# Glossary > 246 Web3 terms with beginner-friendly definitions, from Bankless Academy. Page: https://app.banklessacademy.com/glossary (each term is anchored at #). ## 2 Factor Authentication An extra layer of security used to make sure that people trying to gain access to an online account are who they say they are. ## 51% attack An attack on blockchain consensus by controlling more than half of the block-producing power on the network. ## address Unique public identifier for an entity on a blockchain. ## aggregator A tool that combines multiple sources to offer the most competitive options. ## airdrop A free distribution of crypto assets to users. ## Allo Protocol Short for Capital Allocation Protocol. An open-source protocol that enables groups to efficiently and transparently allocate pooled capital. ## allowance Allows an entity, usually a smart contract, the right to use a specified amount of your tokens in a transaction. ## alternative Layer 1 Layer 1 blockchains other than Ethereum and Bitcoin. ## AMM (Automated Market Maker) A trade matchmaking system, based on a public algorithm. ## asynchronous Communication between multiple collaborators, where participants don’t have to be present at time of messaging. ## attestation A signed confirmation that something is true. On Ethereum, validators publish attestations voting that a block is valid. ## autonomy The quality of governing your own actions, rather than adhering to frameworks of others. ## Basenames A naming service on the Base network, giving wallets human-readable names ending in .base.eth. ## batch auction A trading method that collects many orders over a short period and settles them together at one fair price. ## bet Risking money in exchange for greater rewards. ## blob A cheap, temporary data space in Ethereum blocks, used by Layer 2s to post their transaction batches. ## block A group of transactions on the blockchain. ## block builder A specialized operator that assembles transactions into new blocks, which block proposers then publish to the network. ## block explorer Search and exploration tool for blockchain data. ## block hash The unique identifier for each block file. Each new block refers to the block hash of the previous block to form the single-file connected blockchain. ## block producer A network participant chosen to create new blocks of transactions, such as a miner or validator. ## block proposer The validator node chosen by the network algorithm to select the next block to be added to the blockchain. ## block reward An amount of native coin given to the proposer of a new valid block. ## blockchain A system in which a record of cryptocurrency transactions is maintained across many computers around the world. ## blockchain apps Blockchain applications that allow you to swap cryptocurrency, use web3 social media, make charitable donations, or even learn onchain, like at Bankless Academy. ## blockchain architecture The structures for how data is stored in blockchain technology. ## blockchain technology A new type of network, hosted across many computers. It's adding a new layer of digital ownership to the internet. ## blockchain trilemma The problem describing the need for all 3 blockchain qualities: Security, Scalability, and Decentralization. ## blockspace The amount of space in each block for storing transactions and data. ## borrower Willing to pay interest to lenders in order to borrow assets. ## bridge Connection that allows two different blockchain networks to communicate with each other and exchange assets. ## BTC The market symbol for bitcoin. ## censorship-resistant No government or company has control to determine what is or is not allowed. ## central bank An institution regulating money, banks, and currency in a country. ## centralization The concentration of power over an entire system under a single authority/entity. ## centralized Where a single authority/entity controls the entire system. ## centralized exchange (CEX) A centralized platform that coordinates cryptocurrency trading for a fee, similar to a stock exchange. ## centralized exchange staking Locking tokens through a Centralized Exchange to generate rewards. ## centralized services Corporations or entities that control online activities, setting rules and fees, and managing data and content in ways that often prioritize their own interests over user needs. ## CEX (Centralized Exchange) A platform that coordinates cryptocurrency trading for a fee, similar to a stock exchange. ## chain Binds blocks of data together to form a database which cannot be altered or changed. ## circulating supply The number of a specific cryptocurrency's coins or tokens publicly available for the market to trade. ## coin The native asset of a blockchain mostly used as a form of currency to facilitate transactions on the network. ## cold wallet A type of self-custody wallet that is stored on offline hardware. ## collateral A borrower's pledge of specific asset(s) to a lender, to secure repayment of a loan. ## commercial bank A bank managing money for people and businesses. ## composability The ability to combine existing smart contracts and apps like building blocks to create new products. ## consensus Agreement, trust, and security across a decentralized computer network like blockchains. ## consensus mechanism The method by which a blockchain network judges which transactions are legitimate, and which are fraudulent. ## counterparty risk The risk that another party may not fulfill its part in an agreement. ## credible