The Definitive Web3 Glossary (2022)

The critical problem any beginner faces in the Web3 space is the new terms in Web3 and their crisp and precise meaning.

Because so many new terms in the Web3 space can confuse beginners, someone interested in starting in the Web3 space may not even start it.

The entire focus of this blog is to provide clear and crisp meaning to beginners who want to enter the Web3 space and understand Web3 terms.

I have covered everything which I felt any beginner would question, and here we go -

Cryptocurrency —

A digital currency works as a medium of exchange on blockchain technology. The transactions and records are verified and maintained by a decentralized network using cryptography.

Crypto Coins —

Crypto Coins are the native asset of blockchains, like Bitcoin has a BTC coin, and Ethereum has an ETH coin.

Stable Coin —

It is a cryptocurrency designed to offer stable prices. The functionality of the stablecoin can be pegged to another asset. For example, if it’s pegged to the US dollar, then the price of the stablecoin will be $1.

Shitcoin —

Shitcoin refers to a cryptocurrency that holds no immediate value. It often refers to an altcoin, and its diminished value reflects that the investor was not interested in investing.

Crypto Tokens —

Crypto Tokens are built on applications that are built on existing blockchains. Numerous tokens can be created on the existing blockchain technology. You can find different kinds of tokens on applications or games which can be exchanged with coins, achieving certain numbers.

Airdrops —

It is a marketing strategy for new projects by giving out free tokens to the community for a small task like retweeting a post by the company.

Fungible Token —

It is a token with interchangeable properties as it is non-unique. A fungible token can also be cryptocurrency.

Block —

The data is stored and encrypted inside the blockchain blocks.

Genesis Block —

The Genesis Block is the first ever recorded block on its blockchain, like Bitcoin, on 3rd January 2009 and had a reward of 50 BTC.

Blockchain —

An immutable digital ledger that tracks, records, and maintains transactions across peer-to-peer networks.

Bitcoin —

A decentralized cryptocurrency that doesn’t rely on any central bank but works on a Consensus mechanism called Proof of Work (PoW) and runs on blockchain technology.

Altcoins —

It is a short form of alternative coins, referring to all cryptocurrencies other than Bitcoin.

Creator Economy —

A set of people made up of creators, curators, and community builders who will be able to monetize their content.

Ethereum —

It is a decentralized and open-source blockchain utilizing Smart Contracts functionality, powered by blockchain technology.

Ether (ETH) —

The native cryptocurrency of the Ethereum ecosystem, which can be bought, sold, or exchanged on cryptocurrency exchanges.

Slashing —

Slashing refers to the penalty mechanism in the blockchain. For example, in the Ethereum blockchain, if the validator gets inactive and performs any malicious activity, then slashing occurs on the validator.

Ethereum Request for Comment (ERC) —

It is a technical document used by smart contract developers to set token rules in the Ethereum ecosystem.

ERC-20 —

It is a technical standard for Fungible tokens created on the Ethereum blockchain, which means all fungible tokens hold the same property.

ERC-721 —

It is a free and open standard describing how to build Non-Fungible Tokens (NFTs) on the Ethereum blockchain.

ERC-1155 —

It is a Multi-Token standard, which means it holds the functions of both ERC-20 and ERC-721, thereby correcting their errors and improving functionalities.

Consensus Mechanism —

The consensus mechanism is the complete set of protocols, ideas, and incentives to enable a set of nodes for the state of a blockchain.

L1 / Layer 1 —

Layer 1 is called base blockchain or on-chain network. Layer 1 acts as an ecosystem of the blockchain network, which means they can process and complete transactions on their blockchain ecosystem. Some examples are Bitcoin (BTC), Ethereum (ETH), and Solana (SOL)

L2 / Layer 2 —

Layer2 is also referred to as an off-chain network built on the existing blockchain to enhance its efficiency and scalability. Some of the transaction loads are transferred to Layer 2 to adjust the architecture of the existing blockchain. Some examples are Polygon on Ethereum (ETH) and Lightning Network on Bitcoin (BTC) work as a Layer 2.

Proof of Stake (PoS) —

Proof of Stake (PoS) is a consensus mechanism that selects participants known as validators. The validators need to stake cryptocurrency, then validators get the chance to validate blocks and earn rewards.

Proof of Work (PoW) —

To validate the blocks on the blockchain, complex computational mathematical equations should be solved, requiring high computing power by using physical devices like computers.

Mining —

Mining is the process of generating new coins and verifying transactions like Bitcoin. Mining requires computers to solve computational problems which secure the blockchain and award coins.

Hashing —

Hashing/Hash is the common term for blockchain technology. It refers to transforming input data of any length to a fixed size. It is a one-way cryptographic function that prevents fraud, double spending, and storing passwords.

