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Glossary

Common Web3 terms, each explained in one line.

Glossary

31 / 31 terms

Blockchain

A tamper-resistant distributed ledger where transaction blocks are cryptographically chained and maintained by many parties.

Decentralization

Spreading decision-making and control across many network participants rather than a single authority (degree varies by project).

Public Key

A key generated as a pair with the private key and safe to share, used to verify signatures; wallet addresses are usually derived from it by hashing.

Private Key

A secret key that grants control over the associated assets; losing it is usually unrecoverable.

Wallet

Software or hardware for managing private keys and sending/receiving crypto (it stores keys, not the coins, which live on-chain).

Seed Phrase

An ordered list of words that encodes the wallet's master seed, from which all its private keys are derived, and can restore an entire wallet; must be kept secret.

Consensus Mechanism

The rules and algorithms by which nodes in a distributed network agree on the ledger's state.

Proof of Work (PoW)

A consensus mechanism where nodes expend computing power to compete for the right to add blocks; used by Bitcoin.

Proof of Stake (PoS)

A consensus mechanism in which staked tokens serve as a deposit that qualifies validators, who are then randomly selected, weighted by stake, to produce blocks (rather than by computing power); far less energy-intensive than PoW, now used by Ethereum.

Node

A networked computer that runs blockchain software and stores and validates ledger data.

Miner

A participant in a PoW network who contributes computing power to bundle transactions and compete to produce blocks for rewards.

Gas

The unit measuring the computation needed to execute a transaction or contract on chains like Ethereum; fee = gas used × gas price, and the price fluctuates with congestion.

Smart Contract

Program code deployed on-chain that executes automatically when conditions are met, without an intermediary.

Layer 2

A scaling solution built on top of a main chain (Layer 1) to increase transaction speed and lower costs.

Rollup

A Layer 2 technique that processes many transactions off-chain and posts compressed data back to the main chain to inherit its security.

Stablecoin

A crypto token designed to hold a stable peg to an asset (usually the US dollar), whose stability depends on its reserves or mechanism.

DeFi

On-chain financial applications that use smart contracts instead of traditional intermediaries for lending, trading and more.

DEX

A platform that lets users trade directly via smart contracts without a central custodian; most use either an order book or liquidity pools (AMM).

AMM

A mechanism that uses algorithms and liquidity pools to price trades automatically, replacing a traditional order book.

Liquidity Pool

A pool of assets (usually pairs) deposited by users that an AMM uses to price and execute swaps; when prices move, depositors may end up worse off than simply holding — "impermanent loss".

NFT

A unique, non-interchangeable token on a blockchain used to represent ownership of an asset.

ERC-20

The common Ethereum standard for fungible (interchangeable) tokens, which most tokens follow.

ERC-721

The Ethereum standard for non-fungible tokens (NFTs), used to represent unique assets.

DAO

An organization governed collectively by members via on-chain token voting, with rules often enforced by smart contracts.

Oracle

A service that delivers off-chain real-world data (e.g., prices) to smart contracts; the reliability of its sources directly affects contract security.

Airdrop

A free distribution of tokens to selected wallet addresses, often to reward early users or spread governance.

Hard Fork

A backward-incompatible protocol upgrade that can split a chain in two (e.g., ETH and ETC).

Cold Wallet

A wallet that keeps private keys offline (e.g., hardware wallets), harder to steal remotely.

Burn

Permanently sending tokens to an unspendable address to remove them from circulation, often to manage supply.

Mint

The process of creating new tokens or NFTs on-chain.

Turing-complete

The ability to express arbitrary computation; Ethereum's contract language is Turing-complete, while Bitcoin's script deliberately is not.