications to integrate and interact seamlessly.
investing & market dynamics
Initial Coin Offering (ICO)
A fundraising method where new cryptocurrencies are sold to investors before public release.
Token Generation Event (TGE)
The official launch and distribution of a new cryptocurrency token.
Maximal Extractable Value (MEV)
The profit extracted by block producers or validators by reordering transactions for financial gain.
Volume
The total amount of a cryptocurrency traded within a given time period.
Volatility
The measure of price fluctuations in a cryptocurrency.
Support Level
A price level where buying interest is expected to prevent further declines.
Resistance Level
A price level where selling interest is expected to prevent further increases.
Correction
A temporary price drop after a significant increase, often seen as a market adjustment.
Market Capitalization (Market Cap)
The total value of a cryptocurrency, calculated as price × circulating supply.
Liquidity
The ease of buying or selling an asset without significantly affecting its price.
Portfolio Diversification
Spreading investments across different assets to reduce risk.
Order Book
A real-time list of buy and sell orders for a cryptocurrency.
Market Order
An order to buy or sell a cryptocurrency immediately at the best available price.
Limit Order
An order to buy or sell a cryptocurrency at a specific price or better.
Stop-Loss Order
An order to automatically sell a cryptocurrency if it drops to a certain price to limit losses.
Leverage
Using borrowed funds to increase potential returns on investment.
Airdrop
The distribution of free tokens to users, often as a promotional or reward mechanism.
Whale
A term for individuals or entities holding large amounts of cryptocurrency, capable of influencing market prices.
Privacy & Security
Zero-Knowledge Rollup (ZK Rollup)
A Layer 2 scaling solution that improves privacy and reduces transaction costs by aggregating transactions.
Privacy Coin
A cryptocurrency designed to enhance financial privacy by obfuscating transaction details (e.g., Monero, Zcash).
Hardware Wallet
A physical device that securely stores cryptocurrency private keys offline.
Private Key
A secret cryptographic key that provides access to funds and must be kept secure.
Seed Phrase
A sequence of words used to back up and recover a cryptocurrency wallet.
Metaverse & Gamified Economies
Metaverse
A virtual, immersive digital environment that combines blockchain, gaming, and social interaction.
Play-to-Earn (P2E)
A gaming model where players earn cryptocurrency or NFTs through gameplay.
Digital Land
Virtual real estate on blockchain-based metaverse platforms like Decentraland or The Sandbox.
VR & AR Integrations
The use of virtual and augmented reality technologies to enhance metaverse experiences.
Gamefi
The intersection of gaming and DeFi, where in-game assets have real economic value.