neutrality A mechanism that does not discriminate for or against any specific people. ## crypto (Cryptocurrency) Currencies native to the internet, not an individual country. Rather than being managed by a central bank, they’re often governed by their users. ## crypto wallet An app that allows you to store your cryptocurrency, and send/receive or spend it. ## cryptocurrency A currency native to the internet, not an individual country. Rather than being managed by a central bank, it’s often governed by its users. ## cryptocurrency mining Verifying blockchain transactions in exchange for cryptocurrency rewards, used on Proof-of-Work networks like Bitcoin. ## cryptocurrency wallet An app that allows you to store your cryptocurrency, and send/receive or spend it. ## cryptography Techniques for secure communication or transaction, preventing external interference. ## custodial wallet With a custodial wallet, another party controls the private keys, thus controlling access to your crypto assets. ## custodian A financial institution given responsibility to secure your assets. ## custom record A user-defined data entry linked to an ENS domain, letting you attach extra information, like a website or social links, beyond standard addresses. ## DAO (Decentralized Autonomous Organization) An organizational structure that uses blockchain technology to automate voting and management. ## dApp A “decentralized application” that connects to blockchains and decentralized networks. ## death spiral A self-reinforcing collapse where a falling price forces actions that push the price down further, as with some algorithmic stablecoins. ## decentralization The transfer of control to many individuals rather than one single authority. ## decentralized No single authority or entity controls the system. ## decentralized exchange (DEX) A protocol that facilitates exchange without requiring trusted intermediaries. ## decentralized money Money with properties agreed on by the community, rather than set by an institution. ## decentralized services (dApps) Online services that use automation to reduce fees and improve user experience. ## DeFi (Decentralized Finance) A set of self-custody finance tools, hosted on a blockchain. ## delegate Giving a specific responsibility to another person, i.e. delegation of token voting power. ## delegation Giving a specific responsibility to another person, i.e. delegation of token voting power. ## democracy A system of government where citizens exercise power by playing a key role in decision-making. ## DEX (Decentralized Exchange) A protocol that facilitates exchange without requiring trusted intermediaries. ## DEX aggregator Protocol that combines DEX liquidity from multiple sources in one interface. ## digital assets Anything of value stored digitally. ## digital signature Proof, created with your private key, that you approved a message or transaction. It works like a handwritten signature, but cannot be forged. ## double-spend Spending the same digital money twice. Blockchain consensus exists to prevent this without a central authority. ## earn Contributing value in exchange for rewards; money verb on the skill cube. ## encryption The process of converting information into private and secure code, used to prevent unauthorized access. ## epoch The time taken for a specific number of blocks to be included on any particular blockchain. ## equality of opportunity A fairness principle, where everyone has the same chances to succeed regardless of their background or circumstances. ## ERC-1155 A standard for deploying both fungible and non-fungible tokens on Ethereum, under one optimized contract. ## ERC-20 A standard for fungible tokens on Ethereum. These tokens are divisible and non-unique. ## ERC-721 A standard for non-fungible tokens on Ethereum. These tokens have a unique digital identifier, cannot be copied, or subdivided. ## ETF (Exchange-Traded Fund) An investment fund traded on the stock market, holding assets like stocks, gold, or bitcoin. ## ETH (Ether) Ethereum’s native cryptocurrency. Used to perform transactions on the network, run a validator node, and more. ## ether (ETH) Ethereum’s native cryptocurrency. Used to perform transactions on the network, run a validator node, and more. ## Ethereum Blockchain A public ledger documenting transactions and ownership on the Ethereum network. ## Ethereum Virtual Machine The Ethereum Virtual Machine or EVM is a piece of software that executes smart contracts and computes the state of the Ethereum network. ## fiat A national currency that, rather than being backed by a commodity like gold, derives value from the public's trust in the issuer. ## finality The guarantee that a confirmed blockchain transaction is permanent and cannot be reversed or changed. ## FOMO (Fear Of Missing Out) Anxiety or apprehension about not being included in something. ## fork A radical change in a blockchain network that results in two branches: one following the previous protocol, and one following a new one. ## fraud In blockchain economies: Unfair or fake transactions, used to change amounts of cryptocurrency held. ## fraud proof Evidence that a transaction is invalid and that fraud has occurred. ## front-running Seeing someone's pending transaction and paying to get your own processed first, profiting at their expense. ## fungibility The property of being interchangeable: each unit has the same value and can replace any other, like one dollar bill for another. ## gas Transaction fees for blockchain