Web 3 Dictionary (Part 7 of 7)
0xIntro
We don’t need to repeat why crypto and web3 are going to be at the forefront of the next generation’s companies. We believe in it, and text our frens “gm” and “wagmi” every morning. We’ll cut the bullsh*t and get straight to the point.
It’s hard for the average person to understand what this noise is all about, so we took the initiative to write up a series of posts that dive into what’s actually inside the rabbit hole.
If you don’t know us already, Ripple Ventures is an early-stage venture fund looking to back extraordinary founders building market-shifting software tools. We’re focused on anything enterprise, creator, and developer-focused in web2 and web3.
This is the last part of the seven-part series covering:
- What is Web 1, 2, 3?
- The Benefits and Drawbacks of Web 2
- Why Does Web 3 Matter?
- What’s the Metaverse?
- State of the Crypto Market & Ecosystem
- Web 3 Leading Indicators
- Web 3 Dictionary
Up Next…
We’ll be launching another series in this space, diving deeper into various categories (more to come…)!
Follow our Medium account and subscribe to our Substack to see it first!
Get in touch!
If you’re a founder building in this space and want to connect, please reach out to us using this link!
Web 3 Dictionary
There are a million terms in this complicated Web 3 ecosystem, and we’re here to demystify as many of them for you as possible. Here, we break out terms by a few different sections:
- The Basics
- Twitter Dictionary
- The Not So Basics
The Basics
- Blockchain: A shared, immutable ledger that records transactions and tracks digital assets. It’s shared because multiple computers verify transactions instead of just one company. It’s immutable because once a transaction or asset is moved, the record can’t be reversed.
- Decentralization: An action (i.e. decision making) or an asset (i.e. data) being dispersed across multiple different stakeholders instead of being centered around one group or person.
- Ledger: A ledger is a record of transactions that you keep track of.
- Cryptography: The process used to make blockchain transactions secure and private.
- Nodes: An entity that has a full copy of all the transactions on the blockchain.
- Oracles: Connect blockchains to external data systems.
- Miners: Verify transactions on the blockchain network. In exchange for running computers (hardware and electricity costs), miners get a monetary reward.
- Custodial services: anyone that holds onto crypto for you (i.e. Robinhood or Wealthsimple).
- Token: A digital, fungible asset that has monetary value.
- Stablecoin: A token pegged to fiat currency (like USD).
- Cold wallets: These are paper, physical/external wallets, etc.
- Hot wallets: Digital, internet-connected wallets like Metamask.
- Liquidity: How easily an asset can be converted to cash. Houses are not liquid.
- ICOs: The process of fundraising a Web 3 protocol by offering tokens that can be spent on the protocol. Think IPOs but for Web 3.
- Smart Contract: A line of code on a blockchain network that automatically executes once pre-requisites are hit.
Twitter Dictionary
- Layer 1: A blockchain protocol like Ethereum.
- Layer 2: A network on top of Layer 1 that provides a benefit like how Uniswap is powered by Optimistic Ethereum and Arbitrum to lower gas fees and improve the scalability of their protocol.
- ERC: Ethereum request for comment, a standard used for creating and issuing smart contracts on the Ethereum blockchain.
- Gas Fees: A denomination of crypto that you pay as a transaction fee to miners to verify transactions.
- DeFi/DEX: Decentralized finance and decentralized exchanges.
- CeFi/CEX: Centralized finance and centralized exchanges.
- NFT: Non-fungible token.
- DAO: Decentralized autonomous organization.
- Dapp: Decentralized Application
- Rugpull: When a Web 3 company abandons the project and take all the funds — making the value of the project essentially zero.
- FUD: Used to explain market sentiment (Fear, Doubt, Uncertainty).
- FOMO: Fear of missing out (used to explain irrational individual or group-buying decisions).
- Flippening: The market cap of Ethereum surpasses Bitcoin.
- Fractionalize: The process of splitting 1 asset into multiple sub-assets. For example, fractionalizing NFTs.
- Side Chain: A “side” blockchain linked to the main blockchain, provides benefits.
- Token Economics: The ability to incentivize developers, community members, and all other market participants to align with the success of a Web 3 protocol through tokens/cryptocurrency.
The Not So Basics
- Consensus Mechanisms (PoW, PoS, PoH): Ways to verify the transactions on blockchain networks. Proof of Work (PoW) = solve problems to verify, Proof o Stake (PoS) = “stake” or put up cryptocurrency coins, Proof of History (PoH) = string together transactions to each other.
- Hash Rate: Computing power or guesses within a blockchain network.
- 51% Attacks: Attempting to control 51% of a blockchain network for malicious behavior.
- Fork — Hard/Soft: A fork is when a blockchain’s code changes. Hard is when nodes can’t agree so 2 blockchains are created, soft is when the code changes from the old to new.
- Bridge: Enables tokens and data to move between two separate chains.
- Slippage: The difference in the price you think you’ll get vs. what you actually get.
- TVL: Total value locked, how much $ is “locked” or being used in a protocol.
- TPS: Transactions per second, the number of transactions a blockchain network can process per second.
- Sharding: Method of splitting 1 database into multiple ones.
Thanks for reading!
If you have any suggestions on edits or more content we should cover, please reach out to us at matt@rippleventures.com and dom@rippleventures.com
