*We’re currently working on a dedicated YAP Global Web3 glossary webpage. Stay tuned! 🚧
Name: Debra Nita
Definition: Flat Coin
A flatcoin is a stablecoin that grows together with inflation, unlike regular stablecoins that are pegged to the nominal value of currencies (and are not inflation-adjusted). Flatcoins are pegged to the cost of living. This could for instance be measured through the Consumer Price Index, or a basket of various assets.
The purpose of the flatcoin design is to enable token holders to maintain their purchasing power. It could arguably be more valuable than standard stablecoins because it offers a greater return on investment to its holders.
Several flatcoin projects rose to prominence around a time when inflation was beginning to rise drastically in 2021. These include FRAX’s Frax Price Index and Truflation. Inflation continues to impact citizens globally, particularly those in the lower income bracket. The effects of this are pronounced as wages have not risen to match the rise in inflation. Effective implementations of flatcoins could, therefore, have a major impact on the real world, and make crypto more relevant and accessible to a wider audience.
Name: Vas
Definition: Distributed Validator Technology
Distributed Validator Technology refers to a system where the process of validating or confirming information is spread out across multiple computers or nodes, rather than being handled by a single central authority. A validator’s private key is split across several node operators enabling the duties and responsibilities of a validator to be distributed and shared across a cluster of node operators, instead of a single node. Imagine you have a big puzzle to solve. Instead of one person trying to solve it alone, the task is divided among several people, each working on a different part of the puzzle. Once everyone completes their part, their solutions are combined to form the complete picture.This approach has several benefits, including increased security, transparency, and resistance to tampering, because altering the information would require changing the majority of the copies stored across all these different nodes, which is extremely difficult.
Name: Leila
Definition: Smart Contract
Smart contracts are self-executing and self-enforcing digital contracts stored on a blockchain. They eliminate the need for intermediaries, as they automatically execute actions and release assets when predefined conditions are met.
Smart contracts rely on the security and transparency of the blockchain to ensure trust and immutability in their execution. They can be programmed to perform various functions, such as transferring assets, managing digital identities, executing complex business logic, and more, often in a tamper-proof and irreversible manner.
Given their position as digital contracts that are activated through decentralized pieces of code, smart contracts regularly fall victim to hacks and exploits from malicious actors to gain unauthorized access, manipulate, or steal assets from the contract. Curve’s $62 million exploit back in August 2023 was a result of a re-entrancy attack and created ripple effects throughout the DeFi sector (check out The Context #82 for more information).
As such, robust smart contracts are required to go through regular security audits to function securely and act as a fundamental building block of blockchain-based applications.
Name: Ruth
Definition: Decentralized Orderbook
A decentralized order book is a trading mechanism where buy and sell orders are matched through a distributed network of nodes, rather than being centralized in a single location or controlled by a single entity. In a decentralized order book, users can submit orders and execute trades without the need for intermediaries or central authorities, which helps to improve transparency.
A decentralized order book is powered by blockchain technology, which enables secure and trustless peer-to-peer transactions. The order book maintains a record of all buy and sell orders on the network, and the matching process is automated using smart contracts. The order book operates on a decentralized network, which ensures that no single entity has control over the platform.
In contrast to decentralized order books, centralized order books are managed by a single entity that controls the platform and the matching of buy and sell orders. The centralized approach relies on intermediaries such as centralized exchanges, brokers, market makers, and custodians to facilitate trades, which can lead to higher fees and reduced transparency.
Name: Jon
Definition: EIP
Ethereum Improvement Proposals (EIPs) are standards that specify potential new features or processes for the Ethereum network. They contain technical specifications for proposed changes and serve as the ‘source of truth’ for the Ethereum community. EIPs are not only essential for documenting the changes made to Ethereum but also for proposing, debating, and adopting new changes.
EIPs are categorised into different types, including core EIPs for low-level protocol changes, and Ethereum Requests for Comments (ERCs) for application standards. Core EIPs affect the consensus and necessitate a network upgrade (such as EIP-1559), while ERCs, like EIP-20 (for fungible tokens) and EIP-721 (for non-fungible tokens), describe application-level standards.
Every network upgrade on Ethereum consists of a set of EIPs that must be implemented by all Ethereum clients on the network to maintain consensus. This makes EIPs a central unit of governance in Ethereum, inviting anyone to propose changes, which are then debated by various community stakeholders to determine their adoption.
The EIP process was initiated in October 2015, inspired by the Bitcoin Improvement Proposals (BIPs) and Python Enhancement Proposals (PEPs) processes. The EIP GitHub repository holds all the proposals, which are reviewed for technical soundness, formatting issues, and grammar by EIP editors. These editors also assist EIP authors in advancing their proposals.
Anyone within the Ethereum community is allowed to create an EIP, following the guidelines set out in EIP-1. Before submitting a proposal, it’s recommended to solicit feedback on Ethereum Magicians, a platform where new ideas are discussed with the community.
Name: Vas
Definition: ICO
An Initial Coin Offering (ICO) is a fundraising process undertaken by cryptocurrency projects to raise capital publicly. It involves the issuance of a new cryptocurrency token or coin to early investors and supporters in exchange for more established cryptocurrencies, such as Bitcoin or Ethereum, or even traditional fiat currency. ICOs are conducted on blockchain platforms to ensure transparency and decentralized transactions.
During an ICO, the issuing company or project outlines its objectives, roadmap, and the utility of the new cryptocurrency. These tokens usually serve a specific purpose within the project’s ecosystem, such as granting access to services, products, or special privileges.
ICOs gained significant popularity during the cryptocurrency boom of the late 2010s as a way for startups to bypass traditional venture capital fundraising and democratize investment opportunities. However, due to the lack of regulations and the potential for fraud and scams, ICOs have faced scrutiny from regulatory authorities in various countries. As a result, many projects have shifted towards more regulated fundraising methods, such as Security Token Offerings (STOs) or Initial Exchange Offerings (IEOs).
Name: Vas
Definition: ETF
A cryptocurrency Exchange Traded Fund (ETF) is a type of investment fund that enables investors to gain exposure to various cryptocurrencies without having to directly buy and store the digital assets themselves.
Similar to traditional ETFs, a crypto ETF pools funds from multiple investors and uses these funds to invest in a diversified portfolio of cryptocurrencies. The ETF is then listed and traded on traditional stock exchanges, providing investors with a convenient way to buy and sell shares in the fund just like they would with any other stock.
The advantage of a crypto ETF lies in its simplicity and accessibility. Instead of dealing with the complexities of purchasing and securing individual cryptocurrencies, investors can rely on the expertise of the ETF managers to manage the crypto assets. Furthermore, it offers a level of regulatory oversight and transparency, which can be reassuring for more risk-averse investors.
With leading global asset management firms such as BlackRock and Fidelity filing bitcoin ETF applications, it will be very interesting to see how it plays out. If approved, these ETF’s will help improve consumer confidence in crypto while opening up new DeFi avenues for crypto projects. A positive public and government reaction to ETF’s will also boost bitcoin liquidity and bullishly impact prices.
Name: Ruth
Definition: Modular Blockchain
A modular blockchain refers to a blockchain architecture that is designed to be modular, or composed of independent, self-contained components, or modules, that can be assembled and configured in various ways to create a customized blockchain network.
Modularity provides flexibility and scalability, as different modules can be developed and integrated as needed to support different use cases, while allowing for easy upgrades and maintenance. Modular blockchains are particularly useful for enterprise applications, where customized solutions are often required.
In a modular blockchain architecture, modules can include components such as consensus mechanisms, smart contract languages, storage systems, and network protocols. These modules can be developed independently and then integrated through standard interfaces, allowing for seamless interoperability and easier adoption.
