21/12/2021
We know this web3.0 stuff can all get a little messy. we taken some time to give some brief explanations of some of the jargon that you’ll here flying around. Further down we’ve put together a more detailed explanation to help improve your understanding. Let us know if you’ve got any questions and enjoy😆🤝
Blockchain: A big public database for all transactions, like a bank statement that can’t be changed.
Smart Contracts: Programs that interact directly with the blockchain with rules for each transaction. Think of putting an order in a vending machine- no human interaction is needed to complete the transaction.
dApps: Think of these as companies that operate on a blockchain.
Cryptocurrency: Coins created from a completion of a block on a blockchain.
Tokens: Tokens are the equivalent of equity / shares in a dApp.
Non-Fungible Tokens (NFTs): Unique images created from a smart contract. Can be sold on an exchange or in some cases access the Metaverse.
Exchanges: Just like with stocks, there’s exchange where you can buy and sell cryptocurrencies, tokens and NFTs.
MetaVerse: Have you played multiplayer games with friends? We already spend most of our working hours online (phone times aside). So in a way we're already living in a warped version of the metaverse. Crytpo makes it better by giving users property rights and interoperable assets. Imagine a real life version of The Simms. You can go here, play games, attend events or even go shopping. NFTs can be exchanged after you leave.
The Basics: If you like the images and short description, keep reading. These are larger definitions with more detail.
Blockchain: A big public database for all transactions, like a bank statement that can’t be changed.
The entire crypto ecosystem is built on blockchain. We like to think of it as a railroad that all crypto moves along. Blockchain was first introduced in Satoshi Nakamado's white paper (think of him as the Godfather who created BitCoin).
A blockchain acts as a distributed ledger. Traditional ledgers record transactions and require mutual understanding between transacting parties. A distributed ledger creates a publicly available ledger that is updated and verified by a node. A node is a computer to keep a history of all transactions. A blockchain contains many distributed nodes, meaning transactions are verified by nodes agreeing which “block” should be added next on the “chain”, eventually forming a blockchain.
The objective is to create a single version of the truth, used by all participants, containing an immutable, transparent, and verified data set. This single version of the truth is the alignment mechanism needed to replace the trust of an intermediary. Blockchains allow individuals to conduct and review transactions on the internet without an intermediary. Each time a chain is completed, a coin is created. Bitcoin was the first blockchain, but there are many like Ethereum, Cardano, and Solana.
Smart Contracts: Programs that interact directly with the blockchain with rules for each transaction. Think of putting an order in a vending machine- no human interaction is needed to complete the transaction.
A smart contract is a coded program that runs on top of a blockchain. These contracts are created to facilitate transactions without the need for human intervention. Users submit transactions through the smart contract, which processes and shares the transaction to the blockchain.
Nodes confirm the transaction and add the record to the blockchain. Smart contracts are pre-written code and cannot be modified once launched. A simple analogy to think of smart contracts is vending machines. Users enter a selection, and the vending machine processes and then disperses. Smart contracts operate the same way, are used in every protocol. A protocol is made up of multiple smart contracts. Ethereum was the first blockchain to allow smart contracts to be built, we’ve chosen Polygon to ensure minimum transaction fees and minimal impact on the environment due to the computing power needed
dApps: Think of these as companies that operate on a blockchain.
These companies work through code, and everything they process is put on the blockchain. That means you or I have complete transparency. dApps range across several industries including: finance, gaming, exchanges, betting, insurance, and several other emerging sectors.
Digital Assets:
How often have you heard the term cryptocurrency and thought of Bitcoin or Ethereum? Have you run into those JPEG images online selling for hundreds of thousands? Or did you hear about a coin like Sushi and have no idea? There are other digital assets besides cryptocurrency. Below, we will briefly describe how they are formed and some examples.
Cryptocurrency: Coins created from a completion of a block on a blockchain.
