blockchain, cryptocurrency, metaverse, NFTs & more
A form of currency that exists virtually or digitally and uses cryptography to secure transactions. Cryptocurrencies do not have a central regulating or issuing body/authority (like a central bank). Instead, they use decentralized technology (most commonly blockchain technology) to record transactions and release new units.
Commonly known as “token”, cryptocurrency tokens represent an asset or specific use and reside on their own blockchain. Tokens can be used for investment purposes, to make purchases, or perform operations on the blockchain.
Most commonly, tokens are divided into three types - Utility, Security, and Stable.
A utility token serves some use case within a specific ecosystem. These tokens allow users to perform some action on a certain network or platform. Utility tokens are not mineable cryptocurrencies. They are usually pre-mined, created all at once, and distributed in a manner chosen by the people who created them.
A security token is a digital asset that represents ownership or other rights and transfers value from an asset, or bundle of assets, to a token. In plain language, security tokens are the digital form of traditional investments like stocks, bonds, or other securitized assets. For example, a company that wishes to raise funds for an expansionary project can decide to issue fractionalized ownership of its company through a digital token instead of issuing stocks.
A Stablecoin is a cryptocurrency designed to have a relatively stable price, typically through being pegged to a commodity (for example, gold) or currency (for example, USD) or having its supply regulated by an algorithm.
Commonly known as “coin” in the blockchain world, these assets are native to the blockchain that they support and are used to perform operations on this blockchain.
The key distinction between coins and tokens is that crypto coins are the native asset of a Blockchain like Bitcoin or Ethereum, whereas crypto tokens are created by platforms and applications that are built on top of an existing Blockchain.
A blockchain is a shared, immutable ledger that facilitates the process of recording transactions and tracking virtual assets (like coins and tokens) inside a network. The recorded transactions reside inside blocks, each of which is connected to the previous one like a chain, and all data inside all blocks is shared among all network participants - hence the name blockchain. This data can be viewed even to users outside the network via block explorers - websites that show the blockchain transactions. This is why a blockchain is considered 100% transparent in its operations.
Blockchain "mining" is a metaphor for the computational work that blockchain network participants (commonly called nodes and/or miners) undertake to process transactions and earn new tokens. Miners are essentially getting paid for their work as auditors. They are verifying the legitimacy of blockchain transactions.
GAS refers to the fee, or pricing value, required to successfully conduct a transaction or execute a smart contract on a blockchain platform. Priced in small fractions of the native cryptocurrency of the given blockchain, the GAS is used to allocate resources of the blockchain core so that decentralized applications such as smart contracts can self-execute in a secured but decentralized fashion. The exact price of the GAS is determined by supply and demand between the network's miners, who can decline to process a transaction if the gas price does not meet their threshold, and users of the network who seek to process their transactions.
A smart contract is a self-executing digital programme with the terms of the agreement between two parties being directly written into lines of code. The code and the agreements contained therein exist across a distributed, decentralized blockchain network. The code controls the execution, and transactions that happen as a result of this execution are trackable and irreversible.
Non-fungible tokens (NFTs) are cryptographic assets (like tokens) on a blockchain with unique identification codes and metadata that distinguish them from each other. Unlike tokens, NFTs cannot be exchanged or traded equivalently like other cryptographic assets. For example, 1 BTC is equivalent to another 1 BTC, just like a $100 bill is equivalent to another $100 bill. NFTs are unique in this sense since every single NFT is unique and is NOT equivalent to another NFT.
Metaverse is a network of 3D virtual worlds focused on social connections. In the metaverse, users traverse a virtual world with their 3D avatars that mimics aspects of the physical world using technologies such as virtual reality (VR), augmented reality (AR), AI, social media, and digital currency/cryptocurrency. The internet is something that people "browse." But, to a degree, people can "live" in the metaverse. In this sense, you won't just be on the internet but, “inside” the internet.
A cryptocurrency exchange, or a digital currency exchange, is a business that allows customers to trade cryptocurrencies or digital currencies for other assets, such as conventional fiat money or other digital currencies.
Fiat currencies refer to traditional currencies like USD, EUR, AMD, etc. This term is used to quickly distinguish between cryptocurrencies and traditional currencies when talking about money or payments whenever cryptocurrencies are present in the context.
In blockchain, decentralization refers to the transfer of control and decision-making from a centralized entity (individual, organization, or group) to a distributed network. An easy way to explain decentralization would be the analogy of the president/king/queen running the country by himself/herself, vs a parliament making all the decisions based on votes.
Web3 (also known as Web 3.0) is an idea for a new iteration of the World Wide Web which incorporates concepts such as decentralization, blockchain technologies, and token-based economics. The World Wide Web has three iterations - Web 1.0, Web 2.0, and Web 3.0. Web 1.0 is the "read-only Web," Web 2.0 is the "participative social Web," and Web 3.0 is the "read, write, execute Web." This Web interaction and utilization stage moves users away from centralized platforms like Facebook, Google, or Twitter and towards decentralized, nearly anonymous platforms.
Tokenization is the process of replacing sensitive data with unique identification symbols that retain all the essential information about the data without compromising its security. Because blockchain technology emerged from the field of data science, many of the terms used in cryptocurrency and tokens are similar to those used in those fields. The term "token" is one of them. A token, in data science, is a value—like a randomly-generated number—assigned to sensitive data to mask the original information. So in a blockchain, a token is a number assigned to data stored within the blockchain. Giving an asset a token is called "tokenization."
Within the context of blockchain technology, tokenization is the process of converting something of value into a digital token that's usable on a blockchain application.