Name: Delon
Definition: web3
Web3 represents the next stage of the internet, characterized by decentralization and individual control over data and privacy. It’s the next evolution from the centralization characteristics of Web 2.0.
Initially, there was Web 1.0 – the era of static web pages (e.g., plain HTML sites). You could view the internet, but you couldn’t interact with it. Web 2.0 followed, introducing interactive and social experiences (e.g., Facebook) that reshaped the internet. While Web2 connected billions of people, it concentrated power in the hands of a few tech giants, raising concerns about privacy, data ownership, and censorship.
Web3 aims to address these challenges by embracing decentralization (e.g., DeFi platforms like Uniswap or NFT marketplaces like OpenSea). Unlike Web2’s centralized control, Web3 is built, operated, and owned by its users, returning power to individuals. By leveraging blockchain technology, Web3 guarantees individual control over data and promotes secure, open access to online interactions without the need for trusted intermediaries.
Web3 emerges as a beacon of hope for a more democratic and transparent landscape. By embracing Web3, we pave the way for a brighter, more connected future where technology serves humanity rather than the other way around.
Name: Celina
Definition: NFT
Non-fungible tokens (NFTs) are verifiable representations of digital goods on a blockchain. It uses blockchain’s distributed ledger technology to authenticate, track and verify ownership.
Each NFT has its own unique transaction hash, making it non-replicable and an irrefutable proof of ownership. Due to its unique and non-interchangeable properties, it can act as a certificate of authenticity that lives forever on the blockchain.
NFT first gained momentum when viral meme faces started getting minted as NFTs to circumvent the issue of free distribution and commercial use without attribution. In the art World, NFTs have been a game charger to digital artists who are able to track the provenance and monetary value of their work. Purchasing an NFT enables users to go from being online renters to online owners, giving users exclusive digital ownership although the creator may retain that asset in its tangible form such as, a physical painting that has been digitised.
Looking beyond the art World, there has been an increase in commercial adoption for NFT technology being applied in outside industries. NFTs can build up a brand’s identity, community and customer loyalty, completely revolutionising brand to customer engagements. For instance, publishing giant Pearson utilises NFTs to track digital sales and capture any lost profit in the secondary market.
NFTs have been criticised as a volatile asset of dubious value by critics and due to its infancy nature, its ultimate and true lasting value is yet to be determined.
Name: Elvin
Definition: Optimistic Rollups
With Ethereum’s merge most likely to happen in mid-September 2022, there has been a lively debate about the scaling solutions that are best suited for this task, with the two main contenders being Optimistic Rollup and ZK-Rollup.
Optimistic rollups are a Layer 2 protocol designed to increase the speed of transactions and lower the cost of gas fees on Ethereum’s blockchain. It works by reducing the computational requirement on Ethereum’s chain via processing transactions off-chain, which offers significant improvements in processing speeds.
Optimistic rollups are labelled as ‘optimistic’ due to its assumption that all transactions within a rollup are valid, thereby skipping publishing validity proofs for each transaction. In contrast with sidechain solutions, optimistic rollups still use the primary Ethereum chain for consensus and security.
Optimistic rollups are expected to have roughly 100x more throughput than layer 1 on Ethereum. If chosen, it will go a long way toward relieving some of the congestion Ethereum is currently experiencing.
However, the founder of Ethereum, Vitalik Buterin, has recently come out in favour of ZK-Rollups, citing its faster transaction protocols and cryptographic validity proofs over Optimistic Rollups, and that in the long run, ZK-Rollup will eventually beat Optimistic Rollup.
Name: CJ Cheong
Def: GameFi
Definition: Short for “Gamified Finance”, GameFi typically refers to blockchain games with the “play-to-earn” model which offers economic incentives to players. Participants can earn rewards in the form of cryptocurrency tokens or Non-Fungible Tokens (NFTs) by completing designated tasks or actions, progressing through levels, competing with others and more.
Unlike traditional games, players can encash their in-game rewards to be used in the physical world, via trading on NFT marketplaces and off-ramping the cryptocurrency tokens through exchanges. Players also retain ownership of their in-game assets and characters represented by the NFTs and make decisions to progress them or sell them for profit in future, which adds a unique dimension when players complete or no longer wish to play the game.
Games like Axie Infinity are generally considered the flagship representation of blockchain games, garnering attention as a career prospect for emerging economies. However, the blockchain gaming category is still relatively nascent and needs to address issues with sustainability, tokenomics, security, composability and accessibility for ease of usage and mainstream adoption.
Name: Ewan
Def: Interoperability
Definition: Interoperability can be defined as a product’s ability to interact with different systems. A familiar example would be email i.e. someone with a Gmail account can seamlessly send and receive emails to someone with a Yahoo account. With regards to Web3, interoperability refers to blockchains’ ability to see and transfer information between one another; however we still have a long way to go for this to become a seamless operation. Currently, certain wallets aren’t compatible with certain blockchains and currencies cannot be transferred from one blockchain to another without the cumbersome and risky processes that bridging can pose.
We can currently think of blockchains as islands with their own currencies and assets that are naturally siloed from one another. As we develop technologically, it will be possible for these blockchains to become more interconnected. Of course, different blockchains have their own functionalities and many of them are finding new ways to promote interoperability but they are still in development and will take some time for the innovations necessary for true interoperability to surface.
Interoperability is fundamental to improving the user experience of blockchain technology and with user experience being one of the major obstacles in the way of its wider adoption, one cannot understate the importance of working towards better interoperability within blockchains.
Name: Saad Quresh
Def: DEX
A decentralised exchange (DEX) is a peer-to-peer marketplace where users can buy or sell cryptocurrencies without needing an intermediary to facilitate those trades or custody user funds.
DEXs do this by substituting those intermediaries – brokerages, exchanges, banks, and financial institutions – with automated smart contracts that execute under particular conditions. These smart contracts establish the prices through various means, but some of DeFi’s most successful DEXs operate using an automated market maker model (AMM) which sets the price of various tokens against each other using algorithms and shared pools of liquidity.
The largest DEX by trading volume is an Ethereum-based project called Uniswap, with a current 24h trading volume of $790.45 million.
DEXs provide their users with private, open-source, and permissionless access to trading markets in whichever jurisdiction they may live in. Some see DEX’s inevitably overtaking their centralised counterparts and saw a glimpse of the future during the bull run of ‘DeFi Summer’ in 2020, when the trading volume of Uniswap surpassed the daily volume of Coinbase Pro.
Name: Imogen Searra
Def: EIP-1559
In August 2021, Ethereum introduced EIP-1559 to help reduce gas fees, make transactions more efficient, and to make Ether more scarce through burning. Token burning refers to the act of removing tokens from a cryptocurrency’s total supply.
When a user was transacting, Ethereum’s base transaction fee would be sent to the network and burnt rather than going to miners’ pockets. Less than a year after EIP-1559 was introduced, $2.9 billion in Ethereum (2.5 million ETH) had been burnt. This was trackable on Watch the Burn which is no longer active post-Merge.
Burning is done by sending the predetermined amount of tokens to a wallet that does not have a known private key and is outside the network.
The wallet, known as a burner or eater address, is only equipped to receive assets. When tokens are sent here, they’re rendered inaccessible. The aim of token burning is to remove them from circulation, altering their availability and impacting their value.
Increasing value is usually the reason why protocols burn tokens. The less supply the token has, the more demand there is, thus, the more value it garners.
This is the theory behind token burning, which is similar to traditional financial companies buying back their shares. By reducing the overall supply of a cryptocurrency, the aim is to drive up the token’s demand.
Name: Debra
Term: Over-the-counter
Over-the-counter (OTC) can be understood as the process of trading “off market” or outside of a crypto exchange. Unlike typical trades which consist of automated buy/ sell orders on exchanges, OTC trades are done directly between a buyer and seller, or facilitated by an intermediary like a trading desk or a broker.
