Whether it’s Meta, a MetaMask or the metaverse, here’s an explanation for many of the most commonly-used web3 terms.
Airdrop. In the crypto world, an airdrop is a free distribution of tokens or coins from a company directly into its users ‘or members’ wallets.
Augmented reality (AR). A technology that combines elements of virtual reality (VR) with physical reality. In its current form, AR can be facilitated by devices worn over the eyes – such as glasses or goggles – or by a smartphone or computer screen. Pokémon Go is one common example of AR, because it blends virtual information with one’s physical environment.
Avatar. An avatar is a digital rendering of a human being or other entity in VR, a video game, the internet or another virtual space.
Bitcoin is at the time of writing the most valuable cryptocurrency in the world. It was also the world’s very first cryptocurrency, postulated by ‘Satoshi Nakamoto’ (which is typically presumed to be a pseudonym) in a now-famous white paper called ‘A Peer-to-Peer Electronic Cash System’ in 2008.
Blockchain. A ‘blockchain’ is a distributed digital ledger that’s used to record transactions. It’s an immutable database, which means that information can’t be tampered with or altered once it’s been recorded. (If there’s an error in an entry, then a new, revised entry must be made, and both entries will subsequently be visible on the ledger.) The name comes from the fact that a blockchain stores data in ‘blocks,’ individual units that are linked, or ‘chained,’ together. New data is filed into blocks – and blocks are subsequently chained together – in chronological order, so a blockchain becomes longer and longer as more information is added to it. Each new piece of information is also assigned a timestamp, which makes it easy for users to find out exactly when it was linked to the database. The transparency and immutability of the blockchain makes it a very reliable and trustworthy business resource both for individuals and for companies.
Block. A block, the constituent element of a blockchain, is an individual unit in which data is stored.
Centralized system. This is a system that is controlled and organized according to a rigid hierarchical structure. In such a system, power and decision-making authority is concentrated in the hands of a relatively small number of individuals at the top of the hierarchy. Corporations, for example, are centralized systems.
Cryptography. A word derived from the Greek ‘kryptos’ meaning ‘hidden’ – this is the process of using mathematics to encode and protect sensitive information from malicious actors.
DAO. A Decentralized Autonomous Organization, colloquially referred to as a ‘DAO,’ is an organization that is controlled by its members and not subject to the authority of any single individual or entity. Unlike a traditional corporation or government, they are completely free of hierarchical, top-down structure. Its codes of conduct are recorded on a blockchain to ensure transparency and decentralization. Participation in a DAO is usually accessed through the acquisition of a digital token.
Dapp. A decentralized application, colloquially called a dapp, is an application constructed on the blockchain. Dapps function autonomously, according to the stipulations in smart contracts. Like any other application on your phone, dapps come with a user interface and are designed to provide some kind of practical utility.
DeFi. Decentralized finance, or DeFi, refers to a financial system built upon the blockchain, and therefore fully distributed and not subject to any centralized authority, such as a bank, government agency or a financial management firm.
Digital twin. This is a virtual rendering of a physical object. But a digital twin is more than a mere three-dimensional simulacrum-they’re designed, ideally, to be as dynamic and environment-dependent as the objects they’re imitating. For example, let’s say a team of engineers is making structural improvements to a bridge. They could design a simulation of that bridge, a simple 3D model, which would allow them to make basic measurements and study the overall structure. But that simulation wouldn’t be able to tell them much about how the wind, the traffic or any other number of more subtle environmental factors have been impacting the integrity of the bridge. To study those processes, they might distribute sensors over the bridge in order to create a digital twin. This would allow the team to create a much more informative model.
Ethereum is a decentralized blockchain network built by Vitalik Buterin in 2015. The open-source network is home to its native cryptocurrency, also called Ethereum but more commonly known simply as Ether or ETH (there’s some debate about whether or not it’s pronounced ‘eth’ or ‘eeth’). The Ethereum platform also gave rise to smart contracts – a subject we’ll dive into another week. As of March, ETH is the second most-valuable cryptocurrency in the world, after Bitcoin.
Fiat money. Not to be confused with the car brand, fiat money is a term used to refer to any kind of currency that has been declared a legal tender by a government body. (The declaration itself is often called a fiat.) Fiat money isn’t backed by any intrinsically valuable commodity, such as precious metals like gold and silver. Instead, the value of fiat money is determined by the fluctuations of supply and demand. Paper money, like the US dollar, is fiat money. Fiat money is subject to an economic force called ‘variable supply,’ which means the governing body that issued the fiat can control its value by tweaking a variety of levers, such as the adjustment of interest rates. Cryptocurrency, which is not subject to the authority of any centralized authority, is often positioned as the opposite of fiat money.