Hash Rate —

Hash Rate refers to the combined computational power required for mining and processing transactions under the Proof of Work (PoW) Consensus Mechanism such as Bitcoin.

Node —

A Node runs on the blockchain applications to validate transactions and store the complete transactions on the network.

Light Node —

The Light Node is sometimes called a Node or a Regular Node. The Light Node is the primary computing device to support the blockchain network, like miners are the nodes in the Proof of Work (PoW) consensus mechanism.

Full Node —

Full Node can perform the activities done by Light Node, and it holds a copy of the blockchain ledger, like blockchain transactions. Further, it verifies and downloads all the transaction data, thus increasing network security.

Master Node —

The Master Node only verifies the block and does not add them to the blockchain. It has different roles like managing, regulatory, and governing depending on the blockchain protocol. The first protocol was Dash which was added to the Master Node in March 2014.

Crypto Wallet —

An application that can be installed on Computers or Smartphones that stores the public or private keys for cryptocurrency transactions, NFTs, and digital signing information.

Private Key —

The private key holds a string of letters and numbers and should be kept as safe as it works as a password to unlock your crypto wallet.

Public Key —

The public key is the address of the cryptocurrency wallet. With the address, one can only send the cryptocurrency to the person. No one can withdraw or login into the person’s account.

Burning Crypto —

Burning Crypto is used when the company permanently removes a number of tokens from circulation. Further, the tokens are transferred to a wallet address to burn the tokens, which means they cannot be ever retrieved.

Hot Wallet —

It is a form of digital storage and can be accessed through a computer or mobile phone. Hot Wallets are usually free but not secure from hackers.

Cold Wallet —

It is a form of cold storage like a physical device, mostly USB drives, which can keep cryptocurrencies fully offline. Cold wallets generally cost between $50 to $200, and there is no backup if you lose access to your investments.

Seed Phrase —

A Seed Phrase is the random words generated by the Crypto Wallet when you sign up for the first time. Seed Phrase is a Master key for the Crypto wallet and must be recorded offline to protect it from hackers.

Wallet address —

The Wallet address refers to a random string of characters connected to the Crypto Wallet. The wallet owner can receive cryptocurrency transactions with the help of a wallet address.

Decentralization —

The transfer of power, such as decision-making and control, from a centralized authority like an individual, organization, or government to distributed networks.

Decentralized Apps (DApps) —

An application that will run on blockchain technology autonomously using smart contracts.

Decentralized Autonomous Organizations (DAO) —

A group controlled by its members represented by rules and not controlled by any central government.

Decentralized Finance (DeFi) —

Through the use of smart contracts on a public blockchain, it enables peer-to-peer financial services without being dependent on intermediaries such as exchanges or banks.

Total Value Locked (TVL) —

The Total Value Locked (TVL) measures the total assets locked in Decentralized Finance (DeFi) protocols which includes all the coins and includes functions like lending, staking, and liquidity pools.

Distributed Ledger —

A ledger shared and synchronized digital data maintained in a decentralized form spread across multiple countries, institutions, or websites without any central authority.

Distributed Ledger Technology (DLT) —

It is a digital system for verifying transactions with the help of nodes; those transaction details are recorded in numerous places without any support from the central authority.

Metaverse —

Metaverse is a part of Web3, an evolving concept of 3D virtual reality where people can interact with anyone and anything in the form of Avatar, where they can feel the virtual world.

Digital Twin —

A 3D virtual image similar to the real world.

Avatar —

Avatar is the user’s virtual identity in Games, Virtual Reality, or Metaverse.

MetaMask —

A cryptocurrency wallet that is available as a mobile application and a chrome extension, which further interacts with the Ethereum blockchain by providing features like secure login, token wallet, key vault, and token exchange.

Machine Learning —

A set of algorithms that can enhance itself through data and experience without human intervention.

Artificial Intelligence (AI) —

A computer system that can perform different tasks using Machine Learning, Natural Language Processing (NLP), and Natural Language Understanding (NLU), which require human intelligence and understanding.

Augmented Reality (AR) —

The actual world is transformed into 3D computer-generated images through the support of technology like Goggles, Smartphones, Visors, and Glasses and is a part of Metaverse.

Mixed Reality (MR) —

The merge of two realms, like Physical and virtual worlds, creating new environments and visualizations where users can interact with anyone.

Extended Reality (ER) —

An immersive experience created through the combination of physical and virtual reality from the use of Augmented Reality (AR), Virtual Reality (VR), Mixed Reality (MR), or any similar technologies.

Virtual Currency —

It is an electronic form for digital representations of currency. Virtual currencies are primarily unregulated. They come with benefits like faster transactions and ease of use, but on the other hand, they can be hacked.

Virtual Economy —

It is an economic system within a virtual environment where goods can be bought, sold, or traded through virtual currency in the context of online games.