OTC trades are usually utilised by parties who want to trade large sums of money and can benefit from better pricing available in these private deals. Large orders on exchanges can move market prices. With OTC, buyers do not have to rely on multiple sellers to fulfil their large order which has the effect of moving prices upwards, making it more expensive for the buyer.
OTC trades are not only limited to large buyers, but also enable traders who do not have access to crypto exchanges (e.g. in jurisdictions where it is not permitted) to purchase cryptocurrencies, or to obtain financial instruments that are not typically available on exchanges. Buyers or sellers who want to avoid being monitored by banks or other entities that may block or freeze large transactions may also utilise OTC trades.
(References: CMC, Cointelegraph, Investopedia)
Name: Otto Jacobsson
Def: 51% Attack
Definition: The environmental impact of Ethereum’s transition to proof-of-stake has been much highlighted, but less so how the Merge alleviates “51% attacks” and provides other security benefits. A 51% attack happens when actors take over the consensus mechanism of a public blockchain, i.e. controlling more than 50% of the mining hash rate (proof-of-work) or a majority of staked tokens (proof-of-stake) to further their own aims.
One actor being able to manipulate a public blockchain is contrary to the concept of decentralisation and would likely mean less trust in that chain. Even if an attack happens, it is almost impossible to alter the history of the blockchain. However, transactions can be censored or stopped, allowing double-spending.
For the most significant proof-of-work blockchain, Bitcoin, an attacker would need to spend several billions to complete a 51% attack (including buying miners and operating them). Theoretically a group of existing miners could work together to complete an attack.
After the Merge, you need circa $10bn of ETH (ETH price of $1,350 and 14.4m ETH staked) to complete an attack on Ethereum. The price of ETH is likely to increase as the attack progresses, meaning that it gets more and more expensive. Other security features make attacks unlikely, e.g. slashing and validators voting to restore the “original” chain.
A 51% attack is a genuine concern, but a major public blockchain has not been compromised in this way. However, blockchains like Ethereum Classic have suffered 51% attacks in the past.
Name: Samantha Yap
Definition: EVM
Notable blockchain ecosystems, besides the Ethereum Network, have emerged in the past few years. These include Solana, Avalanche, Near, Polygon, Cosmos, Starknet, Binance Smart Chain, Polkadot among many others, which are underpinned by Layer 1, Layer 2 or Layer 0 chains. One of the main questions asked about each chain is whether it is ‘EVM-compatible’. So what does that actually mean?
EVM stands for ‘Ethereum Virtual Machine’. It is a computation engine that executes smart contracts on the Ethereum Network. It also helps to compute various types of smart contract code into a readable format. Every Ethereum node runs on the EVM to maintain consensus across the blockchain.
Polygon and Avalanche are EVM-compatible chains, which means smart contracts deployed on these changes will be recognised by Ethereum nodes. This enables developers to port their decentralised applications (dapps) or tokens over from Ethereum to these chains with ease helping chains become highly successful due to the low barrier to entry.
EVM is significant because most crypto applications are built on the Ethereum network layer. Roughly 60% of DeFi’s TVL (Total value locked) is on the Ethereum network, not including the volume on other EVM compatible chains. Binance Smart Chain’s success can be attributed to the fact that it is EVM-compatible as it grew rapidly due to the ease in which Ethereum users could transfer their ETH over to the new chain using the Binance Bridge.
Name: Katherine Samson
Definition: AMM – Automated Market Maker
An automated market maker (AMM) is a trading mechanism that provides liquidity to decentralised exchanges (DEXs), helping users to trade and exchange cryptocurrencies without a middleman.
A tool unique to Ethereum, AMMs bring traditional order books to the decentralised finance (DeFi) space to give agency to users to ideate and innovate solutions while engaging actively within this community. Through liquidity pools (a pile of pre-funded digital assets secured in smart contracts) traders no longer wait for order matching systems to proceed with their trade.
Instead, an AMM provides these traders with autonomy through its algorithm. This enables users to trade against their trading pair pool of choice. An example of this is Uniswap, an Ethereum-based DEX allowing users to supply liquidity and exchange with any pair of ERC-20 tokens.
AMMs play a pivotal role to avoid slippages in pools, enabling greater functionality of these DEXs through reduced transaction fees paid on each execution within the pool. Each pool typically uses a mathematical equation (x*y=k) to fulfil its balance function, causing either pairing token to rise and fall based on user purchase. For larger orders placed on an AMM, as a substantial amount of token is either added or removed, asset pricing can vary from its traded price (based on other exchanges), creating an arbitrage that incentivises traders.
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Name: Mia
Definition: Quadratic Funding
Quadratic Funding is a mechanism used to determine whether or not a project is worth funding. Projects that are more valued, meaning they have more individual supporters, will receive a higher proportional amount of funds.
In the Ethereum Whitepaper Vitalik Buterin initially described Quadratic Funding as a mechanism for individual projects to keep track of funds they are raising. At the end of a raise, the mechanism calculates a payment to each project
Pioneered by Gitcoin’s Grants program in 2018, quadratic funding is a way for public goods projects to use a combination of individual donations and grant money to increase the amount raised.
It is the mathematically optimal way to fund public goods in a democratic community where the number of contributors matters more than the actual amount funded.
With quadratic funding, the number of contributors matters more than the amount funded. For example, if there are two individual projects seeking grants and they both raise $100, the project with more individual donors will receive a higher amount in quadratic funding than the project with less donors. More donors signals that there is a higher demand for this project, and Quadratic Funding in practice uses a matching pool to grant projects with more individual backers more funding.
Name: CJ Cheong
Definition: Proof of History
Proof of history (PoH) is a consensus mechanism most notably deployed by Solana, and is an evolution of the Proof of Stake model. As PoH employs Verifiable Delay Functions (VDFs) it is able to incorporate time itself into the blockchain, as a VDF can only be solved by performing a certain set of consecutive steps by a single CPU core.
As no parallel processing is permitted, it is simple to determine how long each step will take, and also calculate the time based on historical occurrences. After analysing these occurrences, a hash function is constructed that can be confirmed by anybody. Every block created by the network has this hash appended to it.
This is unlike traditional blockchains (where gaining consensus on the time a block was mined is just as important as getting consensus on the transactions in that block). While this PoH is drastically able to increase scalability with this method, it is still a relatively newer consensus mechanism that has yet to be as battle tested.
Name: Lena
Definition: Rug pull
A rug pull gets its name from “pulling the rug out,” which is a type of scam that occurs in crypto when a team pumps their project’s token before disappearing with the funds, leaving their investors with a valueless asset.
Rug pulls are common with DeFi projects that aim to disrupt traditional financial services such as banking and insurance. NFTs have also been involved in rug pulls. Rug pulls occur when fraudulent developers create a new crypto token, pump up the price and then pull as much value out of them as possible before abandoning them as their price drops to zero.
There are three main types of rug pulls in crypto: liquidity stealing, limiting sell orders and dumping. Liquidity stealing happens when token creators withdraw all the coins from the liquidity pool. When this occurs, it removes the value injected into the currency by investors, driving its price down to zero.
Limiting sell orders is a subtle way for a malicious developer to defraud investors. In this situation, the developer codes the tokens so that they’re the only party that is able to sell them. Finally there is dumping, which occurs when developers quickly sell off their own large supply of tokens. Doing so drives down the price of the coin and leaves remaining investors holding worthless tokens. “Dumping” usually occurs after heavy promotion on social media platforms.
