News on cryptocurrencies and the ever-evolving “Web 3.0” continue to spread across the airwaves. And with that comes a need for understanding, starting with a basic glossary of definitions. You’ve probably seen these terms scattered throughout articles, or via well-coiffed social media threads, or you’ve heard them in conversations with your neighbour, aka the guy who wants to “get you into crypto”. But maybe, like many, you are still scrolling and trying to make sense of all the information at a pace that is digestible (is anything these days?). Whatever the case may be, here’s a general guide to help clarify what crypto proponents are saying.
Key terms
Airdrop
An airdrop is a tool used by early-stage cryptocurrency platforms to attract users by offering free tokens to kick start a project.
Algorithm
An algorithm is a set of rules to follow to solve a problem or conduct a task.
Altcoin
An altcoin is any cryptocurrency that is not Bitcoin — an alternative digital currency. As Bitcoin was the original cryptocurrency, any cryptocurrency that was created after was treated as an “alternative.”
Bitcoin
Bitcoin is a decentralized digital currency, without a central bank or single administrator, that can be sent from user to user on its peer-to-peer network without the need for intermediaries
Cryptocurrency
Cryptocurrency is a form of digital currency that utilizes cryptographic protocols to record ownership and prevent counterfeiting (when ownership and transaction gets logged onto the blockchain).
Cryptography
Cryptography is a discipline or field of study which practices using cryptography to convert human-readable information that can only be deciphered by individuals who have the knowledge to.
If two people want to communicate securely with each other, cryptography lets them:
- encode and exchange messages with each other, so that no one else who might intercept the messages can read them (“privacy”);
- ensure the messages they receive have not been tampered with in transit (“integrity”);
- know that the messages they receive are actually from the other, and not from another interloper (“authenticity”). [Source]
A cryptocurrency exchange allows its users to buy and sell digital currencies, like Ethereum or Bitcoin. Coinbase (U.S.), Crypto.com (Singapore), and Binance (registered in Cayman Islands; founded by Changpeng Zhao) are examples of cryptocurrency exchanges. As of March 17, residents in Ontario are restricted from using Binance.
- A push approach: where a DAO or project sends (“pushes”) tokens in bulk to a determined and qualified recipient list of people’s crypto wallets while fronting the gas fees in the process.
- A pull approach, or a “claim” approach, is where a given DAO or project requests (“pulls”) qualified community members to claim tokens through a dedicated portal that connects to their individual wallets, thus resulting in the community members incurring the gas fees themselves. [Source]
Ethereum is a blockchain-based software platform that is primarily used to support the world’s second-largest cryptocurrency by market capitalization after Bitcoin. Ethereum has its flaws, including its slowness with processing transactions as well as high gas fees. Transaction fees are highly volatile.
A hash function takes input data of any length and returns a value that is fixed length. This output value (sometimes called a “digest” or “tag”), is computed in a way that is:
- deterministic: the same input always results in the same output;
- non-invertible: the output reveals no information about the input;
- collision-resistant: no two inputs should result in the same output. [Source]
A company seeking to raise money to create a new coin, app, or service can launch an ICO as a way to raise funds. ICOs are similar to initial public offerings, but coins issued in an ICO can also have utility for a software service or product.
A non-custodial wallet is where the service provider/browser doesn’t store keys to your wallet. You have to remember your 12-word secret phrase to restore your wallet on another device.
NFTs are collectible elements within the Ethereum blockchain under ERC-721, where each token refers to a single element with a certain value. A token can represent digital art, music, videos, real estate, and other assets. NFTs can’t be exchanged for one another. That’s why they’re non-fungible. An NFT is a unique pointer to a server like InterPlanetary File System (IPFS) that hosts the image, mp3, data, etc.
As per Wired: “…NFTs typically contain links to an asset hosted elsewhere. The NFT doesn’t convey ownership of the copyright, storage, or usage rights to the asset itself. As White explained, when someone buys an NFT, ‘They’ve paid to have their wallet address etched into a database alongside a pointer to something. I wouldn’t say they really ‘own’ anything at all.'”
“Web 3” refers to the next iteration of the internet which will change the way people interact with brands, socialize within communities, and trade digital assets. The “vision” is that we will be able to buy, own, and sell anything and everything on the internet.