In addition to the interoperability of the metaverse, Web3 will likely hinge on the decentralized framework of various blockchain protocols, some PoW but most PoS as mining loses favor to staking and the rise of NFTs, DAOs and virtual land shed public light on unsustainable and unscalable crypto models (i.e Bitcoin and Ethereum versus Ethereum 2.0, Tezos, Cardano, etc.).
If not, and that reads like a bunch of gobbledygook, you aren’t alone. But as interest in the metaverse and its technologies grows, marketers need to learn and understand the underlying concepts, whether it be for the sake of their clients, their consumers or their forward-looking business strategy.
Here’s a look at some of the most used words that you might be too afraid to ask what they mean. And check back for updates to this list.
Augmented reality (AR): Augmented reality is a technology that adds digital components to a real-life view, such as through a Snapchat filter.
Blockchain: A digitized database for keeping record of transactions, which are stored as units of data in groups called “blocks.” In contrast to a commercial bank, the database is decentralized (thus, even-handed), publicly viewable (thus, transparent) and anonymous (thus, privacy-forward). Blockchains are also practically immutable, which makes them secure from attacks.
Bored Ape Yacht Club (BAYC): An NFT project dropped in 2021 that is one of the most popular, identifiable and expensive in the space. The project’s main collection consists of 10,000 unique art pieces depicting cartoon apes. Other collections are Mutant Apes and the Bored Ape Kennel Club. Together, these NFTs have amassed over $2.9 billion in secondary market trading, and their owners include CEOs, brands and celebrities.
Burn: To “burn an NFT” entails sending the asset to an inaccessible smart contract, which takes the asset out of circulation, effectively destroying it. Burning is also a process used for cryptocurrencies to balance the number of coins that are available.
Consensus mechanism: The process by which transactions are verified and new blocks/coins are added to a blockchain’s ecosystem. Examples include proof of work and proof of stake.
Cryptocurrency: A type of digital currency that is secured through a system of code-based processes called cryptography. Crypto typically exists in the form of “coins” on a respective blockchain, and is therefore decentralized in the way that it is created and distributed. Examples of cryptocurrencies include bitcoin, ether, litecoin and dogecoin.
Crypto domain: Like a traditional website domain, a crypto domain gives the owner rights to a specific online address, only this address refers to a wallet, not Internet Protocol (IP). Buyers and brands have bought these domains—which are formatted as NFTs—to simplify the identifiers to their address; instead of the default, unintelligible string of numbers and letters, the address can be renamed to “brand.eth” (Ethereum domain) or “brand.tez” (Tezos), depending on the blockchain to which the domain is linked.
CryptoPunks: Another popular NFT project, CryptoPunks was originally dropped in 2017, and has since skyrocketed in value due to it being one of the first NFT art projects. The 10,000 NFTs depict unique pixel avatars of varying rarity, some of which are being sold for millions of dollars. CryptoPunks, along with BAYC, is considered highly influential in the NFT boom of 2021.
Crypto winter: A period in which the price of crypto assets is consistently falling. As of June 2022, the crypto market is said to have entered one of these periods.
Decentralized: A framework in which functions are decided upon and carried out by an entire network of participants, as opposed to one or a few arbiters. The reason for decentralization is to prevent power from being overly concentrated in a small number of hands.
Decentralized autonomous organization (DAO): A decentralized autonomous organization is a group of people that uses smart contracts to deploy money in a concentrated way. A DAO is decentralized because each of its members gets a vote in how the money is used and autonomous via the self-executing code of the underlying smart contract. Use cases of DAOs are still incipient but their value could feasibly handle the operations of charities, investor groups and art collectives, among other entities.
DeFi: Decentralized finance, or DeFi, refers to a group of financial services that use blockchain technology to operate without a central authority. These platforms can offer lending, staking or more complex services such as yield farming, wherein an investor submits their crypto to be used as liquidity in a decentralized exchange, earning yield). DeFi platforms exist within various blockchain ecosystems, such as Ethereum or Avalanche, and use the code of smart contracts to conduct financial maneuvers. It is considered an alternative to financial services on centralized crypto exchanges, or CeFi, and traditional finance markets, or TradFi.
Discord: A social chat room platform that serves a popular homebase for Web3 communities, such as members of an NFT collection or a DAO. The platform has roughly 6.7 million different groups, called servers, at the time of writing.
Drop: Another word for releasing an NFT or NFT collection on a marketplace.
Ethereum: The most popular blockchain for NFTs, accounting for roughly 80% of the market share, pera JPMorgan study cited by CoinDesk. Ether is the platform’s cryptocurrency, which is the second-most popular crypto behind only bitcoin. Different from the Bitcoin blockchain, however, is that Ethereum is more than a platform for sending and receiving digital currency, namely via its ability to support smart contracts and thus NFTs, DeFi and more.
FOMO: An acronym for “fear of missing out,” FOMO has been co-opted by the crypto community to describe the pressure one feels toward investing in an asset (i.e. coin, NFT, etc.) that could accrue value over time.
FUD: An acronym for “Fear, uncertainty and doubt,” FUD is a term that encapsulates negative sentiment or pessimism toward an activity. In crypto, the word is typically used in a dismissive manner to characterize non-believers or such feelings toward a project. For example, a member of a specific NFT community may accuse someone of showing FUD if they don’t believe in that NFT collection’s potential to accrue value.
Gas fees: Transaction fees for any function that is carried out on the Ethereum blockchain, such as buying NFTs. The price of gas depends on the level of activity on the network, ranging anywhere from a few dollars during times of low activity to as much as several hundred dollars during times of intense congestion. The average gas fee of an Ethereum transaction at the time of writing is $11.14, per Cointelegraph.