Name: Ewan
Definition: Oracle
Oracles provide blockchains with off-chain data and information from decentralised sources. Before going into this, it is important to understand the limitations of blockchains. Blockchains are good at knowing what happens ON the blockchain, for example, if X has received a transaction from Y. However, blockchains are not good at knowing what happens OFF the blockchain, for example, who is in the 2022 World Cup Final. This is where oracles come in. Oracles are what bridge blockchains with the real world. They are third-parties that provide smart contracts with the off-chain data they need to execute their predetermined conditions.
Oracles have many use cases but what is perhaps the most interesting is in insurance. For example, we could programme into a smart contract that if someone is involved in a collision that isn’t their fault they will immediately receive a pay out. However, a blockchain couldn’t possibly know that the collision took place on its own, it needs an oracle to feed it this information. Other use cases of oracles include stock pricing and even disproving fake news.
The largest oracle is Chainlink but others exist such as UMA’s Optimistic Oracle. Oracles operate slightly differently, but they rely on decentralised sources to avoid the issues with reliability that can arise from relying on one centralised source.
Name: Mehar
Definition: Slashing
Slashing is a means of ensuring good behaviour within the validation process of PoS blockchains such as Ethereum. Slashing refers to the irreversible penalties that actors can face should they behave in a manner that is harmful to the network. It is one of the functionalities of PoS mechanisms that has allowed them to function effectively.
Slashing is fairly rare and only occurs when actors commit certain offences: proposers signing two different beacon blocks for the same slot; attesters signing an attestation that “surrounds” another one (this creates a contradiction to what a validator has already said was finalised in a previous attestation) and when an attester signs two different attestations with the same target. To identify these offenders, you need validators known as “whistleblowers” that monitor this kind of activity. It is important to note that although inactivity can result in penalties, it does not result in slashing.
Penalties include permanent eviction from the network and substantial losses in staked tokens. Staked tokens are gradually drained until the offender is evicted and labelled “slashed.” As eviction is permanent, one can only become a validator again by producing new validator keys and fresh stakes.
Name: Ewan Brewster
Definition: Memecoin
Memecoins started off as a cheaper and light-hearted alternative to Bitcoin. They take their names from the memes that inspire them and possess absolutely no utility. Despite their inherent ridiculousness, they have become immensely popular amongst the crypto community with Dogecoin having a total market cap of $8 billion. But why?
The value of a memecoin depends entirely on their popularity within the community. As they are created, their founders will attempt to hype up their new currency on social media but their lifespan totally depends on the strength of their community base. Memecoins can also boom when high-profile players endorse them, for example, Dogecoin surged in value after Elon Musk showed his support for the cryptocurrency.
As Memecoins are yet to have any real utility, they are, for now, merely a way to make money and despite their humorous reputation, there are dangers involved in investing. Memecoins are more volatile than other cryptocurrencies due to their unlimited supply and they are much more vulnerable to mainstream factors such as social media trends. Furthermore, a substantial amount of the supply is in a select few wallets, for example, 48% of all Dogecoins are held by seven wallets. This means large investors can manipulate the market or cause the coin’s value to collapse should they cash out their holdings.
Name: Tiffany Mac Sherry
Definition: Cross-chain bridge
One of blockchain’s many benefits is that it is a secure, self-contained ledger. However, this means that the networks do not typically interact with each other. Cross-chain bridges create a much broader blockchain ecosystem by allowing cryptocurrency owners to exchange digital assets across the different blockchains. For example, if a user only has bitcoin but wants to buy an NFT on the Ethereum network they would use a cross-chain bridge to complete the transaction.
In this example, the user may use ‘Wrapped Bitcoin’ (WBTC) to send bitcoin to an Ethereum wallet. Wrapped Bitcoin is a cross-chain bridge that creates a new WBTC token on the Ethereum network and holds a bitcoin in a smart contract on the Bitcoin network. The number of WBTC is always equal to the number of bitcoin in the WBTC cross-chain bridge smart contract. After this conversion, the user has Bitcoin-backed ERC-20 tokens to buy the NFT on the Ethereum network. This is an example of a lock and mint cross-chain bridge, others include burn and mint and lock and unlock.
While cross-chain bridges help to promote blockchain interoperability, they also pose security risks. These apps have played a part in multiple hacks in the past, as we have seen with Nomad, Wormhole and Ronin, the latter of which was hacked for 650 million dollars. Therefore, it is best practice, as with most things crypto and DeFi, to do your research before using cross-chain bridges.
Name: Murial Wang
Definition: Whitepaper
Designed as a publicly accessible document, a whitepaper is an informational thesis report published by projects or companies laying out their technical and economic details.
As a sign of goodwill and transparency, protocols produce whitepapers where they break down their product’s inner workings, mission and vision for the future. Within the world of crypto, investors and community members often dedicate time to digest the technically difficult content as it serves as a great starting point to vet the validity of a project.
One such example is the celebrated Bitcoin whitepaper ‘Bitcoin: A Peer-to-Peer Electronic Cash System’ written by anonymous founder Satoshi Nakamoto. Within the whitepaper, Satoshi challenged the constructs of our existing financial system and presented a peer-to-peer electronic cash system which has grown into the crypto industry we know today.
Name: Becky Corbel
Definition: Blockchain
Blockchain is a revolutionary digital database that has revolutionised how transactions work. It intends to provide a safe and secure mode of transacting by using digital cryptocurrencies that cannot be manipulated by anyone.
A blockchain is made up of a set of blocks that record transactional information such as who is sending and receiving a transaction, and the amount of the trade. A new block is created every time someone makes a transaction. Each block is then linked to the previous one, creating a chain of records called a ledger.
One of the main features of blockchain is the fact that it is completely decentralized. There is no central authority controlling the database. Every participant has a copy of every transaction that has taken place on the chain.
All transactions have to be validated and added to the blockchain by miners. Validation looks different depending on what kind of blockchain you’re transacting on, you can see our explainers on Proof of Work and Proof of Stake here.
Name: Ruth De Freitas
Definition: zk-rollups
Zk-rollups is an off-chain protocol and layer-2 scalability solution for the Ethereum blockchain. It allows blockchains to validate transactions faster while reducing gas fees.
On-chain transaction fees and congestion make it difficult for layer-1 blockchains to meet full user demand. As the number of users increases, so does the number of transactions making L1 slow and costly to use. Using zk-rollups, layer-2 transactions can be validated faster than with layer-1 networks because they allow for off-chain processes.
Zk-rollup’s off-chain computation allows millions of transactions to be bundled into one single transaction, reducing traffic and data posted on the parent blockchain. Transactions are taken off the parent-chain and are processed on an off-chain layer-2 network. These transactions are processed in a batch and transformed into a short rolled-up summary that is then sent back to the parent chain. This single rollup includes validity proofs and defines what changes need to be made to the blockchain. In other words, the blockchain receives only the answers to a maths problem, without having to compute the equation and process all the data.
zk-rollups are the needed solution for developers, investors, and traders who are looking to boost usability and ensure faster and cheaper transaction processing.
Name: Iris Au
Definition: Censorship Resistance
With an increased lack of privacy and trust in the internet, people are turning to Web3 for its decentralized nature and high level of censorship resistance.
Censorship resistance refers to the concept that no individual or entity can stop others from using a protocol or carrying out an action. In blockchain technology, this idea specifically refers to the freedom to transact and freedom from asset confiscation. In other words, anyone can transact without the approval or intervention from third parties. Through censorship resistance, blockchain transactions will remain public, permanent, and unalterable, establishing transaction immutability that prevents political or social influences.
Back in 2017, the term was first introduced by Adam Ludwin, the ex-CEO of Chain, when describing the unique value proposition of cryptocurrency. Censorship resistance is especially important when building DeFi protocols as it effectively lowers the barriers to entry while eliminating the middleman or government institutions. Many see censorship resistance as a way towards achieving financial freedom.
