56 Web3 Terms You Need to Know!

Web3 is one of the hottest buzzwords in the blockchain space, but it can also be confusing and intimidating for those just getting started.  The community  has adopted a lot of unique terminologies, so here are all of the key terms you need to know to familiarize yourself with as you dive into the world of decentralized technology:

1. Web3

In simple words, web3 is "a decentralized internet" aimed at ensuring privacy and data security for users.

To achieve this, web3 uses a read-write-own principle that eliminates centralized authorities and makes you the owner of everything you post on the internet.

Web3 also eliminates the monopoly of large technology corporations on the infrastructure of the internet by bringing an individualized form of ownership into play through blockchain technology.

The monetary aspect of the internet, in which large corporations rake in billions of dollars annually, is also replaced by tokenized ownership, which allows users to monetize their digital assets with the use of NFTs and cryptocurrencies.

2. Blockchain

In web3 terms, a blockchain is a digital data storage system.

It's a decentralized database used to store transaction information, digital assets, and other types of files by arranging them inside "blocks."

Unlike in the real world where we need banks or Fintech corporations to handle information about transactions, blockchain is decentralized and allows digital assets and transaction information to be stored and verified without the need for a centralized authority.

To make up for the absence of an intermediary, blockchains use a distributed ledger technology (DLT), which enables the information stored on the blockchain to be managed by multiple users and recorded with a cryptographic signature that can not be changed.

3. Non-fungible Tokens (NFTs)

Contrary to popular belief, NFTs are not only images or artworks listed on a marketplace for thousands of dollars.

They are digital assets, which means they can be images, music files, virtual real estate, videos, receipts, and any other virtual properties.

To secure an NFT and give the owner the ability to claim and transfer ownership of their digital assets, NFTs are minted on a blockchain.

4.DAO (Decentralized Autonomous Organization)

A DAO, in simple words, is an organization or corporation with no central authority.

A DAO is governed by users who are members of the community and own the DAO's native token.

This is contrary to traditional organizational structures in which decisions are made by a central authority like a CEO or manager. The decision-making process in a DAO is community-based, with each member of the DAO voicing their opinion through their vote.

5. Decentralized Finance (DeFi)

Decentralized finance is all about permissionless, peer-to-peer financial services on blockchains that erase the use of banks or any other form of regulatory authority.

These DeFi services are open-source, and you can access them through decentralized applications (DApps) without sharing any personal information or signing up for an account.

With banks, brokers, and other financial middlemen absent, smart contracts come into play.

They're programmed to automatically approve transactions on the blockchain once you meet the predetermined conditions.

What that simply means is that a smart contract can be programmed to automatically fund your cryptocurrency wallet with staking rewards once you've staked for a predetermined period of time.

6. Decentralized Applications (DApps)

DApps offer similar functions to normal applications we download on our devices, but they run autonomously through the use of smart contracts on decentralized blockchains.

DApps operate through smart contracts and serve as the applications of the web3 space due to their decentralized nature.

They are used to access DeFi services such as staking protocols, decentralized exchanges (DEXs), and blockchain games.

7. Metaverse

The metaverse is a popular web3 term, but many still fail to grasp the true meaning of this technological concept.

As you already know, web3 is the internet.

The metaverse is the social media aspect of web 3.

Created using technologies such as virtual reality (VR) and augmented reality (AR), the metaverse is a virtual world where users can socialize, interact, play games, watch movies, hold board meetings, and learn.

To access the metaverse, you need a mobile device or head-mounted devices such as VR headsets or AR glasses, which grant users the ability to meet people from other parts of the world and do things they do in real life using their avatars (virtual representations of themselves).

8.Virtual Reality (VR)

Virtual reality is an immersive web technology used to create 3D virtual environments for the metaverse.

Through computer simulations, VR creates artificial environments that consist of virtual properties.

This artificial environment replaces a user's real-life environment and immerses the user in a completely artificial environment.

9. Augmented Reality

As the word "augmentation" indicates, augmented reality adds valuable information to properties in a user’s physical environment.

Unlike in virtual reality, the data that AR provides doesn't completely replace your real-life environment, it only enhances it.