Gas war: A situation on the Ethereum blockchain in which heightened demand for transactions congests the network, creating a bottleneck effect where users struggle to get their transactions authorized. Gas fees will also surge immensely, hence the term “gas war.”
Generative art: Art that is created via code that randomly combines a set of parameters to output unique pieces. This is how many NFT PFP (profile picture) collections work. For example, during the Bored Ape minting process, when a buyer minted an NFT, the code would generate a unique ape based on traits like facial expression, background color, headwear and other accessories. Early examples of generative art are Larva Labs’ “CryptoPunks” NFT collection in 2017 and Art Blocks’ “Chromie Squiggles” NFT collection in 2020.
Interoperability: The capacity for a user to seamlessly move between platforms with their owned assets.
Metaverse: Part gaming ecosystem, part virtual lifestyle platform, the metaverse is a collection of digital worlds that are interoperable, in which users can create content and interact with others as avatars, or digital versions of themselves.
Mint: To publish an NFT on a blockchain.
Non-fungible token (NFT): A non-fungible token is a certificate proving the authenticity and uniqueness of a digital asset. It is not the asset itself, but rather a unit of data that proves ownership of the asset and is ideally stored on a blockchain to ensure that data is incorruptible.
Read more: How brands are using NFTs
OpenSea: The most popular marketplace for NFTs, accounting for over 60% of the market share. OpenSea currently supports three chains: Ethereum, Polygon (which is built on top of Ethereum) and Klatyn.
Open source: When software is available to the public for the purposes of collaboration and transparency. Blockchain-based platforms often make their code open source in order to build trust with users, while also inviting them to help strengthen the code through debugging.
Private key: A file that is used to access crypto transactions associated with a public key. It is a mechanism that proves a person’s ownership of that crypto, thus allowing them to spend it. Private keys must never be shared with anyone.
Proof of attendance protocol (POAP): Contrary to the name, a POAP is not a consensus mechanism but rather an NFT that proves the holder attended a respective physical or virtual event. POAPs are created via a special smart contract (the protocol), and are typically collected to preserve memories of experiences. They must include an image, description, date and time of the event in question.
Proof of stake (PoS): Proof of stake is a consensus mechanism that relies on staking, wherein computers (known as validators) set aside an amount of crypto as collateral in order to receive a chance to add blocks/coins to the ecosystem, after which they are also rewarded. This method requires far less energy to create new blocks and new coins, and is currently used by less popular but growing chains like Tezos, Solana and Cardano. Ethereum is also planning to switch to PoS sometime this summer, after which it will be known as Ethereum 2.0.
Proof of work (PoW): Proof of work is a consensus mechanism that relies on mining, wherein computers (known as miners) compete to solve a cryptographic math puzzle. The first miner to correctly solve the puzzle gets to add the new block/coins and earns a crypto reward. PoW is used by the top two blockchains, Bitcoin and Ethereum, but despite its level of experience, is known for being exceptionally energy-intensive.
Public key: An address that is used to receive crypto and other digital asset transactions. It is a string of cryptographic code that acts like a secure box, whose contents can only be opened by a corresponding private key. Public keys are mostly safe to share with others because they do not allow for the funds in question.
Seed phrase: Essentially a password that allows a user to access their wallet. It is formatted as a series of 12 to 24 words that are randomly generated (i.e. “witch,” “bull,” “star,” etc.). Because seed phrases offer access to private keys, they must never be shared with anyone.
Smart contract: A smart contract is the mechanism by which NFTs are minted and transferred. It is a computer program that when run, executes a function without the need for third parties, and has use in areas outside of NFTs as well, such as DeFi (decentralized finance).
Soulbound token (SBT): A non-transferable digital certificate that verifies a credential. The credential can basically denote any kind of information, such as an achievement, a recommendation or a medical record. It is intended to solve the shortcomings of digital trust (i.e. verifying, with 100% certainty, that someone’s credentials are truly theirs, short of calling up each and every party that issued those credentials).
Token-gating: A process requiring an individual to prove they own a specific NFT in order to receive access or a reward. It is often used to provide utility for an NFT collection.
Utility: Benefits that are offered through holding an NFT, such as exclusive access to events, special merchandise and discounts. Utility often works through a process called token-gating, wherein an individual must prove they own a specific NFT in order to participate in rewards.
Virtual goods: Assets that exist in virtual platforms and are owned and used by avatars, typically in the form of NFTs. These goods often mirror real-world assets, such as clothes (known as wearables) and furniture. They are considered essential pieces of the metaverse economy.
Virtual land: Parcels of real estate that are formatted as NFTs and exist in virtual platforms, such as The Sandbox and Decentraland. Owners can buy or rent their land on primary and secondary marketplaces and develop it however they want, from building stores that sell virtual goods to creating music festivals with performances on the platform. Just like actual real estate, the parcels are acquired as fixed plots and cost real money (average for smallest plots is roughly $11,000), though transactions are made using platform-native cryptocurrencies.
Read more: What brands need to know about buying virtual land
Virtual reality (VR): Virtual reality is a technology that immerses the viewer in a completely digital experience, as opposed to only partially through AR. An example of a VR tool is Meta’s Oculus headset.
Wallet: Also known as a crypto wallet. It is a tool for securely storing private and public keys, which are used to access an individual’s owned cryptocurrencies and digital assets. Wallets can be “hot,” meaning connected to the internet (e.g. apps like MetaMask and Coinbase Wallet), or “cold,” meaning disconnected from the internet (e.g. external hard drives).
Web3: The vision for the next iteration of the internet. As opposed to the current system (Web2), which is controlled by walled gardens like Google and Facebook, Web3 emphasizes user ownership—of data, content and assets—through the interoperability of metaverse platforms and the decentralized nature of blockchain technology.