Fungibility. A term used in economics to refer to a commodity that is precisely equal in value and therefore exchangeable with other identical versions of that same commodity. A $ 1 bill, for example, is fungible, because it can be exchanged for any other $ 1 bill – they have the same value and therefore, for all intents and purposes, are identical.
Gas. In the context of web3, gas refers to a fee that’s required in order to execute a smart contract or transaction on Ethereum blockchain. Gas, which is often denominated in a very tiny fraction of an ETH called a WEI, is paid to node operators, AKA miners.
Gwei. The smallest denomination of the cryptocurrency ETH is called Gwei. 1 ETH is worth 1bn Gwei.
IRL. Shorthand for ‘in real life,’ IRL is an acronym commonly used in the web3 space to describe a person, place, thing or event in physical – as opposed to virtual – reality.
Liquidity is a term used in economics to describe the degree to which an asset can be converted into either cash or some other asset.
Meatspace refers to the physical world, ie the tangible counterpart to the virtual world of the metaverse. It may not be the most elegant of terms, but it’s been catching on among tech circles.
Meta. Facebook, Inc changed its name to Meta (officially Meta Platforms, Inc) as part of the company’s pivot toward the metaverse. There are many who mistakenly believe that the metaverse is a technology owned by Meta.
MetaMask is a software built for the Ethereum blockchain that functions as a crypto wallet.
Metaverse. ‘The metaverse’ is not synonymous with ‘web3.’ The former is the virtual landscape that’s accessible via virtual reality (VR) technology, whereas the latter is a term that’s commonly used to describe the next evolutionary stage of the internet. ‘Web3’ is inclusive of blockchain, cryptocurrency, the metaverse and other emergent technologies.
Minting is a term used to describe the process of registering a digital asset on the blockchain, thereby turning it into a purchasable non-fungible token. Once a NFT has been minted – given the nature of the blockchain – it cannot be altered. Minting NFTs on the blockchain requires a vast amount of energy, which has led many to criticize the blockchain and its proponents.
NFT. A non-fungible token, or NFT, is a collection of data stored on a blockchain that is non-interchangeable-in other words, it can’t be replicated into multiple copies of equal value in the same way that, say, US quarters can be replicated and exchanged with one another. (See definition for ‘fungible’ above.)
NGMI is a popular slang acronym in the NFT space, meaning ‘not gonna make it,’ and used to refer to a campaign or specific token that is unlikely to attain a high value. Its opposite, WGMI – ‘we’re gonna make it’ – is also commonly used.
P2P. Peer-to-peer, or P2P, is a term used to describe a network of individual computers exchanging information with one another without the oversight of a central server. Management of a P2P network is distributed among its constituent computers.
PAOP. A Proof of Attendance Protocol, or POAP, is a virtual token that serves as evidence – also commonly called a ‘badge’ – that an individual attended, either virtually or IRL, a particular event.
Private keyin crypto-speak, is an alphanumeric code that must be entered by a user in order to access one’s wallet or authorize an exchange of blockchain-based assets or currency.
Public key is an alphanumeric code that’s connected with a particular wallet. Analogous to a bank account number, a public key is the code that other users would input to send assets directly into your wallet.
Redpilled is a slang term used to describe a situation in which someone’s worldview – or their perspective on a specific issue – has undergone a sudden and dramatic shift. The phrase refers to the famous red pill from The Matrix film franchise, which basically symbolizes the decision to swallow a hard and uncomfortable truth about oneself or about the nature of reality.
Smart contracts are blockchain-based computer programs that are designed to automatically go into effect as soon as the parties privy to the contract have fulfilled their respective obligations. Once they’ve been coded and their terms have been agreed upon, they become fully automated, which negates the need for any facilitating third party. Because they’re built upon the blockchain, transactions made via smart contracts can be closely monitored – but can’t be tampered with after the fact – by the parties involved.
Tokenomicsa blending of the words ‘token’ and economics, is an umbrella term that refers to all of the various qualities of a virtual currency that can cause its market value to fluctuate.
TradFi is tongue-in-cheek shorthand that some in the crypto community use to refer to ‘traditional finance’-basically the pre-DeFi paradigm of centralized financial authority, in which governments, banks and other institutions control and regulate currency.
Virtual reality (VR) is a technology that creates three-dimensional, immersive digital environments, wherein visitors can interact with other people (or rather, their avatars) and other elements of the environment. VR technology, though still in its infancy, has been advancing rapidly. Meta’s Oculus Quest headset is an example of a piece of hardware that can transport the wearer to VR worlds.
Wallet. A crypto wallet is an application that stores and protects the keys to blockchain-based assets and accounts. (See definitions for ‘private key’ and ‘public key’ above.)
For a curated view of what’s happening weekly across web3, sign up for The Drum’s metaverse weekly newsletter.