Although it is very difficult to censor blockchains, it is not entirely impossible. A 51% attack could be used to temporarily censor transactions. However, this rarely occurs as it takes a lot of resources and capital to conduct such an attack.
Name: Lauren Bukoskey
Definition: Ethereum
As the Ethereum community prepares for the highly-anticipated Shanghai upgrade in March 2023, others look ahead to the future of Ethereum’s roadmap. This begs the question, what is the Ethereum framework and how does it operate?
Ethereum is a decentralized open-source blockchain network that enables users to make transactions and trades, stake tokens, play games, and utilize NFTs. Transactions are verified on the blockchain through smart contacts, removing the need for a third party.
Ethereum is currently the second largest cryptocurrency and was co-created by Vitalik Buterin in 2013. Ethereum is one singular decentralized system that runs the Ethereum Virtual Machine (EVM) where each node holds a copy of each of the thousand computers that exist in the Ethereum network.
All Ethereum transactions are public, which are added onto everyone’s copy of the ledger once the miner broadcasts the transaction. Miners are paid to complete transactions in the fees that come with each transaction called “gas” fees.
In September 2022, Ethereum launched The Merge, a software upgrade that swapped the platform’s consensus mechanism from a proof-of-work protocol to a proof-of-stake system to reduce its energy usage.
Name: Sam O’Donohoe
Definition: Central Bank Digital Currency (CBDC)
As the world continues to digitise, many countries are beginning to test different ideas for digitising their economies. One such idea that is inspired by the advent of digital assets are central bank digital currencies (CBDCs).
A CBDC is a type of centralised digital asset that is pegged to the value of a country’s fiat currency and issued by central banks. Unlike stablecoins which aim to bridge the worlds of cryptocurrency and fiat currency, CBDCs aim to replicate the properties of fiat currencies in a digital format. As the architects of CBDCs, this will allow central banks to increase financial inclusion, reduce cross-border transaction costs, and preserve their position at the heart of financial services.
Despite these potential benefits, many are concerned that CBDCs will act as a dystopian instrument for state surveillance, infringing on citizens’ privacy and liberty. In the case of authoritarian regimes, CBDCs may allow central banks and governments to access the transaction data of every single digital payment in their country.
Many countries are currently undergoing research periods to assess the properties of CBDCs.
The Bank of China’s digital yuan, or e-CNY, was one of the first CBDCs to be rolled out by a major economy back in 2021. It is currently accessible in all major cities across China, with domestic mobile payments providers Alipay and WeChatPay offering features to support its wider roll-out.
We will continue to see the development of CBDCs across the next decade as central banks continue to dabble in the digitisation of their financial services.
Name: Damian Alvarez
Definition: Hard fork
A hard fork refers to a network upgrade that significantly diverges from an existing ecosystem. Because blockchain technology is decentralised at its core, there is no central administrator that can “upgrade the system” so to speak. These changes are decided upon by different subsets (parties) who secure the blockchain, if the majority agrees to a new Ethereum Improvement Proposal, the hard fork is implemented.
For example, in a traditional business, a central administrator can propose and enforce changes to the internal system and employees are forced to accept these changes. Within the context of Ethereum for instance, it is not possible to do this as Ethereum clients (transaction validators) must decide to update their code themselves to accept these changes, then transactions on chain have to be validated against the new system’s rules.
On Ethereum, Ethereum Improvement Proposals (EIPs) have sought to upgrade the Ethereum network successfully to make important changes; most notably, the EIP-3675 (‘The Merge’) update which scrapped Proof-of-Work (PoW) on Ethereum and introduced a Proof-of-Stake (PoS) mechanism.
A ‘hard fork’ is essentially the act of an existing network being ‘re-created’ anew.
Name: Andrew Wickerson
Definition: Validator
A validator is a participant in a Proof-of-Stake (PoS) blockchain, chosen to confirm transactions and verify block information.
To understand further, one has to consider Proof-of-Work (PoW) and Proof-of-Stake (PoS) consensus mechanisms. In PoW, miners solve complex cryptographic puzzles to verify transactions using large amounts of computational power, receiving block rewards in exchange. In PoS, there are no miners. Instead, a validator is chosen randomly to check transactions, verify activity, vote on outcomes and maintain records. They receive transaction fees in rewards for this.
To become a validator, a participant must first deposit 32ETH into the network, known as staking. Of course, it is simply not feasible for everyone to deposit 32ETH which has led to the invention of platforms such as Lido which allow people to deposit less ETH and earn rewards by creating pools. While the selection process is random, those who deposit a larger stake have a greater chance of being selected. As long as the stake is higher than what the validator receives from transactions fees we can trust that the validator is acting with good intentions. Furthermore, validators will lose part of their stake if they approve fraudulent transactions.
After Ethereum’s imminent Shanghai upgrade, ETH validators will have the chance to access their staked ETH and unlock their staking rewards since staking started in 2020.
Name: Imogen Searra
Definition: Regenerative Finance (ReFi)
Regenerative finance (ReFi) is the vessel used to instil John Fullerton’s theory of regenerative economics in the crypto industry. This theory promotes and sustains human well-being, by providing value to communities that have lost natural resources, helping protect what remains and creating long-term, sustainable financial security.
ReFi was not created for blockchain technology and decentralized finance (DeFi). However, various protocols have emerged based on the idea of creating ways to sustainably benefit people and the planet, versus solely focusing on profit.
ReFi is decentralized and democratic. Through peer-to-peer funding, communities can determine which NPO or NGOs a protocol should provide capital to. Unlike traditional corporate social investments, ReFi ensures 100% of the funding goes to the chosen party, thus reducing the risk of corruption or misuse of funds.
While still considered a nascent sector of the Web3.0 industry, ReFi has the potential to undo the impact of industrialization on the planet and correct global wealth disparities.
ReFi is a way to utilize crypto, its core principles of democratization and financial independence free of intermediary exploitation, to create a sustainable future for the next generation.
Name: Celina
Definition: Decentralised Science (DeSci)
Decentralised Science (DeSci) refers to a scientific approach where information and data are shared openly and transparently. This allows for a more collaborative and democratic approach to scientific research. This can enable more people to participate in scientific discovery, including those who may have been traditionally excluded from the scientific community due to factors such as geography, economic status, and education level.
The reasoning behind DeSci is to create an ecosystem where information can be rapidly shared and disseminated across multiple networks and communities. This ultimately leads to faster and more efficient scientific discoveries that can help address important societal challenges; such as climate change, public health, and environmental sustainability.
While DeSci holds immense potential for the scientific community, it still requires further exploration and development to ensure scientific rigour, quality control, and ethical considerations, as well as address issues related to intellectual property and funding.
Name: Saad Qureshi
Definition: MEV
MEV refers to “Miner Extractable Value” or “Maximal Extractable Value.” It is an ‘invisible tax’ caused by extracting value from users by including, excluding, and changing the order of transactions in a block.
Today, MEV is one of Ethereum’s most significant issues, with Flashbots, a research and development organisation formed to mitigate the negative externalities posed by MEV, estimating that more than $720m of value was captured by MEV activities on Ethereum in 2021.
The most common methods of MEV include:
- Front running: when an exploiter inserts their transactions before the victims’ transactions, thus creating a price shift
- Sandwich attacks: when an MEV searcher can see an incoming trade and then buys/sells orders before and after they occur to profit from the resulting price movement
- DEX arbitrage: when prices for a token differ across two different AMMs, a trader can buy the token on one exchange and sell it on the other for a profit
Some MEV extraction methods like front-running and sandwich attacks can be harmful and cause network congestion and high gas prices for other users of the blockchain. On the other hand, DEX arbitrage can result in users getting the fairest prices across exchanges and accurately reflecting market-wide demand.