Virtual Reality (VR) —

It is a simulated 3D virtual environment where the users can explore and interact with virtual surroundings through their senses, which feel approximately reality.

Web3 —

Web3 embraces decentralization and puts the power in the hands of individuals rather than a web controlled by large technology companies.

GameFi —

The combination of words of Game and Finance (GameFi) which is also referred to as play-to-earn (P2E) games.

Gas Fee —

A fee that is charged for executing a transaction or a contract on the blockchain platform.

Non-Fungible Token (NFT) —

It is a unique digital identifier that includes cryptographic assets and metadata on the blockchain, which helps distinguish it from another. Further, it can’t be copied or substituted once recorded on the blockchain.

Minting —

Minting is the term used when one mints NFTs which means entering metadata on the blockchain technology like NFT platforms, so no one can claim any creator asset as data has been recorded on the blockchain technology.

Open Platform —

The Open Platform is based on open standards where developers can build their applications or services by being on the Open Platform.

Permissionless Blockchain —

It is a decentralized network and open to the public, meaning there is no requirement for Know your Customers (KYC), censorship, or gatekeepers. Anyone can use the network until the protocol allows it.

Proof of Attendance Protocol (POAP) —

It works as an NFT badge which reflects that you were part of an event that happened in either the physical or virtual world.

Smart Assets —

It is a virtual currency token representing either a physical asset or any virtual asset defined by smart contracts on the blockchain network.

Smart Contracts —

A self-executing contract executed by a code between the terms of an agreement between the buyer and the seller.

Solidity —

Solidity is an object-oriented programming language designed to create smart contracts and runs specifically on Ethereum.

Cryptography —

The practice of encoding and decoding data for secure communication.

Hash Function —

The process of generating value from a list of numbers through a mathematical function is called a Hash Function.

Transaction Hash (Txn Hash) —

A unique identifier is generated when a transaction is made. The Transaction Hash can track the status of the transaction made.

InterPlanetary File System (IPFS) —

A protocol that stores and shares data through a peer-to-peer network via the distributed file system.

Trustless —

Trustless means no single authority holds complete control; the consensus mechanism is achieved without trusting any single participant.

Chain Link —

Chainlink is a decentralized oracle network that provides reliable and real-world data to support smart contracts on blockchain technology.

Side Chain —

The Side Chain is a separate blockchain ecosystem that connects with the main/parent blockchain to increase security and privacy and reduce additional trust required to maintain a network.

Blockchain Bridge —

It works as a bridge to connect the two blockchain ecosystems, which further facilitates communication between two blockchains and the transfer of assets and information.

Hard Fork —

The Hard Fork lacks backward compatibility, which means the old version follows the old set of rules, and the new version follows the new rules on the blockchain.

Soft Fork —

The Soft Fork is backward compatible with the older versions and is a safer alternative.

Fiat Money —

Fiat Money is issued by the government and is not backed by any commodity like gold or silver. Fiat Money is backed by the relationship between supply and demand and the relationship with the government.

Liquidity —

Liquidity in cryptocurrencies means how easily a coin or token can be converted into digital assets or cash.

Liquidity Pool —

The Liquidity Pool refers to the digital assets locked in the smart contract, which results in liquidity for faster transactions. Automated Market Makers (AMMs), a Liquidity Pool component, allow digital asset trading automatically.

Testnet —

The Testnet describes when a protocol is not developed fully and is tested by developers to test the protocol features before launching for the Mainnet launch.

Mainnet —

The Mainnet is the term that means the cryptocurrencies broadcasted, verified, and recorded, and its protocol has been deployed on blockchain technology.

Peer-to-Peer (P2P) —

Peer-to-Peer (P2P) is a decentralized communication model network between two nodes; those two nodes can communicate without the help of a central server.

Protocol —

The Protocols are the rules required for the infrastructure of the blockchain, which allows digital assets to be securely exchanged on the internet.

Scalability —

Scalability refers to the transaction speed of the cryptocurrencies.

Sharding —

The Sharding is a process of splitting the blockchain ecosystem into smaller portions known as “Shards.” The splitting is done to enhance the scalability and transaction speed of the blockchain ecosystem.

SHA-256 —

It is one of the hashing algorithms used by various cryptocurrencies. The full form of SHA is the Secure Hash Algorithm. The SHA generates a 256-bit digest of messages.

Bear Market —

It is a time when prices of cryptocurrencies start falling and a difficult time to trade in.

Bull Market —

It is a time when prices of cryptocurrencies are rising, market confidence rises, and investors start buying.

Block explorer —

It is a blockchain search engine providing any information related to the blockchain.

Market Capitalization / Market Cap —

Market Capitalization means the total value of all the cryptocurrencies that have been mined. Market Capitalization is an estimation of the stability of cryptocurrencies.

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