Essential Web3 Terms & Concepts
Introductory
Web 1 - Web of Information
The first version of the internet, primarily only for viewing & reading.
Web 2 - Web of Interaction
The current state of the web, is mostly for writing & publishing content, in a variety of forms.
Web 3 - Web of Ownership
The 3rd, and most recent generation of the web. Currently being built with decentralized technologies, like Blockchains - focused on true personal ownership.
Decentralization
Distribution of power and control away from a central authority.
Blockchain
A decentralized, distributed, digital ledger of transactions that is verified across multiple nodes.
Immutable
Something that cannot be altered or deleted.
Self-Sovereignty
Ownership and control of one’s personal data, assets, and identity.
Blockchain Terms
Block
The smallest unit of a blockchain, which stores a list of transactions, a reference to the previous block, & a unique identifying code called a hash.
Node
A computer connected to the blockchain network.
Consensus Mechanism
A system to achieve agreement across a decentralized network.
Smart Contract
Self-executing contracts with terms of the agreement directly written into code.
Proof of Work (PoW)
A Blockchain consensus mechanism that requires computational effort, typically through mining.
Proof of Stake (PoS)
A Blockchain consensus mechanism where validators are rewarded based on their stake in the network.
Mining
The process of validating transactions & creating new blocks on a blockchain through computational effort.
Cross-Chain Technology
Technology that enables transactions & the exchange of information across different blockchains.
Scalability
Evaluating a blockchain’s current & future capacity to handle increased transactions.
Distributed File Storage
Storing data across a network to enhance security & efficiency.
Cryptocurrency
Fiat Currency
Government-issued currency not backed by a commodity.
Cryptocurrency
Digital or virtual currency using cryptography for security.
Tokenomics
The economics surrounding a cryptocurrency or token.
Bitcoin
The first decentralized digital currency.
Altcoin
Typically referencing cryptocurrencies other than Bitcoin.
Token
Represents things like assets, art, or utility on a particular blockchain.
Token Economy
An economic system where tokens are used as a medium of exchange.
Wallet
Digital Storage for Cryptocurrencies.
Cold Wallet - Cold Storage
Offline storage of cryptocurrencies. Offers more security, but less accessibility (intentionally).
Hot Wallet
A wallet connected to the internet. Offers less security but more convenience.
Public Key
an address where others can send you digital assets.
Digital Signature
A cryptographic signature proving account ownership.
Gas Fee
Gas fees are used to conduct transactions & execute smart contracts on the blockchain. These fees vary greatly from chain to chain.
Stablecoin
A cryptocurrency that is meant to hold a stable value, & is often tied 1:1 to another asset such as fiat currency or gold.
CBDCs - Central Bank Digital Currencies
Digital currencies that are issued & controlled by centralized banks, & centralized authorities like governments to take advantage of decentralized innovations for centralized purposes.
Decentralized Applications (DAPPs)
DAPPs - Decentralized Applications
Applications that run on a blockchain network.
Interoperability
The ability of different blockchain systems to work together.
Layer 1 - L1
The base layer of a blockchain network. Ex: Bitcoin & Ethereum.
Layer 2 - L2
A secondary framework built on top of an existing blockchain.
Sidechain
A separate blockchain linked to a “parent” blockchain via a two-way “bridge”.
Oracle
Tools that provide external data to the blockchain.
DAO (Decentralized Autonomous Organization)
An organization that is represented by rules encoded as a computer program on the blockchain.
Governance Token
A token that provides voting or participation rights in a DAO.
Multi-Sig Wallet
A wallet requiring multiple digital signatures for transactions.
Decentralized Finance (DEFI)
Decentralized Finance (DEFI)
Financial services on a blockchain, free of intermediaries.
Yield Farming
Earning returns by lending crypto assets.
Liquidity Pool
A collection of funds locked in a smart contract.
Automated Market Maker (AMM)
Algorithms for pricing assets in DEFI.
Liquidity Mining
Providing Liquidity to a pool to receive rewards, often in the form of tokens.
Staking
Storing or locking up crypto to support the operations of a blockchain network and in turn earn rewards.
Staking Rewards
Incentives received, for participation in staking. Usually rewarded in regular intervals, and often in the form of additional cryptocurrency. Similar to earning a percentage back, on money in a traditional savings account.
Tokens & Tokenization
Non-Fungible Token (NFT)
A digital asset on top of a blockchain, that is intended to store data & represent ownership. Common use cases are for digital artworks, documents, experiences, and real estate.
Fungible Token
A digital asset on top of a blockchain, that is intended to store monetary value.
Tokenization
The process of converting the rights to an asset into a digital token on the blockchain. This could mean representing physical assets like real estate or art, or intangible assets like intellectual property.
Minting
The process of creating a new NFT by recording it on a blockchain. This process turns digital art or collectibles into part of the blockchain, which ensures its uniqueness and ownership.
Metadata
A digital dataset that often provides information and context to an asset. Commonly utilized in NFTs.
Digital Art
Art that is created or stored in a digital format, on the blockchain utilizing digital innovation as part of the creative process. When tokenized as an NFT, it gains the ability to demonstrate verified ownership and provenance and empower new possibilities for artists & patrons.
Digital Collectibles
Digital assets that are considered collectible items. They can range from digital trading cards to virtual pets, all represented as NFTs on a blockchain.
Royalties
A feature of many NFTs where the original creator can receive a percentage of sales each time the NFT is sold on a secondary market.
Investing & Market Dynamics
Initial Coin Offering (ICO)
A method of fundraising where new cryptocurrencies are brought to market.
Token Generation Event (TGE)
Event in which an initial token supply is generated and/or distributed.
Volume
The amount of a currency traded within a specific period of time.
Volatility
The degree of variation in the price of a currency over a specific period of time.
Support Level
A price level where a downward trend can be expected to pause due to a concentration of demand.
Resistance Level
A price level where an upward trend can be expected to pause due to a concentration of selling.
Correction
A short-term pullback in prices, that can be interpreted as a reversal or “correction” of a significant upward trend.
Market Capitalization (Market Cap)
The total market value of a currency.
Liquidity
The ability and extent of a currency to be quickly bought or sold in the market.
Portfolio Diversification
Intentionally investing in a variety of assets, and asset classes to reduce risk.
Order Book
A list of buy and sell orders on an exchange for a particular cryptocurrency.
Market Order
An order to buy or sell a cryptocurrency immediately at the best available current market price.
Limit Order
An order to buy or sell a cryptocurrency at a specific price or better.
Stop-Loss Order
An order placed to sell a cryptocurrency when it reaches a certain price, is used to limit losses.
Leverage
The use of borrowed money to increase potential returns on investment.
Miscellaneous
FOMO
Fear of Missing Out
FUD
Fear, Uncertainty & Doubt
Rug
A project that has “pulled the rug out” from under investors.
Pump & Dump
A scheme that attempts to boost the price of a stock or currency through false, misleading, or exaggerated measures.
HODL
A term derived from a misspelling of “hold” referring to committed buy-and-hold strategies in the context of Bitcoin, and other currencies.
WAGMI
“We’re All Gonna Make It” - a positive affirmation often shared among the community.