The conversations that surround the exciting emergence of Web3 technology are rife with terminology that can be easy to miss out on. Even people who are familiar with the landscape may not know all of the terms that frequently get used in the Web3 space, and newcomers might find these terms quite alienating. Here are 15 important terms to know when getting involved in Web3.
The first thing worth knowing when discussing Web3 is what the term actually refers to. Web3 is different from Tim Berners-Lee’s concept for a semantic web, which is known as “Web 3.0”. The term Web3 was instead created in 2014 by Gavin Wood.
Web3 ecosystems are those which leverage blockchain and adjacent technologies in order to permit the decentralized exchange of data, goods, transactions, and more.
Blockchain and distributed ledger technology (DLT) first arrived alongside the advent of Bitcoin in 2009. It was conceptualized by a still-anonymous figure or group that published the original Bitcoin whitepaper under the pseudonym “Satoshi Nakamoto.” Today, it serves as the backbone of both the cryptocurrency industry and the broader Web3 movement.
Simply put, blockchain technology functions as a distributed ledger on which immutable information can be permanently stored. One of the biggest selling points of this technology is that anyone can verify the legitimacy of network activity, as all transactions are permanently recorded in the chain and remain publicly viewable.
The term ‘node’ refers to each and every device that participates in a blockchain network. Most cryptocurrencies and decentralized Web3 projects are made up of thousands of nodes across the world.
To learn more, check out our guide to everything you need to know about nodes.
Proof-of-Work (PoW) is the name of a consensus mechanism that is used to allow decentralized networks to function without the need for a third party (such as a bank). Bitcoin is the most famous example of a cryptocurrency that uses Proof-of-Work.
Cryptocurrency mining is a process that enables networks to stay decentralized by providing a financial incentive for people to contribute to the network’s governance. PoW cryptocurrencies like Bitcoin are entirely built upon this cryptocurrency mining process, with miners having a great deal of influence over how the network operates.
Like Proof-of-Work, Proof-of-Stake (PoS) is a mechanism that allows networks to reach consensus without the use of an intermediary. In a PoS network, devices belonging to users who have a proven stake in a network are tasked with validating transactions and play a vital role in allowing the network to stay decentralized.
In a PoS network, validators play a similar role to that of cryptocurrency miners in a PoW network. These devices validate incoming transactions, allowing the network to stay secure and decentralized without the need for a third party intermediary such as a bank. In order to run a validator, most networks require that you have a proven stake in the network.
Staking is the process by which you can lock away a portion of your crypto holdings in order to prove that you have a stake in the continued survival of a network. In exchange for doing so, you are financially rewarded by the network in the form of staking rewards.
A ‘staking pool’ is a solution that allows people to pool their resources together in order to contribute to a network. Often, staking on your own can mean needing to lock away a minimum amount of money in the network. With a stalking pool, however, you can contribute less and still earn staking rewards relative to your contribution.
Annual percentage yield (APY) is an investment term used to calculate a return on one’s investment. Unlike an ROI, however, the APY is a standard calculation that also takes into account compound interest.
A staking calculator is a type of tool that allows you to estimate the APY that you could earn from staking different crypto projects. If you are looking to earn passive income by staking, these calculators can serve as a great starting point. Many projects offer staking calculators natively on their official websites, while others can be estimated using online tools.
Check out AVADO’s guide to staking calculators to find the best one for your needs.
Ethereum 2.0 is the name of an ongoing effort to revamp the Ethereum network so that it uses Proof-of-Stake rather than Proof-of-Work. As one of the largest cryptocurrencies in the space, the ETH 2.0 movement is one of the most notable ongoing stories in the Web3 landscape. The decision to switch to PoS has largely been motivated by the fact that PoW networks consume significant amounts of energy.
For information on how to earn ETH 2.0, check out our guide.
Decentralized applications (dApps) are simply applications that function without a centralized intermediary. They play a key role in the decentralized finance (DeFi) movement and have become extremely popular over the past few years.
Centralized / Decentralized exchange
On the market today, there are two major types of digital asset and cryptocurrency exchanges. Centralized exchanges are those controlled by platforms which serve as a third party between the user and the digital assets they trade. Decentralized exchange, on the other hand, allow for the direct peer-to-peer exchange of assets.
Plug-and-play devices are those which allow you to immediately carry out their desired function — without the need for any complicated installation process. Plug-and-play devices are extremely accessible and can make it easy to unlock the full potential of systems that would otherwise be difficult to use.
At AVADO, we offer a range of plug-and-play blockchain devices that allow anyone and everyone to get involved in the Web3 landscape. Whether you are a newcomer or an experienced Web3 participant, AVADO offers devices that suit your needs and allow you to securely earn passive income. To find out more, visit our website today.