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Web3Glossary - EFG of web3
Ready for some web3 gyaan?
Gm Gm to all the new subscribers and bit n bytes readers!
If you’re new here, Bits and Bytes, is a weekly newsletter which was started to help everyone learn web3 through real world examples. It is a free resource for folks exploring crypto, NFTs, blockchain, and all things decentralized. It’s an attempt to help demystify commonly used terminology and to help you better understand the world of web3. Currently I am running a series called web3glossary to help you understand this space better one letter at a time.
Starting with E: Ethereum, EVM, ERC-20, ERC-721, ERC-1155
Let’s start with understanding about the leading smart contract-enabled blockchain in the world
It’s a decentralized, open-source blockchain network, launched in 2015 by Vitalik Buterin. It's native token, ETH (Ether), is the 2nd largest digital asset by marketcap.
Don’t get mixed up b/w Ethereum and ETH. ETH is the native token that people trade in, Ethereum is the underlying blockchain network.
💡Ethereum was a crowdfunded project.
It’s not just a cryptocurrency! It’s an open source project enabling the ecosystem.🚀🚀
Most of the emerging tokens are launched in Ethereum for their Initial Coin Offering sales. Over three-quarters of ICO sales, are hosted on the blockchain. A majority of the ICOs are built on ERC-20
Well what’s ERC-20?🤔
Let's take a step back and get to know ERC 👇👇
ERC = Ethereum Request for Comments
It’s like technical documents that define the methods, innovation, and research applicable to a group of developers and users of the Ethereum ecosystem. They explain certain rules for all the ERC tokens built on Ethereum blockchain!
ERC-20 is token standard
ERC-20 = fungible tokens
This token standard, provides a standardized smart contract structure for fungible tokens. Each ERC-20 token is strictly equivalent to the same value regardless of its feature and structure.
There’s more on the token standards, let’s dive in⏬
ERC-721 = Non- fungible tokens
📌A token standard that allows for the formation of unique tokens (NFTs)
It has specific properties that allow each one to be
uniquely identified and valued independently of one another.
ERC-721 is invaluable for digital assets that represent someone’s ownership like a unique digital artwork, gaming characters or even tweets and songs!
ERC-1155 = Multi-token Standard
📌This token standard supports the development of fungible, semi-fungible, non-fungible tokens and other configurations with a common smart contract. Simply put, it allows for the transfer of multiple types of token at once
Who's using this token?
Horizon Games, a blockchain games company whose Skyweaver game uses ERC-1155.
Opensea Their NFT marketplace's ERC-1155 implementation allows multiple creators per smart contract but only one creator is able to mint more copies.
A good enough Ethereum 101, but how do you deploy your Dapps on the Ethereum blockchain?🤔
We use a virtual Machine: Ethereum Virtual Machine (EVM)
EVM is like a large decentralized computer that can complete all types of tasks on the blockchain
It interacts with Ethereum's accounts, smart contracts, & distributed ledger
It’s a virtual component, contained in every Ethereum node & is able to execute bytecode for contracts.
The next time you see an NFT you know what it actually is 😎
Moving on to F: Fiat, F-NFT, Fork, Full node
There are 3 different types of money: commodity money, fiat money, and bank money
Fiat money = paper money
It’s a currency established as legal tender, often backed and regulated by a government, such as the US Dollar, the Indian rupee and the Euro
Since it is not tied to a tangible asset, the value of fiat money is dependent on responsible fiscal policy & regulation by the government.
Irresponsible monetary policy can lead to inflation & even hyperinflation of a fiat currency
We've seen this during the past recessions!☠️
Want to own an NFT, but couldn’t?
The prices of popular NFTs can run into millions, making them prohibitively expensive for the average buyer.
Having a small piece of a popular yet expensive NFT is much better than acquiring full ownership of several insignificant ones at the same price, considering the profitability perspective.
Now that we’ve talked about NFT’s, its time to dive deeper.
Presenting (drum rolls)
It’s a way of locking an NFT into a smart contract, & then dividing it into fractions that can be issued as fungible tokens.(ERC-721 token is split into multiple ERC-20 tokens)
This lowers the price of ownership & allows artwork & other digital assets to be owned by a community
📌The Doge NFT sale is a real-world example of NFT fractionalization. In June 2021, the Doge meme, , was sold for a whopping $4 million.
