web3 Terminology
Last Updated: January 2nd, 2022
Web3: the next iteration of the web being ushered in as we speak, which leverages blockchain technology, open-source applications, and the decentralization of data and information. Web3 aims to remove control of the web from monopolistic tech companies, and return ownership of data and content to its users. Also referred to as the “read-write-trust web.”
Blockchain: a publicly-accessible digital ledger used to store and transfer information without the need for a central authority. Blockchains are the core technology on which cryptocurrency protocols like Bitcoin and Ethereum are built.
Non-Fungible Token (NFT): a digital certificate of authenticity used to assign and verify ownership of a unique digital or physical asset. Unlike fungible tokens, NFTs are not interchangeable with one another.
Decentralized Exchange (DEX): a peer-to-peer cryptocurrency exchange built on the blockchain. A DEX is run by its users and smart contracts instead of an intermediary figure or centralized institution. i.e. Uniswap, 1inch, Sushiswap
Centralized Exchange (CEX): a cryptocurrency exchange managed by a centralized business or entity.i.e. Coinbase, Gemini, Kraken
Decentralized Autonomous Organization (DAO): an organization based on open-source code and governed by its users. DAOs typically focus on a specific project or mission and trade the traditional hierarchical systems of legacy corporations for guidelines written on the blockchain.
Decentralized Application (Dapp): an application built on open-source code that lives on the blockchain. Dapps exist independent of centralized groups or figures and often incentivize users to maintain them through rewarded tokens.
Ethereum: a public blockchain serving as the foundation for decentralized applications. Ethereum is a turing complete language, allowing for users to write and deploy complex, self-executing smart contracts which live on the blockchain.
Fractionalize: the process of locking an NFT into a smart contract, and then dividing it into smaller parts which are issued as fungible tokens. This lowers the price of ownership and allows artwork and other digital assets to be owned by a community.
Altcoin: initially used to refer to any cryptocurrency that wasn’t Bitcoin, altcoin may now refer to any new cryptocurrency with a relatively small market cap.
Airdrop: a marketing technique in which crypto projects send their native tokens directly to the wallets of their users in an effort to increase awareness and adoption.
Collateral: any asset accepted as security for a loan, such as a physical asset like real estate, or a digital asset like an NFT.
Gas: a fee paid by a user to conduct a transaction or execute a smart contract on the Ethereum blockchain. This fee is dependent upon the transaction’s complexity as well as the current demand on the network
Gm: simply meaning “good morning,” gm is a common greeting used in crypto circles
GMI: short for “gonna make it.” This term is frequently thrown around on Twitter to voice support for a project or person
Layer 1 (L1): this is the blockchain platform itself, also referred to as the base layer, mainchain, or mainnet.i.e. Bitcoin, Ethereum
Layer 2 (L2): protocols, also referred to as solutions, built on top of a layer 1 blockchain and commonly used to improve scalability, privacy, and add cross-chain communication. Unlike sidechains, which use their own consensus mechanisms, layer 2 solutions are secured by their underlying mainchain. i.e. Lightning Network, Optimism, Arbitrum
Liquidity: a measure of how easily an asset can be bought, sold, or traded in a given market or on an exchange.
Liquidity Pool: a collection of user-provided funds locked into a smart contract to facilitate trading on a DeFi platform. On decentralized exchanges and lending protocols liquidity must be provided by the users, as there is no central bank or figure to do so.
Mainnet: short for main network, this is a main layer 1 blockchain, as opposed to a testnet or layer 2 solution
Market Cap: the total value of an asset based on its current market price. A cryptocurrency’s market cap is found by multiplying the price of a single coin by its circulating supply.
Minting: the process of validating information, such as domain ownership, and registering that onto the blockchain.
NFT Domains: domain names minted on the blockchain which allow people to govern their own data, set their Web3 username, take control of their digital worlds, and harness the power of the internet.
Oracle: a service supplying smart contracts with data from the outside world. Smart contracts are unable to access data that exists off-chain, so they rely on oracles to retrieve, verify, and provide external information. i.e. Chainlink,
Peer to Peer (P2P): a distributed network of two or more computers which interact directly without a central server or entity.
Protocol: the foundational software layer of a program. Protocol has become a general term used to refer to both layer 1 blockchain networks and the layer 2 applications built on top of them — Bitcoin, Ethereum, Uniswap, and Lightning Network can all be considered protocols.
Rollup: a scaling solution that aims to improve transaction throughput and decrease fees by batching multiple transactions off-chain and then submitting them to the main chain as a single transaction.
Sidechain: a parallel blockchain used to offload transactions from the main chain in order to increase scalability or add other functionality. Sidechains are connected to their main chain, or parent chain, via a two-way link which allows data and assets to be seamlessly transferred.
Slippage: the price of a cryptocurrency may change between the time an order is placed and the time that order is ultimately filled. Slippage is the difference between a cryptocurrency’s quoted price and the price that a trade actually executes at.
Smart Contract: self-executing code deployed on a blockchain. Smart contracts allow transactions to be made without an intermediary figure and without the parties involved having to trust one another.
Solidity: the native programming language of Ethereum, mainly used to write smart contracts.
Stablecoin: a token with its value pegged to another asset. Stablecoins are usually backed by a fiat currency, like the US dollar, but can also be pegged to physical assets like precious metals, or even other cryptocurrencies like Bitcoin.
Token: unlike a coin, a token is a digital asset created on an existing blockchain. Tokens can be used to represent digital and physical assets, or used to interact with dapps.
Transaction: data written to a blockchain. New transactions are verified by nodes on the network and then broadcasted to other nodes. Once enough nodes have verified the transaction, it is considered valid and added to a block.
Total Value Locked (TVL): a measure of the assets locked into an dapp’s smart contract, usually expressed in USD.
WAGMI: "We're All Gonna Make It," a common saying in crypto and trading circles signaling camaraderie and a positive outlook.
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