Cryptocurrencies, such as BTC, ETH, or DOGE, result from a block being created on a blockchain. Each different currency almost always comes from a separate blockchain. Bitcoin is the OG of any cryptocurrency. While the Bitcoin chain is the oldest, more protocols are built on Ethereum. I like to think of Bitcoin as digital gold. The second cryptocurrency to be aware of is ETH. ETH is the coin created by the Ethereum blockchain. The Ethereum blockchain is the most used today and broadly supports the NFT and DeFi industries through smart contracts, although Cardano and other blockchains are quickly growing in popularity to build smart contracts on.
Non-Fungible Tokens (NFTs): Unique images created from a smart contract. Can be sold on an exchange or in some cases access the Metaverse.
aka NFTs, are non-fungible cryptographic tokens, meaning they are unique. Unlike a $5 bill which can be exchanged for another $5 bill or 1 ETH for another 1 ETH, each NFT contains characteristics that make it non-fungible. NFTs are predominately created from smart contracts. At first, NFTs were mostly digital art. You probably are familiar with cryptopunks (JPEG image of a face). However, they are rapidly growing for different use cases in the crypto world, including:
Identity
Gaming
Art
Music
Let's review two quick examples. The first is Bored Ape Yacht Club. By owning an "ape," members have access to a digital lounge where you can only enter if your NFT matches one of the ape's numbers (remember, NFTs are minted on a blockchain). Another example is in gaming (think Metaverse). Blockchain games create characters that are NFTs. These NFTs can be taken out of a game and sold on an exchange. NFTs are the bridge between the digital and the real world.
Tokens: Tokens are the equivalent of equity / shares in a dApp.
dApps are usually started by a few people who seek to grow a community around their business. As a community grows around the dApp, members will want to help shape the company. In the last 18 months, there are increasing dApps becoming decentralized autonomous organizations (DAOs). A DAO has no central leadership and is governed by the community with specific rules put on the blockchain. dApps will release governance tokens to members, giving them the ability to vote on decisions. The tokens also are a way for dApps to raise money and help increase participation in the dApp. These are like shares in a company. Some common ones are MATIC, SUSHI, and AAVE.
Bringing this together:
Exchanges: Just like with stocks, there’s exchange where you can buy and sell cryptocurrencies, tokens and NFTs.
Users today can purchase digital assets through either centralized (CEX, like Coinbase and Kraken) or decentralized exchanges (DEX, like SushiSwap and UniSwap. The primary difference between a CEX and DEX is how the transaction occurs. CEXs operate like traditional exchanges from security to consumer protection to regulatory compliance and pricing. DEXs are powered by smart contracts and managed peer-to-peer rather than a central authority. Users of DEXs control their assets, meaning the exchange does not hold custody. When a user makes a transaction on the DEX, a smart contract records the transaction on the chain. DEXs offers an alternative method to exchange digital assets and hold both advantages and disadvantages compared to CEX. Transactions typically require lower fees (for the exchange, not the gas fee), and users retain anonymity. Users control their assets rather than a third party, increasing autonomy and decreasing the likelihood that a DEX will be hacked directly. DEXs offer significantly more digital assets than a CEX. The disadvantage to a DEX is the lack of insurance- if something happens to your asset there is no help line.
MetaVerse: Have you played multiplayer games with friends? Imagine a real life version of The Simms. You can go here, play games, attend events or even go shopping. NFTs can be exchanged after you leave.
How many times did you hear about the Metaverse this year? Between Facebook rebranding and Snoop Dog buying digital land, the Metaverse is hard to ignore. But do you actually know what it is? Think of the SIMs. These are virtual worlds where communities can gather for different purposes. Many join Metaverses for gaming (blockchain games) like Axie Infinity or attend a virtual event in Sandbox. We are still at the very early stages, but imagine in a very short time being able to put on VR goggles to go shopping in a store where you can buy products by purchasing NFTs. Then maybe you want to go see some flying whales and meet friends for a hangout while floating around Snoop Dogs mansion. The possibilities are endless. But NFTs allow for a bridge between any Metaverse and reality. NFTs purchased in a Metaverse can be exchanged on a DEX or CEX for either crypto or regular currency. The digital world and real world are beginning to blend, and this will rapidly evolve in a short time