The most important Web3 terms at a glance – how many do you know?
Web3 – everyone’s talking about the Internet’s next stage of evolution. The new net generation will be amazing, but also significantly more complicated. Here, we explain the most important Web3 terms to make the journey less bumpy.
Web3 terms – to prepare you
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An airdrop is a marketing measure in which digital assets, such as cryptocurrency, are distributed for free in an attempt to attract attention to them, for example in the form of a sign-up bonus or a premium.
Augmented reality (AR)
Augmented reality is a technology where users project digital objects into the real world via a mobile device – for example, a 3D model of a chair to see whether it would fit in the corner of a room.
Blockchain is a database structuring principle. A blockchain is a decentralized database that, instead of being stored on a single server, is mirrored on multiple computers in a network. The method is particularly tamperproof because the computers validate each other’s mirrored copies, meaning that a tampered or altered dataset would be immediately noticeable.
Blockchain technology gets its name from how the data is stored.
Rather than information being stored in a big, comprehensive database, the database entries are compiled into individual, chronologically arranged blocks – like beads on a string. Every additional data block is automatically replicated on the other computers in the network. Older data blocks and their sequence in the chain are known to all network members and can no longer be changed. Among other application scenarios, blockchain technology is an especially secure way of accounting for digital financial transactions, storing music and photos, and documenting ownership rights for digital assets such as NFT art.
A burn is an alternative method for deleting a token from a blockchain. Tokens can’t actually be deleted, but they can be made no longer accessible to users in the blockchain by “burning” them.
Decentralized finance (DeFi)
DeFi is a modern approach for trading assets and the associated financial services. While in traditional, centralized finance (CeFi), these are managed by banks or other third parties, DeFi is based on publicly visible, open-access blockchain platforms that aren’t centrally regulated and where financial transactions are conducted directly and without an intermediary.
Decentralized application (DApp)
A DApp is a type of software that is based on blockchain technology. Compared to standard programs, these applications aren’t set up on a specific server or end device, but instead are run via a decentralized blockchain network.
Decentralized autonomous organization (DAO)
DAO refers to the principle of a completely decentralized, autonomous organization that does not contain hierarchical structures and is jointly controlled by all members of a blockchain network. DAOs play a particularly important role in cryptocurrency trading.
Due diligence (DD)
A due diligence check – often simply called due diligence – is an extremely meticulous audit that investigates the financial, tax, or legal affairs of companies or people.
Fear of missing out (FOMO)
FOMO is a behavioral phenomenon that has found its way into financial jargon. It describes the perpetual feeling that investors experience in terms of potentially missing out on lucrative trading options.
Hashing is a coding method and structuring principle for databases, whereby a dataset is divided into lots of small segments and structured using what are referred to as hash values. The technique particularly comes into play for storing, checking, and encrypting large quantities of data as well as for programming.
Initial coin offering (ICO)
An initial coin offering is a method for companies to fund projects through tokens, which act as ownership shares or revenue shares in the project and can be purchased by investors – similar to a digital share.
Cryptocurrencies are blockchain-based, digital monetary assets that can be traded on crypto marketplaces. Bitcoin was the first cryptocurrency to be created and is now joined by many others, including Ethereum and Polygon, known collectively as altcoins to distinguish them from their predecessor.
A metaverse is a global virtual reality that exists alongside the real world and can be visited and designed by real-life users via VR devices. The most famous example is Facebook’s metaverse.
(Crypto) mining is where users are rewarded with coins for generating new cryptocurrency units, i.e. coins, and validating transactions in crypto networks.
Minting refers to the process of creating a token in a blockchain network.
Non-fungible token (NFT)
An NFT is a unique, non-divisible, and non-replaceable token in a blockchain that only one user can own. These tokens are non-exchangeable one-of-a-kind items that confirm the ownership status of assets or rights of use, for example.
In industry jargon, shitcoin denotes a cryptocurrency that is failing on the market.
A smart contract is a coded set of regulations for a decentralized autonomous organization (DAO). A smart contract allows the organization’s members to define the DAO’s goals and tasks and to stipulate rules of conduct for fulfilling them. In line with the blockchain-based protocol, a DAO can make decisions and take action entirely automatically.
A token is a block of code that is stored in a blockchain and represents a digital asset, for example a specific crypto coin, a piece of NFT art, or an access key to certain products or services.
Virtual reality (VR)
Virtual reality is a three-dimensional, digital world that exists beyond real life and can be experienced by users through special devices such as VR glasses.
A wallet is essentially a secure, app-based payment method for digital transactions. In the context of cryptocurrencies, a crypto wallet is an app-based service where buyers can store their crypto shares and other tokens.