Name: Celina
Definition: Proof of Stake
Proof of Stake (PoS) is a consensus algorithm used to validate transactions and create new blocks on the blockchain. In PoS, validators are randomly chosen to validate transactions and create new blocks based on the amount of cryptocurrency they have staked.
Validators are incentivized to act honestly, as they risk losing their staked cryptocurrency if they act maliciously or fail to validate transactions correctly. This mechanism is designed to encourage validators to act in the best interest of the network.
To further ensure the security of the network, PoS introduces a mechanism known as finality. Finality refers to the point in time when a block on the chain becomes immutable and cannot be altered or reversed. In PoS, finality is achieved by requiring validators to stake their cryptocurrency as collateral, and imposing penalties if they attempt to validate conflicting transactions or create multiple blocks at the same height.
A key benefit of PoS is that it is more energy-efficient than PoW, as it does not require as much computing power to validate transactions and create new blocks. This makes it a more sustainable alternative to PoW, which has been criticised for its high energy consumption and environmental impact.
Name: Tiffany Mac Sherry
Definition: Account Abstraction
The process of account abstraction involves the customization of certain elements of smart contract accounts, such as gas fees and transaction approval, in order to facilitate user interaction with the blockchain.
Let’s use Ethereum as an example, currently, a transaction is only valid if the nonce is correct, the user has enough gas fees and it has a valid digital signature. This model limits the types of transactions that can occur on the blockchain. However, with account abstraction, the account model is extended to allow for more complex transactions, such as those that require multiple signatures or those that involve conditional statements.
Account abstraction allows developers to abstract away details of a blockchain’s account model to focus on creating smart contracts that are more flexible and adaptable. This means a developer can create more sophisticated smart contracts that can execute more complex transactions without having to worry about the underlying details of the account model. This makes it easier to build decentralized applications that can interact with other systems and blockchain networks.
Name: Mehar Singh
Definition: Blockchain Communication
Blockchain communication refers to the process of transmitting and receiving information over a blockchain network. A blockchain is a decentralized, digital ledger that records transactions in a secure and transparent manner. Each block in the chain contains a timestamp, a cryptographic hash of the previous block, and transaction data.
In a blockchain network, communication is facilitated through a peer-to-peer (P2P) network. Each node in the network maintains a copy of the blockchain ledger and can participate in the validation of new transactions. When a new transaction is initiated, it is broadcasted to the entire network, and each node in the network verifies the transaction before adding it to the blockchain.
Blockchain communication is often used for applications such as cryptocurrency transactions, supply chain management, and secure data sharing. Since the data on a blockchain is distributed across the network and stored in an immutable, tamper-proof manner, it provides a secure and transparent way for parties to communicate and transact without the need for intermediaries.
Name: Iris Au
Definition: Proof of Work
Commonly known as “Mining”, Proof of Work (PoW), is a consensus mechanism used in blockchains to validate newly-added transactions. A critical component of blockchain technology, this ensures that all transactions recorded are secure, decentralized, and transparent.
In PoW, network participants, also called “miners”, compete to be the first to solve a complex mathematical problem with the use of specialized hardware. The first to solve the problem is rewarded with cryptocurrency and will be able to add a new block of verified transactions to the blockchain. Once the new block is added, the transaction is considered complete and the solution to the problem is broadcasted to other miners.
Having more computational power indicates a higher chance of solving the problem, successfully updating the blockchain, and receiving the reward in the form of coins or transaction fees. Given that PoW requires the use of significant computational power, many expressed concerns over the negative environmental impact this continuous process leaves.
Name: Leila Stein
Definition: Airdrop
Airdrops are a mechanism of distributing cryptocurrency or digital assets to a large number of individuals or wallet addresses. There are a few purposes of aidrops though most relate to promotion and marketing of a project. Token issuers use the airdrop mechanism to first distribute tokens to the market, raise awareness for a project, stimulate user adoption, reward loyal community members, or distribute tokens fairly.
In a typical airdrop, project developers or companies determine specific criteria for participation, such as holding a certain amount of a particular cryptocurrency or meeting specific previous project participation requirements, such contributing to the project’s Discord for example. Once the criteria are met, the project team executes the airdrop by sending the designated tokens directly to the participants’ digital wallets.
Airdrops continue to be the mechanism by which projects share their tokens initially, however it has come under scrutiny more recently. Airdrop farmers, who look to gain tokens for little community input are common undermining the community building element, along with with the opportunity for scams.
Name: Imogen Searra
Definition: Tokenomics
Tokenomics refers to the economic principles and rules governing a blockchain-based system or cryptocurrency. It encompasses the distribution, functionality, and value of tokens within the network.
Key aspects of tokenomics include the initial token distribution, token utility and purpose, token supply dynamics, governance mechanisms, and incentives. Tokenomics aims to align the interests of participants, incentivize desired behaviors, and foster community engagement.
It involves determining how tokens are distributed, how they are used within the ecosystem, and how token supply is managed. Tokenomics also incorporates mechanisms for decentralized governance and decision-making, allowing token holders to participate in shaping the system’s future. By carefully designing tokenomics, blockchain projects strive to create sustainable ecosystems that drive growth, innovation, and value for participants.
Market Marker – Debra Nita
Market makers are high-volume traders that “make a market” or provide liquidity for securities by always standing at the ready to buy or sell. They profit on the bid-ask spread and they benefit the market by adding liquidity.
Whenever an investment is bought or sold, there must be someone on the other end of the transaction. If someone wanted to buy 100 shares of XYZ Company, for example, they must find someone who wants to sell 100 shares of XYZ. It’s unlikely, though, that they will immediately find someone who wants to sell the exact number of shares they want to buy. This is where market makers come in.
Market makers earn money on the bid-ask spread because they transact so much volume. So, if a market maker is buying shares on average for a few pennies less than it sells them for, with enough volume it generates a significant amount of income.
If market makers didn’t exist, each buyer would have to wait for a seller to match their orders. That could take a long time, especially if a buyer or seller isn’t willing to accept a partial fill of their order. This ensures investors can trade quickly and at a fair price under all conditions. In turn, this generates confidence in the markets.
‘DAO’ by Mia Grodsky
Last week an organization called MoonDAO made headlines for sending a viral YouTuber to space. This isn’t the first time that a collective group with the “DAO” appendage has made the news and this viral term, first defined in the Ethereum Whitepaper, is slowly inserting itself into mainstream culture.
A Decentralized Autonomous Organization (DAO) is a member-owned community without centralized leadership.
DAOs are a safe way to collaborate with strangers (or anonymous/pseudonymous players) to build an organization, a product, a service, or rally support to commit funds to a specific cause.
The backbone of a DAO is its smart contract which defines the rules of the organization and manages the group’s treasury. Once the smart contract is live on the blockchain, no one can change the rules except by a vote. Because the rules are embedded into the code, no managers are needed, thus removing bureaucracy and hierarchy.
DAO members typically receive voting power in the form of the DAOs governance token, but DAOs also exist without a token and voting rights are given in DAO shares.
There are many categories of DAOs including Service DAOs, Investment DAOs, Protocol DAOs, Fundraising/Charity DAOs, and more.
Bitcoin is generally considered to be the first fully functional DAO, as it is an example of a DAO which is truly autonomous and self-sustaining and does not require voting or membership for it to exist.
CeDeFi stands for Centralized Decentralized Finance. CeDeFi represents a hybrid of centralized and decentralized financial systems, with its primary aim being to combine the best features of both worlds. Specifically, CeDeFi offers the traditional regulatory safeguards of centralized finance, while also providing the innovative financial products and infrastructure seen in decentralized finance (DeFi). An example of CeDeFi we can observe today is MakerDAO.
