Monday, January 30, 2023
  • This article defines some of the most popular web3 terms
  • Web3 borrows many of the words from the world of traditional finance and data
  • Web3 still needs to come up with its own dictionary

The world of web3 is a vast expanse that is only growing. With this growth come terms or vocabulary that are customary to insiders but a bit confusing to new entrants. If you struggle to differentiate between cryptocurrency, De-Fi, CEX, crypto, blockchain, NFT and  CBDC, then this is the perfect reading for you. We take time to define some of the most popular web3 terms that may as well be Greek to the average person trying to understand the web3 world.

Airdrop

A process through which cryptocurrency developers send tokens directly to user wallets to create awareness

Altcoin

Originally this meant an Alternative to Bitcoin but in current usage refers to coins with small market capitalization.

Ape

From the slang term “to go ape”, meaning to go crazy, this word is used to describe a person who aggressively invests in crypto or NFTs but isn’t fully informed.

ATH- All-Time High

The highest price an asset has ever had.

ATL- All-Time Low

The lowest price an asset has ever had.

Bitcoin

The first decentralized digital currency launched in 2009.

Block

A batch of transactions written to the blockchain. Every block contains information about the previous block, thus, chaining them together.

Blockchain

A publicly-accessible digital ledger used to store and transfer information without a central authority. Blockchains are the core technology on which cryptocurrency protocols like Bitcoin and Ethereum are built.

Bridge

A system that allows two blockchains to communicate and therefore convert tokens and coins between them.

Bull market

A market with a sustained rise in prices, especially in investment circles

Burn

The process of removing tokens from a cryptocurrency’s circulating supply is usually done by sending them to an inaccessible wallet address. Other digital assets, such as NFTs, can also be burned via the same process.

CBDC – Central Bank Digital Currency

A digital currency that is issued by a Central Bank or other traditional finance monetary authority.

Centralized

A structure or community where control rests with a few or a central authority

CEX- Centralized Exchange

A cryptocurrency exchange that is managed by a centralized business or entity such as Coinbase or Kraken

Coin

A cryptocurrency that is built on its own blockchain such as Bitcoin or Ethereum

Cold Wallet

Any offline method of storing crypto or tokens. This may be a flash drive or even a paper printout. Cold because they are not connected to the blockchain and are considered the most secure method.

Cryptocurrency

A digital asset on a decentralized blockchain as opposed to centralized banks or governments.

DAO- Decentralized Autonomous Organization

Any open-source organisation that its users run.

Dapp- Decentralized Application

An open-source application built on a blockchain.

Decentralized

A system that operates without the control of a centre of power or authority

DeFi- Decentralized Finance

Peer-to-peer financial tools built on public blockchains. They provide financial services without the use of intermediaries such as banks.

DEX- Decentralized Exchange

A blockchain-based peer-to-peer exchange that its users run. Instead of a central authority, smart contracts are used to govern the exchange.

DYOR- Do Your Own Research

Usually used as a disclaimer and a reminder to research information.

Ethereum

A popular blockchain that allows users to create their own decentralized applications and self -executing smart contracts

Fiat

A traditional currency issued by a central bank or monetary authority that has legal tender status.

FOMO- Fear Of Missing Out

The tendency to do something because it is popular is based on the fear of being left behind.

Fork

A change in the way a blockchain works alters its protocol. A minor change is referred to as a soft fork, while a major change is referred to as a hard fork.

Gas

Fees are paid for transacting or executing smart contracts on the Ethereum blockchain.

Hashing

Hashing is the process of converting a long string of characters into a shorter string that is easier to identify. This is how complicated entries are stored and managed on a blockchain.

Hash rate

This is the rate at which hashing is done. So when nodes validate blockchain transactions, they are hashing, and the hash rate is how fast they do it.

HODL

A misspelling of the word hold that was later acronymized as Hold On for Dear Life. Refers to holding an asset for the long term rather than selling it for short-term gain.

ICO-Initial Coin Offering

A crowdfunding approach that sells tokens to the public to raise capital for crypto projects.

Key

Alphanumeric codes that either point to a wallet (public key) or allow access to a wallet (private key).

Liquidity

How easily a digital asset can be bought or sold in the market.

Market Cap

Short for market capitalization which is the total value of an asset based on current market prices.

Metaverse

A virtual and augmented reality 3D world allows people to interact and inhabit through avatars.

Memecoin

A coin that is popular and growing but without fundamental or utility backing. The value is usually propped up as a joke.

Mining

The process of verifying transactions and organising them into blocks on a blockchain.

Minting

The process of validating information and adding it to a blockchain.

Moon

When the value of an asset is expected to rise dramatically, it is said to be shooting to the moon.

NFT-  Non-Funguible Token

A digital certificate of both ownership and authenticity of an item that is not interchangeable with another.

Node

Any device connected to a blockchain network.

P2P (Peer to Peer)

Where users connect directly on a network without intermediation.

PoS (Proof of Stake)

A mechanism that requires validators on a blockchain to stake (collateralize) their own currency when verifying transactions on a blockchain.

PoW (Proof of Work)

Validators on a blockchain are required to solve mathematical puzzles to gain the ability to verify transactions.

Pump and Dump

A scheme where the value of a crypto, NFT or digital asset is artificially increased and then sold to unwitting buyers at high prices. The asset then declines in price rapidly.

Rug Pull

A scam where creators of a crypto project take funds invested into it, out of the project and run.

Shitcoin

A cryptocurrency with little value due to a lack of fundamentals or use case.

Sidechain

This is a blockchain that runs alongside another blockchain and connects through a bridge. Think of it as a sub-blockchain.

Smart Contract

A program that exists on a blockchain monitors activity and executes a set of instructions automatically upon the satisfaction specified conditions.

Stablecoin

A token that pegs its value to another asset such as Bitcoin, another crypto, Gold or fiat currency like the US dollar.

Token

A digital asset created on an existing blockchain can represent physical assets too. This includes NFTs.

Wallet

A software application (hot wallet) or hardware device (cold wallet) that stores private keys that prove ownership of digital assets such as crypto or NFTs.

Wrapped

A wrapped crypto token has its value pegged to another asset. The other asset may be cryptocurrency or another asset class altogether.

These terms are the most common in the web3 world. Web3 looks like it’s going to need to come with its own dictionary. While it borrows many of the words from the world of traditional finance and data, many have new meanings in this arena. NFTs are also expansive and will need their own “NFT dictionary”.

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