In short, AR technology only serves as a supplement to the physical properties in your surroundings.

To add information to your physical environment, AR devices project images over what you look at and automatically provide additional information without totally immersing you in a virtual environment.

10. Wallet

Wallets are used to store the private keys (seed phrase) and public keys (wallet address) that grant access to a user's blockchain accounts and digital assets.

A wallet doesn't store your coins and NFTs but instead the seed phrase that can be used to access your account and the wallet address with which other users can send you digital assets.

MetaMask, Trust Wallet, and Klever Wallet are good examples of wallets.

11. Consensus Mechanism

A consensus mechanism is a blockchain's constitution.

It's a system of agreement reached by the members of the protocol to determine key areas of the blockchain's operation.

The agreements can be based on how transactions are to be validated and the type of smart contracts the blockchain will use.

There are various types of blockchain networks with different types of consensus mechanisms.

However, Bitcoin's Proof-of-work and Cardano blockchain's Proof-of-stake are the two most prominent in the web3 space.

12. Scalability

Scalability is a challenge that Web3 protocols constantly face.

It has to do with the capacity of a protocol to handle a surge in demand for the network's services, mostly in the form of an increase in the number of daily transactions on the network.

To illustrate: When a protocol that normally handles 10 transactions per second records an increase to 500 transactions per second, scalability is the ability of the protocol to handle that sudden increase in traffic without crashing down.

A good example of a protocol that has failed woefully in terms of scalability is the Solana blockchain, as the blockchain has been shut down five times since its launch due to sudden surges in transactions on the network.

13. Testnet (Test Network)

In web3 terms, a testnet is what you can call a "dummy" blockchain.

It is used by developers to understudy the main protocol's capabilities without any risk to funds on the actual protocol.

To carry out the experiments, the developers can give testnet tokens that do not have actual value to bounty hunters.

Bounty Hunters will then use the tokens to execute transactions on the test network so that the developers can analyze the transactions and determine whether they can launch the mainnet (main network).

14. Node

Nodes are primarily responsible for the security of a blockchain.

They secure the blockchain from scammers, who can sometimes find fraudulent ways to double spend or manipulate the system.

To avoid these fraudulent manipulations, a blockchain node determines the legitimacy of each block of transactions created on the network.

Once a new block of transactions is created on the blockchain, a node approves or rejects the block and passes it to other nodes on the network for further verification.

15. Cryptography

Cryptography is a method used to secure data in a blockchain from unauthorized access or third-party interference.

Blockchains can be at risk of unauthorized access as they are open-source.

To make sure that only users who have been granted access to important data can access it, each piece of data is encrypted using cryptography, with only people who have the keys being able to access it.

To illustrate, anyone can check the amount of Bitcoins you have in your wallet, but they can't spend them except they have the private keys (which are generated with cryptography) to your wallet.

16. Block

Blocks are immutable storage units that contain the history of information written on a blockchain.

Each block houses information such as transactions and is linked to each other to form "a chain of blocks" or otherwise

"blockchain".

As new information is created on a blockchain, it's added to a block which is then encrypted using cryptography once it's verified by a node.

17. Oracle

Web3 oracles are third-party services that connect smart contracts on a web3 protocol with external information.

Smart contracts can only process data they have access to on-chain, but with an oracle, they can see their blindspots and receive off-chain data about the outside world.

To illustrate, when calculating the circulating supply of the blockchain's token, the smart contracts can not analyze the tokens kept on centralized exchanges or other platforms that are not native to their network; therefore, oracles help them collate the data.

18. Market Cap

A market cap is the total value of a digital asset based on its current market price.

To calculate the market cap of a coin, you need to multiply its unit price by its circulating supply.

For example, if FXT coin is currently worth $12 per coin and there are 10,000 tokens in circulation,

To get the market cap of FXT coin, you'll multiply $12 x the circulating supply of FXT coins, which in this case happens to be 7000 FXT coins.

The market cap of FXT coins will then be $84,000.

19. Stablecoin

Stablecoins are cryptocurrencies whose value is pegged to an asset such as the US dollar, gold, or another cryptocurrency.

