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Feb 24, 2023

Web3: Definitions of Key Terms

Credera Team

Credera Team

Web3: Definitions of Key Terms

The digital world is dynamic — evolving and changing by the minute. How we interact with it evolves and changes as well. Every once in a while, there's a game-changer.

Web1, the first iteration of the digital realm, was read-only and static. You could see or download web pages, but you couldn’t interact with them. Then along came Web2, which gave us the ability to read AND write, to interact.

Web2 opened the door for social media, blog comments, eCommerce, and much more. People can create content — and respond or react to other people’s content — but that content is primarily owned by centralized entities (think Facebook).

Now we’re hearing about Web3. What is Web3? That answer depends on whom you ask. At Credera, we define it as:

Read/Write/Execute. Centralized, corporate platforms (Facebook or Google) will gradually be replaced with an open infrastructure and community-run networks.

What that might mean for day-to-day use of the Internet is yet to be seen, but as we get our heads around Web3 and how it might impact our digital lives, here are a few key terms and definitions to lay the foundation.

Decentralization

Data and content are stored across a global network and owned by the people who produce it rather than by a centralized company that hosts it.

Technical Definition: Restructuring of the Internet that removes centralized hosting services, replacing it with a peer-to-peer infrastructure.

Blockchain

Digital records of financial transactions. They’re structured in a way that reduces the opportunity for fraud.

Technical Definition: A shared database that’s structured in sequential blocks, rather than tables. When a block is filled with data, it is permanently set and becomes part of an irreversible timeline, guaranteeing data fidelity and security.

Smart Contracts

Digital contracts stored on a blockchain that are automatically executed when pre-set terms and conditions are met. They’re typically used to avoid loss of time and eliminate the need for an intermediary. They can also be used to initiate an automated workflow.

Blockchain Oracles

Third-party services that connect blockchains to real-world systems, providing the information for smart contracts and facilitating outputs, such as the disbursement of funds.

Nodes

Electronic devices that serve as communication points for interacting with a blockchain.

DAO (Decentralized Autonomous Organization)

Community-led entities that use smart contracts to establish their rules and execute their missions. They can be used for various purposes, such as managing donations to charitable organizations or pooling funds for freelancer expenses.

Cryptography

Putting information or communications into a format that can’t be read by unintended recipients.

Technical Definition: Information and communication techniques that use mathematical concepts (algorithms) to encode messages in a way that’s hard to decipher.

Cryptocurrency

Digital currency.

Technical Definition: Virtual currency secured by cryptography and exchanged within a decentralized system.

Bitcoin

The first, most widely recognized cryptocurrency.

Ethereum

A decentralized software platform that’s based on blockchain technology; it may be best known for its cryptocurrency, ether (ETH). It supports smart contracts and can be used by anyone to create any kind of secure digital technology. Because of that, it’s where many digital advances are happening.

Ethereum Virtual Machine (EVM)

The EVM reads and executes code, enacting smart contracts on blockchains that are compatible with the Ethereum network.

Gas Fee

A transaction fee that’s charged to interact with a smart contract blockchain, paid in the blockchain’s native currency.

NFT (Non-Fungible Token)

A unique token attached to a digital file that identifies the file as an original, distinguishable from copies, and makes it trackable. It enables true ownership of digital files, basically serving as a certificate of authenticity.

ICOs (Initial Coin Offerings)

Initial public offerings (IPOs) that involve cryptocurrency — companies use them to raise funds to create a new digital currency, app or service.

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