MakerDAO operates as a lending platform that powers a decentralized stablecoin, DAI, which is pegged to the U.S. dollar. Users can take out loans in DAI using other cryptocurrencies as collateral, adopting a system of over-collateralization to protect against crashes in the value of the backing cryptocurrencies. This process mirrors traditional lending mechanisms, offering a sense of centralized financial stability within a decentralized framework.
Borrowing DAI allows investors to access a U.S. dollar stablecoin without selling their ETH, which can be beneficial given that many yield farms and lending platforms offer higher returns for U.S. dollar stablecoins. In addition, the Dai Savings Rate (DSR) provides returns to those who lock up DAI in the DSR’s smart contract, allowing Maker’s governance module to influence DAI demand, mirroring the role of a centralized bank.
This crucially demonstrates the ethos of traditional finance being upheld parallel to the technological infrastructure decentralized finance can offer.
Tether by Heather Jones
Tether, commonly denoted as $USDT, is a unique player in the world of cryptocurrency. Known as a ‘stablecoin’, its value is pegged to the US dollar, with each Tether theoretically equal to one dollar. This makes it akin to the ‘dollar store’ of the crypto world, where everything is always a dollar. This design seeks to offer the stability of traditional fiat currencies, like the US dollar, while retaining the technological advantages of cryptocurrencies, such as fast, secure, and borderless transactions. However, it’s important to note that even though it’s designed to maintain a 1:1 value with the US dollar, Tether’s price can still fluctuate slightly due to the forces of supply and demand.
Why is a stablecoin that lacks the wild price swings characteristic of cryptocurrencies like Bitcoin or Ethereum important? The answer lies in the volatility of the crypto market itself. Tether offers a safe haven for traders, allowing them to ‘stable’ their funds in USDT during periods of high market uncertainty. In such scenarios, if traders rush to convert their cryptocurrencies into Tether, its value can creep above $1; conversely, an oversupply of Tether can push its value below $1. But these fluctuations are usually minor – the most notable dips and peaks, even during significant market events, have only resulted in changes of around half a cent.
Despite its stability, Tether is not without its controversies and questions. One major point of concern is whether actual dollars are backing each USDT in circulation, a topic that has sparked considerable debate. However, despite these uncertainties, Tether remains a crucial part of the cryptocurrency ecosystem. It provides calm waters for traders to momentarily escape the crashing waves of volatility associated with other cryptocurrencies. It acts as a steadying force in the often tumultuous sea of crypto trading.
Fraud proof is a technical method in blockchain that enables scalability through sharding or larger blocks and ensures the accuracy of on-chain data. It uses Optimistic Rollups (ORs) to reduce costs and latency for decentralized applications.Sequencers processing ORs provide fraud proofs and face rewards or penalties based on consensus rules.
The primary challenge with state transition fraud proofs is their reliance on complete blockchain data, even if a fraction of the data is missing, it can impede the block’s validation, which demands complete data. While Zero-knowledge proofs can confirm correctness, scammers might publish inaccessible blocks,hindering validators’ computation and block communication.
Fraud proofs, along with erasure codes,allow light nodes to independently reject blocks and pinpoint incorrect state transitions, scaling blockchains without relying on trustworthy full-nodes. Their advantage lies in their deployment only in response to issues, thereby reducing the demand on computing resources, and fitting well in scalability-constrained scenarios. However, they establish dialogue/interaction between protocols that can be disrupted, particularly by the party alleging fraud.
White Hat Hack: by Andrew Wickerson
White hat hacking, also known as ethical hacking, is a practice where skilled and knowledgeable individuals, referred to as white hat hackers, legally and ethically assess and evaluate the security of computer systems, networks, and software applications. White hat hackers employ their expertise to identify vulnerabilities, weaknesses, and potential threats that could be exploited by malicious attackers.
White hat hacking involves a systematic and controlled approach to testing the security defenses of a target system. It typically includes various methodologies, tools, and techniques aimed at uncovering weaknesses in the system’s infrastructure, configurations, applications, or protocols. These activities may involve scanning networks, analyzing code, simulating attacks, exploiting vulnerabilities, and attempting to gain unauthorized access to the target system.
The main objectives of white hat hacking are to:
– Identify vulnerabilities:
– Evaluate security controls:
– Verify compliance:
– Enhance security posture:
– Foster a proactive security culture:
It is crucial to note that white hat hackers adhere to strict ethical guidelines, ensuring that their activities do not cause harm, compromise data integrity, or violate any laws or regulations.
Overall, white hat hacking serves as a valuable practice to identify and mitigate security risks, protect sensitive information, and enhance the resilience of computer systems and networks against potential attacks.
LSTfi by Tiffany Mac Sherry
LSTfi, or Liquid Staking Token finance, represents an innovative and promising concept within the Ethereum ecosystem. Its primary objective is to enhance yields, accessibility, and support philanthropic initiatives by leveraging Liquid Staking Tokens (LSTs) that enable users to stake their ETH while maintaining liquidity. This approach aims to make staking more flexible and appealing to a broader range of users, unlocking the potential for increased participation in the DeFi space.
The development of LSfi has been shaped by notable upgrades such as Shapella and The Merge, which have laid a solid foundation for its growth. Currently, the liquid staking market is predominantly led by established LST providers, and LSTs have become a significant component of the staked ETH ecosystem.
This dynamic evolution showcases the progress and potential of the Ethereum blockchain ecosystem, promising a bright future for decentralized finance and the opportunities it presents for users seeking diversified and accessible investment options.
The Atom Economic Zone by Sara Peoples
The ATOM Economic Zone (AEZ) is an interconnected system of chains and decentralized applications (dApps) designed to generate direct value for the Cosmos Hub. Before its creation, the Cosmos Hub facilitated an interchain ecosystem with over 50 chains. The AEZ’s convergence of interconnected chains and dApps is strengthened by Replicated Security, introduced in the Lambda upgrade. This ushered in a new era of innovation and collaboration while enhancing security!
Interchain Security comes in 3 forms for a broader understanding – starting with:
Replicated Security: Provides immediate protection for new blockchains on the Cosmos Hub, ensuring they start with security from day one. Projects like Neutron, a secure CosmWasm platform, are able to benefit from this protection while leveraging cutting-edge Interchain technology.
Opt-in Security: Allows individual chains to choose whether to connect with the Cosmos Hub for an extra layer of protection, akin to having a bodyguard for added security.
Layered (Mesh) Security: Enables interconnectedness among chains, creating a united front where each chain supports others, forming a ‘mesh’ that amplifies security for all involved.
The AEZ, empowered by Replicated Security and the other Interchain Security types, represents a significant advancement in safety, cooperation, and protection for the interchain ecosystem, propelling it forward into a new frontier of possibilities.
Danksharding is a new concept of sharding for Ethereum first introduced as EIP-4844.
It was created by Ethereum researcher Dankrad Feist to avoid the MEV (Maximal Extractable Value) concerns thereby increasing decentralization and security.
Danksharding is a sharding design that implements the concept of a merged market fee. Unlike regular sharding, in which shards have both different block and block proposers, only one proposer exists in danksharding. In danksharding, the block builders have the duty of choosing the data and transactions that go into each slot of a block.
Danksharding and sharding are interrelated, but they are different. While sharding is the overall design for the splitting of networks in an effort to scale Ethereum, danksharding is a step towards the realization of this goal.
ERC – Imogen Searra
An Ethereum Request for Comment (ERC) is a formal proposal or standardization document that outlines a specific improvement or extension for the Ethereum blockchain. ERCs allow the Ethereum community to discuss, design, and implement new features, functionalities, or protocols within the Ethereum ecosystem. These proposals are intended to be open and transparent, encouraging collaboration and feedback from developers, researchers, and the wider community.