networks. ## gasless transactions Transactions where the gas fee is paid in the token being traded, or covered by a sponsor, instead of the network’s native coin. ## gold standard A monetary system where a country's currency has a value directly linked to gold. ## gwei A unit used on the Ethereum blockchain, equal to 0.000000001 ETH (one billionth), commonly used to describe gas prices. ## halving A scheduled event, roughly every four years, that cuts the reward for mining new Bitcoin in half. ## hardware wallet A type of self-custody wallet that stores private keys offline in a physical hardware device. ## hash A digital fingerprint for information. ## hashing function A function that turns any input into a unique fixed-size fingerprint (hash). It is easy to compute one way, but practically impossible to reverse. ## HODL (Hold On for Dear Life) Crypto slang for not selling crypto no matter what the market conditions are. ## hot wallet A type of self-custody wallet that is perpetually connected to the internet. ## inflation A general increase in prices and fall in the purchasing power of money. ## intent A signed trade request describing the outcome you want, like “swap X for at least Y”, leaving the best route to specialists. ## intermediary An entity or service connecting people, in order to facilitate an exchange of value or information. ## intermediary token A token that is part of the middle of a trade route, not the starting or ending token. ## interoperability The ability of different apps, tokens, and blockchains to work together and share information. ## invest Putting money into an asset, like a coin or token, expecting its value to grow. ## KYC (Know-Your-Customer) A government-sanctioned user identification process. ## L1 Layer 1 refers to a base network such as Bitcoin or Ethereum. ## L2 A blockchain that extends Ethereum scalability while inheriting Ethereum security. ## Layer 1 Layer 1 refers to a base network such as Bitcoin or Ethereum. ## Layer 2 A blockchain that extends Ethereum scalability while inheriting Ethereum security. ## ledger The record of all transactions that have ever occurred. ## lender Deposits assets to earn interest. ## Lightning Network A payment network built on top of Bitcoin, using payment channels to make everyday payments instant and cheap. ## liquid In blockchain economies: The ability to easily use a digital asset in trading, or use in smart contracts. ## liquid staking token Tokens representing staked Ether. Holders earn a portion of staking rewards proportional to the amounts staked. ## liquidation The automatic sale of a borrower’s collateral when its value falls too low to safely cover the loan. ## liquidity The quantity of a token available for trading. ## liquidity pool A communal vault of tokens that facilitates permissionless token swaps. ## LP (Liquidity Provider) Blockchain users who loan their tokens to protocols in exchange for a share in fees. ## LSTs Tokens representing staked Ether. Holders earn a portion of staking rewards proportional to the amounts staked. ## Mainnet The main, live blockchain network where transactions carry real value, as opposed to test networks. Often refers to Ethereum’s Layer 1. ## market cap The total value of a given token, or market sector. ## max supply The maximum number of coins or tokens that will ever exist for a particular cryptocurrency. ## memecoin A cryptocurrency token themed on an internet meme, often with no purpose or utility. ## meta-aggregator A tool that brings together other aggregators into an extra overview layer. ## MEV (Maximal Extractable Value) Profit block producers can make by reordering, inserting, or censoring transactions within blocks. ## miner A participant in a Proof-of-Work network, like Bitcoin, who competes to propose new blocks in exchange for rewards. ## mining The Proof-of-Work process of verifying transactions and adding new blocks to the blockchain, in exchange for rewards. ## mint Issuing new fungible or non-fungible cryptocurrency tokens on a given blockchain. ## monetary policy How a central bank manages the amount of money circulating in an economy. ## money A medium of exchange, a unit of account, and a store of value, used to facilitate transactions for goods and services. ## network governance The process by which a decentralized community reaches agreement on network features/upgrades. ## neutrality The principle of treating all participants equally, without bias towards any user or group. ## NFT (Non-fungible Token) A token with a unique ID that cannot be replicated, as compared to a fungible token like Ether that has no unique identifier. ## node A computer running blockchain software that stores a copy of the ledger and helps verify the network. ## node operator A member of the Ethereum community, running a validator node to process transactions on the network. ## offchain Any action or data that happens outside the blockchain, like on regular servers or in signed messages. ## onchain Recorded on a blockchain network. Refers to actions performed on cryptocurrency networks like Ethereum. ## onchain governance The automated system that mediates changes to a blockchain’s structure. ## onchain identity A public identity built from your blockchain activity and records, such as an ENS name linked to your wallet address. ## onramp A service that converts regular money, like dollars, into cryptocurrency. Offramps do the reverse. ## open internet An accessible digital space where information, services, and communication