Web3 Glossary - Beginner's Guide

Airdrop—a method of giving away game-specific tokens or NFTs to users. It's usually done to generate interest in the game or service.

Alpha—in video game development, "alpha" refers to the early stage of development when a game is feature-incomplete and is being actively developed and tested.

Blockchain—a type of digital record-keeping that is secure and permanent. It uses a chain of blocks to store information across a network of computers, instead of one central location. Each block contains information and a unique code, and once it is added to the chain, it cannot be altered. This makes it useful for things like secure digital transactions and storage of valuable online information.

Burning—is the process of destroying tokens or NFTs. Reducing the total number of tokens raises the value of the remaining tokens. Burning an NFT usually lets the user get other value like consumables from it.

Coin—A coin is cryptocurrency that is used in a specific game or network. It has value and can be used to trade within the game, allowing people to make transactions with each other without the need for external currency.

Cryptocurrency—digital or virtual money that uses cryptography for security. It is independent of a central bank or government, and is typically based on a decentralized system, usually a blockchain. The blockchain serves as a public ledger for transactions, and uses cryptographic techniques to secure the integrity of the transactions and to control the creation of new units of the currency. 

It is maintained by a network of users and computers that work together to validate transactions and add them to the blockchain. This decentralized system makes it difficult for anyone to manipulate or corrupt the currency, and it also allows for fast and secure transfer of funds without the need for intermediaries.

DAO—A Decentralized Autonomous Organization is an organization that operates on a blockchain network. It is governed by its members through a decentralized process. It does not have a traditional hierarchical structure, and its rules and guidelines are encoded into the blockchain, allowing for transparency and automation of processes.

DAOs operate through collective decision making, this allows the members to decide the direction and management of the organization. They typically focus on a specific project or mission, and they operate autonomously, meaning that once set up, the organization can run itself without the need for intervention. They allow for a new way of organizing, which is not limited by geographic or legal boundaries, and can enable collaboration and cooperation across a global network of individuals and entities.

DeFi (Decentralized Finance)—a financial system that uses a blockchain to bypass banks and governments. It offers a wide range of financial services like lending, borrowing, trading, insurance and more, without intermediaries.

DeFi is usually built on public blockchains. Anyone with an internet connection can access DeFi services, regardless of where they are located or their financial status, and can transact with anyone else on the network directly.

Fiat—A fiat currency is money that is created and controlled by the government, some examples are the US dollar and euro.

GAS—A gas fee is a small amount of cryptocurrency that is required to be paid in order to complete a transaction or a smart contract. This fee is necessary because creating a block on a blockchain requires computational power and energy from the computers.

Metaverse—a new digital reality that people can access through virtual reality, augmented reality, game consoles, mobile devices, or computers. It allows people to interact with each other and have digital experiences. Everyone can access the metaverse, different virtual features work together, and users can build things together, creating a shared space for people to interact.

Minting—the process of creating new digital tokens, typically done by adding a block to a blockchain. These tokens can represent a variety of assets, such as a digital collectible or a share in a company. Minting can also mean the process of turning a digital asset into a NFT.

NFT (A non-fungible token)—a digital asset that proves ownership of a piece of content, a digital collectible, artwork, or music. NFTs are created using blockchain technology, which allows them to be stored and traded securely and transparently. Unlike cryptocurrency, NFTs are not interchangeable with one another, and therefore are considered "non-fungible." NFTs can be bought, sold, and traded on various online marketplaces and decentralized platforms.

P2E (Play to earn)—game mechanics where players can earn real-world assets by playing a game. Players can earn goods such as cryptocurrencies, NFTs, and money based on their performance in these games. 

Proof of Stake—(PoS) is a blockchain security measure and a way to earn. It requires the users to "stake" a certain amount of cryptocurrency as collateral in order to participate in verifying transactions and creating new blocks on the blockchain.

When a new block is to be created, the network chooses a user to be the validator to create that block through a process called "staking". The validators risk losing a portion of their staked cryptocurrency if they validate fraudulent transactions. This mechanism ensures security of the network by providing an economic risk for bad actors.

Proof of Work—Proof of Work (PoW) is a mechanism in which users, called "miners," have to use computational power to solve complex mathematical puzzles in order to verify transactions and create new blocks on the blockchain. When a miner successfully solves a puzzle, they are granted the right to create a new block and receive a block reward and transaction fees as a reward. This process consumes a lot of computational power and energy, but it ensures the security of the network by making it very expensive for an attacker to take control of it.

Stablecoin—Stablecoins are a type of cryptocurrency that is designed to maintain a fixed value. They are three types:

Fiat-backed stablecoins: These are the most common type of stablecoins and their value is fixed to a specific currency, such as the US dollar, and they are backed by an equivalent amount of the currency held in reserve. For example, if a stablecoin is pegged at 1:1 with the US dollar, it will always be worth $1, and it will be backed by $1 held in a bank account.

Crypto-backed stablecoins: These are backed by an equivalent value of other cryptocurrencies, or digital assets.

Algorithmically-pegged stablecoins: These stablecoins maintain their value by adjusting the supply and demand of the coins. For example, the Luna token was designed to maintain its value by being connected to the USDT token on the same Terra blockchain system. 

Token—A token is created on a blockchain and can be used to represent various types of assets, or to interact with decentralized applications (dapps). There are two types of tokens: fungible and non-fungible. Fungible tokens, such as Bitcoin, are identical and interchangeable, while non-fungible tokens (NFTs) are unique and cannot be replicated.

Wallet—A blockchain wallet is a software or hardware tool that stores the private keys for blockchain assets and accounts. These private keys are used to prove ownership of digital assets. There are two main types of blockchain wallets: fully digital "hot" wallets, such as Metamask, that can be accessed from any device with an internet connection, and physical hardware "cold" wallets, such as the Ledger USB drive, that store the keys offline. Hot wallets are more convenient to use, but they are also more susceptible to security risks because they are connected to the internet. Cold wallets offer increased security because they are not connected to the internet, but they are less convenient to access.

Web3—Web3 is the next phase of the internet that is being driven by blockchain technology. It aims to address some of the limitations and challenges of Web2. The idea is to create a more democratic, community-driven internet where anyone can actively participate and users can own and control their data and content.