📌PleasrDAO, who purchased the NFT, later offered fractional ownerships of the NFT in $DOG tokens that fans could purchase for as low as $1.
Fractionalized ownership finds its use in multiple other domains such as metaverse and real estate💯
F-NFTs can be used to allow groups of investors, or individuals to come together and buy virtual land/ other digital assets within the virtual world.
In real estate F-NFTs (converting real estate to a NFT) allow multiple parties, and not just one, to share the property’s ownership.
We aren’t there yet, but the adoption of this will definitely make investing in real estate easier and more affordable in future.🚀🚀
Let’s talk about Full Node
It refers to any program/server that downloads the entire Ethereum blockchain, address states, and validates new blocks.
There are other types of nodes: light, master, archive etc:
More on these coming soon👀. Stay tuned!
Running your own full node is the only way to have full control & to ensure that all the rules of the blockchain are being followed. It helps the network as full nodes enforce the consensus rules, no matter what.
Miners are an example of servers that run full nodes on the blockchain
P.S: we’re not discussing cutlery🤭
It’s a change in a blockchain’s protocol. When a fork happens, the chain splits - producing a second blockchain that shares all of its history with the original one, but is headed off in a new direction.
Fork can be a soft fork or Hard fork👇👇
When these changes are minor, it results in a soft fork. It’s like a software upgrade for the blockchain
When the changes are more fundamental, it can be a hard fork leading to the formation of a new chain with different rules which are no longer backward compatible with prev blocks
Hard fork of Bitcoin(BTC) resulted in Bitcoin Cash (BCH)
But, why do we need forks?🤔
Just like our softwares need upgrades, blockchain needs to be upgraded:
📌To add new functionalitoes
📌Address security risks
📌Resolve a disagreement within the community about the cryptocurrency’s current state and direction
If you’ve made this far, stay tuned for more!
Next we have G: Gas, Genesis block, Gwei
None of the above made sense? Wait till you read further🤔
In order to send and receive crypto on most blockchains, you must pay a transaction fee.
How’s it calculated?🤔
Let’s get this started with Gas - Fees, limit, and price👇
What is Gas?
Its a measure of the computational effort required to complete a transaction.
This fee is paid by a user to do a transaction/execute a smart contract on a blockchain.
The fee depends on the transaction’s complexity & the current demand of processing power on the network coz it’s used to compensate miners for providing the computational work required to process and validate transactions!
How much you spend to complete a transaction is = total amount of gas * gas price.
C’mon now, What’s gas price?🤔
Let’s take example of Ethereum👇👇
Gas fee is made up of Gas limit and gas price
📌Gas price = amt of Ether (ETH) a user pays for every unit of gas required to complete a transaction (denominated in Gwei).
📌Gas Limit - the maximum amount of gas that you’re willing to pay
Just like fuel, Ethereum only takes what is required to do the computation. You won’t be charged for what you don’t use!💯🚀
But what was Gwei again?
It’s price per unit of Gas.
📌Technically, Gwei is one billionth of something🤯
In Ethereum, Gwei is the smallest denomination of ETH, 1 Gwei = 10^-9 ETH
I am sure, web3 has become a tad bit simple for ya’ll by now, but do you know where do all blockchains start from?
The Genesis Block (Block 0) is the first ever block to which all other blocks are linked!
Genesis blocks are generally hardcoded into the software, since there is no previous block to reference to!
Genesis block is like the ancestor that every other block can trace its lineage back to since every block references the one preceding it.
Satoshi Nakamoto mined this very first block for bitcoin blockchain, containing 50 bitcoins. It took him 6 days to accomplish this back in 2009.
That’s a wrap for today!
Stay tuned for more on the new vocabulary of the web for next 30 days.💯
It’s like a free crash course on the jargons and terminologies in Web3.
As ever, thank you for subscribing and reading. It matters. It’s a big deal to me.
And, remember, half-true compliments and feedbacks are always welcome at:
laisha.wadh [at] gmail [dot] com