are available to all users without control by centralized entities. ## open source Software with source code that anyone can inspect, modify, and enhance. ## optimistic rollup A Layer 2 rollup that assumes all transactions in its batch are valid, unless proven false by a fraud proof during a challenge period. ## oracle A service that brings outside information, like market prices, onto the blockchain for smart contracts to use. ## order book A list of buy and sell offers at different prices. Traditional exchanges match trades from this list. ## OTC (Over the Counter) Trades made directly with private entities. ## over the counter (OTC) Trades made directly with private entities. ## password manager An app that securely stores your passwords and can generate strong, unique ones for each account. ## payment channel Allows two parties to transact multiple times without the need for each transaction to be recorded on the blockchain. ## peer A person or entity treated as an equal. ## peer-to-peer Connections between multiple parties that don’t require an intermediary. ## peg Method of maintaining value equivalence between two or more assets. ## permissionless Not requiring the permission of any entity. ## phishing A type of social engineering attack where the attacker poses as a trusted person or organization to trick victims into sharing sensitive information or sending them money. ## POAP A POAP (Proof of Attendance Protocol) is a badge that keeps a reliable record of life experiences in your wallet, like for example successfully completing a lesson. ## PoS (Proof of Stake) Consensus where validators lock up stake to secure the network. ## price impact How much your own trade moves the price on a DEX, based on the trade’s size. ## primary name The ENS name linked to your wallet address, letting apps display your name instead of a long address. ## private key A private key grants access to your wallet, allowing you to send crypto assets to other wallets. ## private transaction routing Sending transactions directly to block builders instead of the public queue, hiding them from front-running bots. ## proof of stake A consensus method that randomly chooses block producers based on the stake each participant has locked into the protocol. ## proof of work A consensus method where miners spend computing power (the “work”) competing to propose valid blocks. ## pseudonymous Acting under a chosen name that hides your real identity. ## public Public blockchains allow anyone to view the blockchain ledger. ## public good A public good is a commodity or service that is available to all members of society. ## public key A code created from your private key that is safe to share. Your wallet address is derived from your public key. ## quadratic funding A crowd-funding mechanism that amplifies available resources with individual donations of any size acting as votes. The broader the support, the bigger the impact! ## recovery phrase A recovery phrase is a list of 12 to 24 words, used to generate your wallet's public key and private key. ## red flag A warning sign of danger. ## restaking Reusing staked Ether tokens to help secure and validate other protocols, in exchange for rewards. ## RetroPGF (Retroactive Public Goods Funding) A mechanism for funding projects, based on their historical impact. ## rollup A Layer 2 scaling solution that processes many transactions away from the main chain, then posts them in one batch, increasing throughput and lowering costs. ## sandwich attack An attack where bots place trades right before and after yours to move the price, profiting at your expense. ## Satoshi Nakamoto The pseudonymous creator of Bitcoin. To this day, nobody knows their real identity. ## scalability A blockchain’s capability to handle a growing amount of work, transactions, and usage with minimal disruption for users. ## scam-token A cryptocurrency token that is launched for the sole purpose of stealing investor funds. ## scarce The state of being in short supply. ## scarcity Being in short supply. ## security Ability of a blockchain to withstand hacking attempts, code exploits, and economic exploits among other attacks, and continue to function as normal. ## seed phrase Group of random words generated by a wallet on setup, they act as the master key to ALL accounts controlled by that wallet. NEVER SHARE YOUR SEED PHRASE WITH ANYONE FOR ANY REASON. ## self-custodial A means of holding your assets where only you have access to them. ## self-custody A means of holding your assets where only you have access to them. ## self-custody wallet (AKA: Non-custodial wallet) With a self-custody wallet, you have sole control of your private keys, which in turn control your crypto assets. ## settlement layer The “lowest” level of a blockchain that records the details of asset exchange from finalized transactions. Mainnet Ethereum is the settlement layer for Ethereum layer 2 scaling solutions. ## settlement time The time needed for a transaction to be confirmed. ## sharding The process of splitting a single blockchain into multiple chains that all run together in parallel to increase scalability. ## sidechain A separate blockchain that runs in parallel to a main blockchain, connected by a bridge, with its own validators and security. ## slashing A penalty on Proof-of-Stake networks that destroys part of a validator’s stake for provable cheating, like signing two conflicting blocks. ## slippage The difference between the price you expect and the price you get when your trade