ERCs can cover a wide range of topics such as token standards (ERC-20, ERC-721, ERC-1155), improvement p roposals like the chang in consensus mechanisms, gas optimization, or enhanced security measures, protocol upgrades, like the Shanghai Upgrade that saw Ethereum’s consensus mechanism move from Proof of Work (PoW) to Proof of Stake (PoS), as well as infrastructure like the standards for APIs, libraries, and tools like development tools that help create Ethereum-based applications.
ERCs are typically drafted in a standardized format and include details such as the proposal’s title, author(s), rationale, motivation, specification, and so on. Once an ERC is proposed, it goes through a process of community discussion, refinement, and review before it can be formally adopted and implemented as a standard. This ensures that the changes align with Ethereum’s design, principles and security.
ERCs allow the community to collaborate and evolve the network while also improving the platform though decentralized decision-making.
Gas Fees – Celina
Gas fees are an integral part in the world of blockchain and cryptocurrency, representing the cost required to perform transactions or functions on a blockchain network. This cost serves as a way to price the computational effort required to process and validate transactions on a blockchain.
Gas fees can be broken down into 2 components: gas units and gas price. Gas units represent the amount of computational work needed for a specific operation. While gas price refers to the amount of cryptocurrency a user is willing to pay to achieve a transaction settlement.
The cost of gas fees follow a supply and demand mechanism and is updated in real time based on current network demand. These fees vary depending on the network congestion, complexity of transaction computations and demand for computational resources. Users can adjust their fee offering based on their needs for a faster-but-more costly settlement or a slower-but-less-costly settlement. This is because miners or validators will prioritise transactions with higher fees to maximise their earnings.
They are used for a multitude of reasons including incentivizing miners or validators to include transactions in blocks and preventing network abuse by requiring users to pay a fee for using computational resources. When interacting with blockchain networks, users must take into account gas fees to strike a balance between transaction speed and cost.
A security – By Alice Li
A security is a tradable financial instrument with monetary value used in finance and investing. Companies issue them to raise capital. Securities represent ownership, debt, or the right to buy/sell financial assets. Examples: stocks (represent ownership), bonds (act like loans), derivatives (value depends on assets).
Stocks (Equity Securities): These show ownership in a company. Investors who own stocks have a share in company assets and earnings. They often get voting rights and can receive dividends, making stocks relatively more valuable.
Bonds (Debt Securities): Governments, municipalities, or corporations issue bonds to raise capital with lower risk. Buying a bond means lending money to the issuer in exchange for periodic interest payments and getting the bond’s face value at maturity.
Derivatives: These are financial contracts tied to underlying assets like commodities or currencies. Common derivatives include options, futures, and forward contracts.
Securities are traded in financial markets like stock exchanges. They help investors diversify portfolios, manage risk, and invest widely. Securities are subject to various regulations and laws to protect investors and maintain the integrity of financial markets.
TVL – Iris
Total Value Locked (TVL) is a common measure used to evaluate the value of digital assets in DeFi protocols, including all assets that are locked in its smart contract for staking, lending, and yield farming. This ratio is calculated by multiplying the total value of all assets or tokens deposited and multiplying it by the current price of each asset.
A higher TVL signifies that there is an increase in user rewards, asset deposits, and the protocol is growing while gaining more credibility; while a lower TVL signifies lower yields, lower rewards, and less stability from its money circulation.
There are a wide range of reasons why TVL is one of the most popular metrics in DeFi. A way for DeFi users to assess the market, TVL gauges if an asset is overvalued or undervalued. For founders and analysts, TVL serves as an indicator of a protocol’s success while predicting potential trends in the space. Moreover, it is a great way to determine the overall health and adoption of the DeFi ecosystem.
Commodity – Damian
In traditional economics, a commodity is a basic, interchangeable good or raw material like oil or gold, often traded on exchanges and priced based on supply and demand. In the context of crypto, the term “commodity” emphasizes a digital asset’s role as a store of value or its utility within a blockchain network. Bitcoin, for instance, is often called “digital gold,” aligning it more with commodities than currencies. The distinction between traditional and crypto commodities lies in their physical vs. digital nature and their different utilities.
From a regulatory perspective, classification, as a commodity implicates specific laws and oversight bodies, like the Commodity Futures Trading Commission (CFTC) and Securities and Exchange Commission (SEC) in the U.S. Traditional commodities, have intrinsic value based on physical properties, while the value of crypto commodities often stems from their network utility or speculative value. Whether a cryptocurrency is considered a commodity, security, or currency can impact its regulatory treatment. In summary, “commodity” can refer to both traditional raw materials and certain types of cryptocurrencies, each with their own trading, utility, and regulatory implications. This can be best summed up into one sentence as an asset that is physical or digital which acts as a store of a value which can be openly exchanged.
Hardware Wallet — Imogen Searra
A hardware wallet is a physical device, that looks like a USB, that is solely designed to store digital currencies.
The device is punted as the most secure way for users to store their digital currencies, as it keeps private keys offline.
The devices enable users to store their private keys that then enable access to a their holdings. If a user needs to authorize a transaction, the device can be connected to a laptop or computer in order to process it securely.
Hardware wallets provide peace of mind, as it provides an added layer of protection against scams, hacks and melware. Hardware wallets include advanced security protection, like a PIN code and an optional passcode or phrase.
If a wallet is stolen, keys can’t be extracted, as these are never exposed to the internet. Which is where the term cold storage is derived from. However if a person looses their device, the stored digital assets are backed up by a recovery phrase.
Vampire attack – Tiffany Mac Sherry
In the realm of cryptocurrency, a “vampire attack” is a cunning strategy employed by one blockchain or decentralized project to siphon users and liquidity away from another.
Here’s how it works: First, the attacker identifies a target project and creates a new project. The attacker enhances the new project with alluring incentives, like higher yields, lower fees, or enticing token rewards, which beckon users and liquidity away from the target. As a result, the target project can suffer a loss in activity, liquidity, and value.
Liquidity – Sara Peoples
The concept of liquidity in DeFi, refers to how quickly and easily one can sell or purchase a token of a particular cryptocurrency, without this having a significant impact on the price of the asset or token in question.
A liquid market allows investors to realise their gains, when a price rises. Equally, a liquid market enables investors to minimize their losses, because it enables them to sell quickly and efficiently when token price is in decline. The concept applies not just to transactions where an investor wishes to convert their crypto tokens into fiat, but also when people wish to exchange one token with another. A liquid market is generally desirable as it is conducive to efficient transactions, and indicative of stable and efficient market conditions.
Liquidity is a crucial concept to note, as when there is a lack of liquidity, even relatively small transactions could easily move the market and impact prices. This would create a risk that the markets could easily be manipulated, by people seeking to profit from sudden changes in the price of a given token.
Inflationary – Alice Li
Inflationary cryptocurrencies are characterized by a built-in mechanism designed to increase the coin supply gradually. This results in a decreasing value for each individual coin as more coins are generated. To maintain the cryptocurrency supply and foster network participation, these inflationary cryptocurrencies employ various factors, including predetermined inflation rates, supply limits, and token distribution mechanisms.
Each cryptocurrency has its unique system for coin production and supply management tailored to its monetary structure. In the case of inflationary cryptocurrencies, the overall coin supply steadily grows over time. The rate at which this supply increases is typically predetermined through an inflation rate. Moreover, there is a maximum supply of inflationary tokens, which can be either fixed or variable. Once this predetermined supply limit is reached, no additional tokens can be created.
Inflationary cryptocurrencies can be advantageous for individuals using digital currencies for day-to-day transactions, as the lower value of each coin enables smaller transactions. However, continuous coin creation can also lead to inflation and a long-term decline in coin value.