ABCs of Web3

Enrich your knowledge from A to Z with these essential concepts related to blockchain technology and the crypto ecosystem. As this space rapidly evolves, so too does the vocabulary that describes it. Consider this your roadmap to becoming fluent in the language of Web3.

Airdrop: The free distribution of cryptocurrency tokens or digital assets to individuals as a promotional or community-building measure.

Blockchain: A decentralized and distributed digital ledger that records transactions across multiple computers. It ensures transparency, security, and immutability.

Cross-chain: Refers to the interoperability between different blockchain networks, allowing the transfer of assets and data across multiple blockchains. Cross-chain solutions aim to enhance connectivity and expand the functionality of decentralized ecosystems.

DAO (Decentralized Autonomous Organization): An organization or entity that operates based on smart contracts and blockchain technology, with decisions made through voting by token holders. DAOs aim to eliminate central authority and allow community governance.

DApp (Decentralized Application): Applications that run on a decentralized network, such as a blockchain, instead of a centralized server. They are typically open source, transparent, and allow users to maintain control over their data.

Ethereum Virtual Machine (EVM): EVM allows developers to write and deploy decentralized applications (dApps) on the Ethereum network. EVM enables the execution of smart contract code in a secure and deterministic manner.

Fork: A general term used to describe the creation of a separate version of a blockchain, either through a hard fork or a soft fork.

Gas Price: The amount of cryptocurrency users are willing to pay per unit of gas to have their transactions included in a block. Higher gas prices increase the priority of transactions and incentivize miners to include them sooner.

Hard Fork: A permanent divergence in the blockchain resulting in the creation of two separate versions, each following different rules. It occurs when there is a fundamental change in the protocol, often leading to a split in the community and the creation of a new cryptocurrency.

Immutable: In the context of blockchain, immutable refers to the property of data or transactions that cannot be altered, reversed, or deleted once they have been recorded on the blockchain. Immutability ensures transparency and tamper resistance.

JSON (JavaScript Object Notation): A data-interchange format used to store or transmit data objects. It is easy for humans to read and write, and in Web3, JSON is often used for configuring and interacting with smart contracts and dApps.

KYC (Know Your Customer): A verification process used by financial institutions and crypto exchanges to confirm the identity of their customers, aiming to prevent fraud, money laundering, and other illicit activities.

Liquidity: The ease with which an asset can be bought or sold in the market without causing significant price fluctuations. High liquidity indicates a liquid and active market, facilitating efficient trading and price stability.

Mainnet: The live or production version of a blockchain network where real transactions occur. It is the operational network where users can send, receive, and interact with cryptocurrencies and decentralized applications.

NFT (Non-Fungible Token): An NFT, based on Ethereum’s ERC-721 token standard, is a digital asset representing ownership of various digital items like art, photography, music, and more. NFTs are not interchangeable, as each has distinct properties and characteristics.

On-Chain: Refers to activities or transactions that take place directly on a blockchain network, recorded and validated by the network’s decentralized nodes. It involves interacting with the blockchain’s native protocol, executing smart contracts, and ensures transparency and immutability of data.

Permissioned: A restricted blockchain or network where access, validation, and interaction are limited to authorized participants, ensuring controlled governance and compliance.

Quantum Computing: An emerging field of computation based on quantum mechanics. Quantum computers, using qubits instead of classical bits have the theoretical potential to break existing cryptographic schemes, posing future challenges for blockchain security.

Rekt: Slang used in the crypto community to describe a significant financial loss or failure, often resulting from poor investment decisions, market volatility, or scams (i.e. “I just got rekt!”)

Smart Contract: Self-executing contracts with predefined conditions written in code. They automatically facilitate, verify, or enforce the terms of an agreement, enabling trustless transactions without intermediaries.

Tokenomics: The economic system and principles behind the design, issuance, and distribution of tokens within a blockchain ecosystem. Tokenomics considers factors such as supply, demand, utility, and incentives.

Uniswap: Decentralized exchange (DEX) on Ethereum. Enables direct wallet-to-wallet token trading using smart contracts, automated market makers (AMMs), and liquidity pools.

Validator: A participant in a proof-of-stake (PoS) blockchain network responsible for validating transactions and creating new blocks. Validators are chosen based on the number of tokens they hold and are staked as collateral to ensure honest behavior.

Web3: The next evolution of the internet, characterized by the integration of blockchain technology, decentralized applications, and peer-to-peer networks. Web3 envisions a more user-centric, open, and secure internet.

XRP: A digital asset and cryptocurrency used in the Ripple network. XRP serves as a bridge currency for facilitating fast and low-cost cross-border transactions, aiming to improve liquidity in the global financial industry. It is designed to enable efficient and scalable transfers between different fiat currencies.

Yield Farming: A practice in decentralized finance (DeFi) where users provide liquidity to protocols or liquidity pools in exchange for earning additional tokens or rewards. Yield farmers can optimize returns by moving their funds between different DeFi platforms.

Zero-knowledge Proof: Cryptographic protocol that proves a statement’s validity without revealing additional information. Preserves privacy in transactions and identity verification, enhancing confidentiality in blockchain applications.