executes. ## slippage tolerance The maximum price change you accept for a trade. If the price moves more than this, the trade is cancelled. ## smart contract Computerized code that executes terms of a contract automatically. ## smart wallet A wallet powered by a smart contract instead of a single private key, enabling features like account recovery and passkey logins. ## social engineering Manipulating someone into sharing sensitive or confidential information such as passwords or seed phrases. ## solo staker A node operator running an independent validator node. ## solo staking Running your own validator node to process transactions in Proof-of-Stake systems. ## solver A specialist that competes with others to execute a user’s intent at the best possible price. ## spend Using your crypto assets to pay for goods or services. ## spot ETF An ETF that holds the actual asset, like bitcoin, letting people invest in it through the traditional stock market. ## stablecoin A token designed to hold a steady value, usually pegged 1:1 to a currency like the US dollar. ## stablecoin issuer The company or organization that creates a stablecoin and manages the reserves backing its value. ## stake The amount of a financial asset locked into a cryptocurrency protocol. It represents someone’s financial commitment to the protocol, their “skin in the game”. ## staker A member of the Ethereum community, providing Ether to a validator node, in exchange for rewards. ## staking The temporary commitment of a portion of your crypto into a smart contract for a specified amount of time in exchange for earning interest ("rewards"). ## staking pool On Ethereum: Smart contracts through which stakers provide Ether to another staker’s validator node. ## staking providers Digital platforms providing staking services, usually through staking pools. ## standard record A common data entry linked to an ENS domain, such as a wallet address, avatar, or email. ## swap A trade from one token to another. ## token Units that can stand for assets or deeds that are built on an existing blockchain. ## token allowance An agreement between a wallet and smart contract, allowing limited or unlimited access to a specific token. ## token distribution The way in which tokens are allocated across different stakeholder groups. ## token pair The two associated cryptocurrencies that make up a liquidity pool. ## TPS (Transactions Per Second) A measure of a blockchain’s scalability: the number of transactions it processes per second. ## trade Exchanging assets or money for something valuable; money verb on the skill cube. ## trade route The path taken from starting token to ending token in a trade. ## trade routing Planning the path taken from starting token to ending token in a trade. ## transaction A record of transfer, monetary or otherwise, on the blockchain. ## transaction hash The unique identifier for each transaction; it is derived from the transaction data, the digital signature of the transaction sender, and a one-time use number to avoid duplicate transactions. ## transaction throughput How many transactions a blockchain can process at once, usually measured in transactions per second (TPS). ## trustless The quality of operating without need to trust in people or institutions. (Automatic, not owned by any one person). ## TVL (Total Value Locked) The overall amount of asset value stored in a specific place. ## validating bridge A bridge contract that verifies withdrawals itself, removing the need to trust any external authority. ## validator A participant in a Proof-of-Stake network who locks up stake to check transactions and propose blocks, earning rewards for honest work. ## validator client The software a validator node runs to propose and check new blocks on a Proof-of-Stake network. ## validator node A computer device run by a member of the Ethereum community. It processes transactions on the network in exchange for rewards. ## validity proof A mathematical proof that a batch of transactions is correct, letting a blockchain verify it without redoing the work. ## value-creation A business practice focused on generating innovative, high-quality products and services for users and the economy. ## value-extraction A business practice where users are exploited through high fees, data harvesting, and unfair terms. ## vault A smart contract that holds deposited tokens and puts them to work, giving depositors a token representing their share. ## veto A vote in rejection of a governance proposal. ## wallet A wallet is an application or device used to send and receive crypto assets on the blockchain. ## wallet app An app on your computer or phone, used to connect to your wallet on the blockchain. ## wallet provider The creator of the software you use to access your wallet. These providers do not own your wallet, but instead act as a bridge that lets you access your account on the blockchain. ## web2 The internet of centralized platforms and accounts, without blockchain infrastructure. ## web3 Refers to the internet of blockchains, where users can self-custody their assets & data. ## yield farm A DeFi protocol where users deposit tokens to earn rewards. Yield farming means chasing the best of these rewards. ## zero-knowledge Mathematical method that allows one party to prove a statement is valid without revealing any additional information about it. ## zk rollup A Layer 2 rollup that uses zero-knowledge proofs to mathematically prove its batched transactions are valid on the Layer 1 blockchain.