Nerd Notes

Section 2: Navigating Web 3.0

3 Chapters

Estimated ~ 3 hour read

At the end of this lesson, you will know: What a blockchain is and why it’s so important to the creation of bitcoin and all digital currencies. How blockchains work and who operates them. How Bitcoin is Gold 2.0 leading a paradigm shift in the world of finance. How Ethereum is different and valuable in its own ways. 

dAPPs are programs with a website interface, that give crypto real-world utility. Billions of dollars of assets are locked on dAPPs earning massive amounts of interest.

Terms to Know

Hover over the card to see the definition

Blockchain

A digital ledger of transactions maintained by a peer to peer network. There are countless blockchains, each offering unique benefits. Ethereum, for example, was the first blockchain to incorporate smart contacts. Avalanche also aims to be a smart contract based blockchain, but much faster and cheaper.

Stable coins & base currency

USDT, UST, USDC, and DAI are the most common stable coins. They are all pegged to the dollar. 1 DAI = $1 USDT is the most commonly used base currency in crypto. A base currency is the coin used to buy other coins for. For example, you will see these pairs: BTC/USDT, ETH/USDT, or ADA/USDT. This means you will be using USDT to buy BTC, ETH, and ADA. This also means you will receive USDT when you see these coins.

Layer one

A layer 1 is the primary, or base level, blockchain. It defines specific protocols, such as POS or POW for the blockchain. The Bitcoin, Ethereum, and Cardano blockchains are all layer 1.

layer zero & interoperability

Interoperability is the ability for multiple blockchains to share and communicate data with each other. Fundamentally, a layer 0 blockchain connects all the blockchains together. Polkadot, Cosmos, and Harmony One are all layer 0 blockchains.

POS, POW

Proof of Stake (POS) and Proof of Work (POW) are two types of network consensus. In order to verify transaction on the blockchain there must be agreement (consensus) among all people on the network. In BTC's POW, for example, all miners (computers) must correctly answer the same math question, thus reaching consensus via work, to verify the transaction.

Smart contracts

A program that automatically executes given all the right conditions. Smart contacts is what allows for the development of applications on top of blockchains.

Layer two

A layer two is a network built on top of the layer one's protocol to improve its scalability or efficiency. For example, the layer two Lightning Network in built onto of Bitcoin to enable transactions faster than VISA!

Coin vs. token

A coin is a currency used to pay for the blockchains fees. Tokens are currencies built on top of that layer 1. For example, ETH is a coin, used to pay for gas fees on the ethereum blockchain. A token is built on top of an existing blockchain, and can be used for utility or governance. For example, the AAVE token is built on top of the Ethereum blockchain.
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