They're designed to serve as a stable form of exchange and eliminate volatility, which is a common attribute of cryptocurrencies.

USDT, USDC, and Terra USD (UST) are good examples of stablecoins.

20. Fiat Money

A fiat currency is a legal tender issued by a government that isn't a cryptocurrency or native to a blockchain.

A fiat currency is simply the normal real-world currency that will spend, such as the Japanese Yen () or the US dollar ($).

21. Interobablity

Interoperability refers to the ability of different blockchains or systems to communicate and share data with each other.

The lack of interoperability has been a major challenge in the blockchain industry, as it limits the potential for mass adoption and real-world use cases.

However, various projects and initiatives are working towards improving interoperability, such as Polkadot and the Interledger Protocol. Improved interoperability would allow for more seamless interactions between different blockchains, paving the way for a truly connected and decentralized ecosystem.

22.Dex

A decentralized exchange (DEX) is a platform for trading cryptocurrencies that operates without a central authority. DEXs allow users to remain in control of their assets at all times and can offer increased security and privacy compared to centralized exchanges. Examples of popular DEXs include Uniswap and Kyber Network.

23.Hash

A hash is a function that converts an input of letters and numbers into a fixed, encrypted output. In the context of blockchain, hashes are used to secure and verify transactions on the network. Each block in a blockchain also has its own unique hash.

24.Gas

Gas refers to the fee required for a transaction or operation to be processed on a blockchain network. In Ethereum, gas is denominated in ether (ETH), and the amount of gas needed for a transaction depends on its complexity. Users must include an adequate amount of gas with their transactions in order for them to be successfully processed by miners.

25.Smart contract

A smart contract is a self-executing digital contract that is written onto the blockchain. They are designed to automatically carry out the terms of the agreement between parties, removing the need for intermediaries and increasing efficiency and trust. In Ethereum, smart contracts are programmed using Solidity, a programming language specifically designed for writing smart contracts on the network.

26.Mixed reality

Mixed reality, also known as hybrid reality, combines elements of virtual reality (VR) and augmented reality (AR). In a mixed reality experience, digital objects are seamlessly integrated into the physical world in real time. While still in its early stages, mixed reality has potential applications in industries such as gaming, education, and healthcare.

We have seen meta with the new oculus  quest 2 with mixed reality features

27.Airdrop

An airdrop refers to the distribution of free tokens or coins to a large number of wallet addresses. Airdrops are often used by blockchain projects as a marketing tactic, in hopes that recipients will become interested in and engaged with the project. They can also serve as a way for projects to fairly distribute their tokens or reward community members. Airdropped tokens may have real value and can be traded on exchanges if there is demand for them.

28. KYC

KYC, or "know your customer," refers to the process of verifying the identity of a customer or user. In the context of cryptocurrency, KYC is often required by exchanges in order to comply with anti-money laundering laws and regulations. This typically includes submitting proof of identification, such as a driver's license or passport, as well as proof of residence. Some decentralized exchanges also offer KYC procedures in order to access certain features or trading pairs.

29.Altcoin

An altcoin is any cryptocurrency that is not bitcoin. These include well-known cryptocurrencies like Ethereum, Litecoin, and XRP, as well as thousands of smaller, lesser-known coins. Altcoins often have their own unique features or use cases, and may be based on different technological foundations than bitcoin (such as Ethereum's use of smart contracts).

30.Fungible

Fungibility refers to the interchangeability of a good or asset. In the context of cryptocurrency, this means that each individual unit (or coin) is equal to another and can be freely substituted. Bitcoin and Ethereum, for example, are both fungible cryptocurrencies.

31.NonFunglible

Non-fungible tokens (NFTs), on the other hand, are unique and cannot be substituted for one another. These tokens, which have gained recent popularity in the digital art and collectibles space, are often used to prove ownership and authenticity.

32.Minting

Minting refers to the process of creating and issuing new tokens or coins. This is typically done by a central authority for traditional currencies, but for cryptocurrencies it is usually done through a predetermined protocol or algorithm. For example, new bitcoin is created through the mining process, in which miners compete to solve complex mathematical problems in order to add new blocks to the blockchain and receive a reward in the form of freshly minted bitcoin.

