Web3 basic knowledge and security tips - by Consensys

What is Web3?

Web3, or Web 3.0, are terms used synonymously with “the decentralized web” and are often used to refer, broadly, to the blockchain and decentralized technology ecosystems and communities as a whole.

What is Blockchain

A digital ledger comprised of unchangeable, digitally recorded data in packages called blocks. Each block is ‘chained’ to the next block using a cryptographic signature. Ethereum is a public blockchain, open to the world; its digital ledger is distributed, or synced, between many nodes; these nodes arrive at consensus regarding whether a transaction is valid before encrypting it, along with a number of other valid transactions, into a block.

What is gas?

A measure of the computational steps required for a transaction on the Blockchain. This then equates to a fee for network users paid in small units of tokens.

What is on-ramp, off-ramp?

Based on a metaphor from the American highway system, “on-ramp” refers to a tool, or a service provider, or the action, of converting fiat currency into tokens on a blockchain. Conversely, “off-ramp” refers to exchanging on-chain assets for their value in a given fiat currency.

What is an address?

Used to send and receive transactions on a blockchain network, and to identify different users; also referred to as a ‘public key’. An address is an alphanumeric character string, which can also be represented as a scannable QR code. In Ethereum, the address begins with 0x. For example: 0x06A85356DCb5b307096726FB86A78c59D38e08ee

When you open a GoodDollar account and pass face-verification to claim G$ UBI, your GoodDollar verified-address is created. This is your ‘public key’, or wallet address that is associated with your verified GoodDollar account.

What is a private key?

A private key is an alphanumeric string of data that corresponds to a single specific account in a wallet. Private keys can be thought of as a password that enables an individual to control a specific crypto account. Never reveal your private key to anyone, as whoever controls the private key controls the account funds. If you lose your private key, then you lose access to, and control over, that account.

What is a bridge?

A bridge is a tool built to move assets from one network to another. It’s also a verb, used to describe that action: “I bridged my ETH from Ethereum mainnet to Arbitrum.” Not all bridges are created equal, and you should be informed about what you’re doing before you use one.

GoodDollar operates across Ethereum, Celo and Fuse networks, and G$ tokens can be bridged across those networks. One of GoodWallet’s features is an embedded bridge to move G$ tokens seamlessly to and from Celo <> Fuse. Other GoodDollar bridges are visible on GoodDapp.com.

What is cryptocurrency?

Digital currency that is based on mathematics and uses encryption techniques to regulate the creation of units of currency as well as the verification of funds transfers. Cryptocurrencies operate independently of a central bank, and are kept track of through distributed ledger technology.

What is a DAO?

A Digital Decentralized Autonomous Organization (DAO, pronounced like the Chinese concept) is a powerful and very flexible organizational structure built on a blockchain.Alternatively, the first known example of a DAO is referred to as The DAO. The DAO served as a form of investor-directed venture capital fund, which sought to provide enterprises with new decentralized business models. Ethereum-based, The DAO’s code was open source. The organization set the record for the most crowdfunded project in 2016. Those funds were partially stolen by hackers. The hack caused an Ethereum hard-fork which lead to the creation of Ethereum Classic.

What is DeFi?

If cryptocurrency is Web3’s monetary system, its financial system is DeFi. This includes familiar concepts like loans and interest-bearing financial instruments, as well as so-called “DeFi primitives”, novel solutions like token swapping and liquidity pools.

What is a DEX?

A decentralized exchange is a platform for exchanging cryptocurrencies based on functionality programmed on the blockchain (i.e., in smart contracts). The trading is peer-to-peer, or between pools of liquidity. This is in contrast with a centralized exchange, which is more akin to a bank or investment firm that specializes in cryptocurrencies. Additionally, there are so-called on-ramp providers, who could be compared to currency brokers, exchanging traditional “fiat” money for cryptocurrencies, and do not hold customer’s funds “on deposit” the way a centralized exchange does. There are important technical and regulatory differences between these, which are constantly evolving.

What is Ethereum?

A public blockchain network and decentralized software platform upon which developers build and run applications. As it is a proper noun, it should always be capitalized.

What is liquidity?

An asset is considered more ‘liquid’ if it can easily be converted into cash, and therefore, ‘liquidity’ refers to the availability of assets to a company or market. Conversely, the harder it is to turn an asset into cash, the more illiquid the asset. For example, stocks are considered relatively liquid assets, as they can be easily converted to cash while real estate is considered an illiquid asset. The liquidity of an asset affects its risk potential and market price.

What is an NFT?

When discussing Non-Fungible Tokens (NFTs), “fungibility” refers to an object’s ability to be exchanged for another. For example, an individual dollar is considered fungible, as one dollar is fully interchangeable with another. Artwork is usually deemed non-fungible, as paintings or sculptures are likely to be unequal between them in quality, value, or other attributes. A non-fungible token is a type of token that is a unique digital asset and has no equal token. This is in contrast to cryptocurrencies like ether that are fungible in nature.

What is a protocol?

Formally speaking, a ‘protocol’ is a set of rules governing how a process is carried out. This concept is used throughout public blockchain networks and web3 to refer to the way smart contracts execute their functionality in the same way regardless of the user. The products or services built on top of smart contracts are often referred to as ‘protocols’ by extension.

What are sidechains?

A ‘sidechain’ refers to a chain that is connected to another (most often, to Ethereum) through a bridge, allowing assets to be transferred between them. In contrast to a Layer 2 network or a rollup, a sidechain is a full blockchain network in and of itself, and does not rely on Ethereum for consensus.

What are smart contracts?

Smart contracts are programs that have been published on a public blockchain, and can be used by anyone. While they often contain agreements or sets of actions between parties that emulate a traditional legal contract, they are not, in and of themselves, legal documents. Smart contracts are automated actions that can be coded and executed once a set of conditions is met, and are the dominant form of programming on the Ethereum Virtual Machine

What is a stablecoin?

A cryptocurrency whose value has been ‘pegged’ to that of something considered a ‘stable’ asset, like fiat currency or gold. It theoretically remains stable in price, as it is measured against a known amount of an asset which should be less subject to fluctuation. Always spelled as one word.

Security tips
  1. Never share your private key with anyone - ever.

  2. Never share your seed phrase with anyone - ever.

  3. Be wary of any website or any link that requires you to connect to your wallet or have funds in your wallet before connecting.

  4. Beware of links/private messages on Discord/X/Telegram and other social media messages.

  5. Do Your Own Research (DYOR)

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