For most people, Web3 is an often confused and hard-to-imagine future version of our world complete with its own financial systems and virtual realities we’ll use to interact. And while many of these new technologies sound exciting, a polished and functional version of them is still a ways away.
However, many of the tools and systems that will be used in the future are already being experimented with and are quickly making their way into the association and non-profit industry.
This is why having a basic knowledge of Web3 terms and concepts is key to not only understanding the possibilities for your organization, but also the future implications you need to prepare for as an association leader.
At its most basic, however, Web3 is a future iteration of the internet that will be secured by blockchain technology, likely immersive and decentralized, and using alternative finances to keep things moving.
Whether that means it’s a fully immersive world that replaces day-to-day interactions or simply an upgrade to the web as we know it is yet to be seen.
Of course, there is a lot more to it than that, and if you need a full primer, be sure to check our Guide to Web3.
Related: How To Talk to Your Members About Web3
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Essential Web3 Terms You Should Know
One of the biggest reasons Web3 is misunderstood is because of all the components and terminology that go into how it functions. While terms will continue to develop as the technology does, having a basic understanding of critical Web3 terms can ensure that you and your organization are prepared for the future.
- Blockchain – A virtual or digital ledger that is used to record any and all transactions. Using cryptography and duplication across a network of nodes. This duplication is what helps create a secure process because all changes are tracked and recorded on the ledge, which allows for complete transparency.
Related: How to Talk to Your Members About Blockchain
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- Smart Contracts – A smart contract is an agreement that’s converted into computer code, which is stored on the blockchain, and self-executes when the terms of the agreement are complete. By relying completely on blockchain networks, there is no need for an intermediary and agreements are always executed, assuming the terms have been met.
- Decentralization – Many of the applications and systems in Web3 are considered decentralized. As opposed to our current systems, which have oversight by either a private company or government, a decentralized system wouldn't have a central authority in charge. Instead, decision-making happens within a group.
- Decentralized Autonomous Organization (DAO) – The future of associations and organizations. Members would buy into a DAO using a token, which then affords them a vote on any decisions the organization makes – anything from purchases to organizational structure.
- Decentralized Application (Dapp) – Software applications built on blockchain technology. They often use smart contracts and can be designed for applications like games, NFT marketplaces and accounts to store and save cryptocurrencies.
- Decentralized Finance (DeFI) – An entire decentralized financial system that combines decentralized apps, exchanges and cryptocurrencies. Not only will it allow users to exchange coins, but it can also create opportunities for lending, borrowing and investing, with all interactions being executed via smart contracts and secured by blockchain.
- Decentralized Exchange (DEX) – A decentralized exchange that allows users to exchange cryptocurrencies. There is no intermediary and users can exchange any type of coin in most systems.
- Cryptocurrency – A digital currency encrypted on the blockchain and used for secure transactions. There are over 17,000 currently in existence and more are being created daily. Their appeal often depends on uses and the amount minted. For example, Bitcoin is one of the most valuable and sought after because of its wide usage and finite amount.
- Wallet (Crypto wallet) – A wallet is designed to store your private keys, which prove ownership of a specific cryptocurrency. They are also critical when connecting to any decentralized exchange or app. Wallets can either come as software, which is stored on your computer, or hardware, which is a physical device that stores your keys.
- Bitcoin – The cryptocurrency that launched it all. Bitcoin has the largest market cap and is viewed as a stable store of value due to its universal acceptance. It was created in 2008 by Satoshi Nakamoto with a limit of 21 million to ever be created.
- Ethereum – Launched in 2015, Ethereum is one of the more popular cryptocurrencies. It has become the foundation of things like NFTs, event tickets and real estate transactions on the blockchain, which also allows it to be used to build Dapps.
- Altcoin – Officially, an altcoin is any cryptocurrency that is not Bitcoin. While they can still represent currency and are stored and secured by the blockchain, they also have wider applicability, including stable coins and governance tokens.
- Mining – When transactions need to be confirmed on a blockchain, a complex mathematical problem is used. When it’s solved, cryptocurrency is created and the transaction is added to the blockchain. This process is called mining and it's one of the ways new cryptocurrency units are created.
- Proof-of-Stake (PoS) – One of the methods used to confirm transactions on the blockchain. Users stake their own cryptocurrencies to validate transactions that are being added to the blockchain. Once confirmed, they are also given portions of the cryptocurrency as payment.
- Proof-of-Work (PoW) – Unlike PoS, where you need to put your own cryptocurrency as stake, PoW works by solving mathematical problems. Once solved, the miner is also awarded cryptocurrency.
Tokenization & Collectibles
- Creator Coins – Whether you’re an organization or an individual creator, you can create your own cryptocurrency that is categorized as a creator coin. Not only can they be used to purchase things like merchandise and NFTs, but they can work as a key to additional features, membership perks and content.
- Fungibility – In order to understand what an NFT is, you need to know the fungibility aspect. “In less geeky terms, fungible simply means replaceable,” says Amith Nagarajan. So if an item or collectible is non-fungible, this means it is not replaceable and there is only one (i.e. the Mona Lisa).
- Non-Fungible Token (NFT) – “NFT” stands for “nonfungible token.” It’s a unit of data on blockchain that represents digital files or collectibles. While many of the current applications and use-cases of NFTs are artwork, creators will be able to use NFTs to represent things like certifications or licenses, deeds for homes or even tickets to your next association event.
Related: Can Event NFTs Be the Next Big Thing for Your Association?
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- Non-Transferable Tokens (NTTs) – Unlike NFTs that can be sold and traded in the marketplace, NTTs are considered “soulbond.” Designed with inspiration from video games, where achievements cannot be traded or sold, these tokens would represent the most important of “achievements” or credentials. Things like employment history, licenses and certifications would all be verifiable on the blockchain – creating a Web3 reputation that cannot be falsified.
- Minting – Whether you create a new NFT and add it onto the blockchain, you’re “minting” that item. Minting can also be used for new cryptocurrencies and creator coins.
- Metaverse – A virtual representation of our regular world. It should allow people to recreate or replace daily routines, like meetings, visits to offices and even vacations, in a fully immersive 3D virtual world.
Related: How to Talk to Your Members About The Metaverse
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- Augmented reality – An emerging technology that allows you to augment your real-world surroundings. Generally using phones or glasses, you’ll be able to interact and see 3D elements in the real world.
- Virtual Reality – A more immersive experience, virtual reality relies on full headsets like the Oculus Quest headset. An entire world, or Metaverse, will be created that you can then interact with as you would in the real world.
- Avatars – A digital representation of you! As users explore a metaverse, there will need to be a way for you to interact with that world, and that’s where avatars come into play. Not only will you be able to customize them with in-world purchases and NFTs, but you’ll also likely be able to use them to interact with others, attend virtual experiences and even enter your virtual workplace.
This list is in no way exhaustive and will likely be a living document that we consistently update and improve. However, it does give you an understanding of jargon and terminology that can help you make informed decisions and plan for emerging technology.
The Future of Web3 Is Still Unknown
The bottom line is that the implications and functionality of Web3 are still very much in their infancy. However, with investments from major organizations around the world, their application and impact will likely be felt in the very near future.
Understanding key concepts and Web3 terms are key to helping keep your association ahead of the curve and prepared to integrate and leverage them for organizational growth and connection with members.
Looking for guidance and actionable steps as your association explore the applications of AI and Web3? Be sure to book your tickets to digitalNow 2022.
Jose Triana joined the Sidecar team as the Content Manager in 2021. He is a writer and creative focused on helping purpose-driven organizations learn and find value online. When he isn't working on content, you can catch him going for a run or resting with a good book.