33.PoW

Proof of  work (PoW) is a mechanism used to achieve consensus and verify transactions on a blockchain network. In PoW-based networks like bitcoin, miners compete to solve complex mathematical problems in order to add new blocks to the blockchain and receive a reward. This process consumes a large amount of computing power and electricity, leading some projects to seek alternative methods such as proof of stake (PoS).

34. PoS

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Proof of stake (PoS) is an alternative consensus mechanism to proof of work (PoW). In PoS-based networks, a validator can validate transactions and add new blocks to the blockchain by staking their own tokens. This process typically requires less computing power and electricity than PoW, but has its own drawbacks such as centralization risks. Ethereum plans to move to a PoS consensus mechanism in the near future with its upcoming Eth 2.0 upgrade.

35.Seed phrase

A seed phrase, also known as a recovery phrase or backup phrase, is a set of words that can be used to access and recover the funds in a cryptocurrency wallet. These phrases are typically 12-24 words long and should be kept secure and stored safely, as anyone with access to the seed phrase can take control of the wallet and its funds.

36.Cold storage

Cold storage refers to the secure offline storage of cryptocurrency funds, as opposed to hot or online storage which is vulnerable to hacking attempts. Cold storage options include hardware wallets and paper wallets, both of which allow users to store their private keys offline in a physically secure manner.

Slang:

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1.GM

Good morning. A term used by the community daily  to greet each other on social media or in forums.

2.WAGMI

Were all gonna make it . A term to express confidence in the future success of a cryptocurrency or project.

3.FOMO

Fear of missing out. The feeling of urgency to buy a certain asset, often driven by the fear that it will continue to rise in price and one will miss out on potential gains.

4.Shill

To promote a certain cryptocurrency or project, often in an overly enthusiastic or deceptive manner. Can also refer to someone paid to shill a certain asset.

5.Mooning

When the price of a cryptocurrency dramatically increases or is expected to increase in the future. Can also be used as a verb (e.g. "This coin is mooning!")

6.FUD

Fear, uncertainty, and doubt. Spread of negative or misleading information in an attempt to lower the price or discredit a certain cryptocurrency or project.

7.HODL

A misspelling of "hold," meaning to retain ownership of a certain asset, often during periods of market volatility. Originally coined in a forum post during the 2013 bitcoin bubble.

8.Whale

An individual or entity who holds a large amount of a certain cryptocurrency, often enough to significantly influence its price. Can also refer to someone with a high net worth in the industry overall.

9.Paper hands

Individuals who easily sell their assets at a loss during market downturns, as opposed to "HODLers" who hold onto their assets. Often used in a derogatory manner.

10.BTFD

Buy the fucking dip. A term used to encourage buying during periods of low prices, with the expectation that the asset will eventually increase in value.  (Note: This term may be considered offensive to some)

11.NGMI

Not gonna make it. Used to express lack of confidence in the future success of a certain cryptocurrency or project. (Note: This term may be considered offensive to some)

12.REKT

A misspelling of "wrecked," used to describe an individual who has suffered heavy losses. Can also refer to the loss of a larger portion of the market. (Note: This term may be considered offensive to some)

14.No coiner

Someone who does not own any cryptocurrency. Often used in a derogatory manner by members of the community. (Note: This term may be considered offensive to some)

15.Moonboy/moongirl

An individual who is overly enthusiastic about the potential for a cryptocurrency to increase in price, often to the point of being unrealistic. (Note: This term may be considered offensive to some)

16.DYOR

Do your own research. A reminder to always thoroughly research a cryptocurrency or project before investing.

17.Dimaond Hands

Individuals who hold onto their assets, even during periods of market downturns. The opposite of "paper hands."

18.Degen

Short for "degenerate," used to describe an individual who takes excessive risks in their investments. (Note: This term may be considered offensive to some)

19.Ape

To invest in a certain asset. Can also be used as a verb (e.g. "I'm gonna go ape in this altcoin"). (Note: This term may be considered offensive to some)

20.Shitcoin

A cryptocurrency with little potential value or use, often used as a derogatory term. Can also refer to fraudulent projects or scams. (Note: This term may be considered offensive to some)