Many newcomers, especially those coming from the stock market, often struggle to understand key terms such as “blockchain,” “smart contracts,” and DeFi. It sounds like a jumble of incomprehensible terms until they fully dive into this topic.

If you don’t understand them either, this misunderstanding could cost you real money in the future. For example, if you don’t know what a price oracle is, you’ll be surprised when the market reacts differently than you expected.

In this article, we’ve simplified the task and explained the 50 most popular Web3 keywords. What they are and why you need to know them.

So, let’s break them down!

The Basics: Blockchain & Crypto Fundamentals

This section contains the bare essentials, and it is recommended that it be read by those unfamiliar with these terms. If you are already familiar with these terms, then you may continue to the next section.

1. Blockchain: A shared ledger system in which data is replicated across thousands of computers around the world. No data may be deleted or altered in a blockchain system. In Web3 betting sites, everything is permanent.

2. Decentralization: This means that there is no central operator. It is not operated on a company’s server. No one may lock your money, alter the rules, or shut you down with your money.

3. Smart Contract: This is a set of rules that is created in a blockchain system. Once a result is determined, it automatically makes payments.

4. Gas Fee: This is the fee paid for the transaction by the validators of the blockchain. This amount may vary depending on the blockchain, ranging from tens of dollars on the Ethereum blockchain during peak hours to fractions of a penny on other second-layer blockchains such as Arbitrum or Polygon.

5. Crypto Wallet: This is essentially a way of interacting with the blockchain. You cannot use any Web3 application without this. The most common types include MetaMask, Phantom, and Trust Wallet.

6. Private Key: This is essentially a cryptographic key. This key gives the user full control. Anyone who has this key has full control over the funds. There are no exceptions for such cases.

7. Seed Phrase: It is essentially 12 or 24 words generated while creating the wallet, and this phrase is essentially a full backup of the user’s private key. This can be used to restore the wallet if the user loses access to their devices, but if they lose their seed phrase, there is no way to recover their funds.

8. dApp: an app that runs on a blockchain, not a centralized server. It stores logic and data in smart contracts. If the team that created it disappears, it still works.

9. Layer 1 (L1): a basic blockchain protocol such as Ethereum, Solana, or Bitcoin. It is a foundation on which everything is built.

10. Layer 2 (L2): a scaling solution built on top of L1. It processes transactions off the chain and writes them in batches to the main chain – it is fast, in seconds, and costs pennies. It is a standard that most modern dApps, like betting dApps, are built on: Arbitrum, Polygon, or other.

Tokens & Assets

In this section, we’ll dive into tokens and related terms in more detail. Let’s get started:

11. Cryptocurrency: A digital currency using cryptography for security and a blockchain for transaction verification. ETH, SOL, BNB, and MATIC are popular cryptocurrencies for Web3 betting transactions.

12. Stablecoin: A cryptocurrency pegged to a fiat currency such as the US Dollar, e.g., USDC, USDT, and DAI. Stablecoins are popular among Web3 bettors for their stability and immunity to cryptocurrency market volatility during betting transactions.

13. Native Token: The cryptocurrency of a particular betting protocol. Holding native tokens allows users to earn rewards.

14. ERC-20: The most popular cryptocurrency standard for tokens created on the Ethereum network.

15. NFT (Non-Fungible Token): A unique digital asset on a blockchain network. In Web3 betting, NFTs represent VIP membership and betting rights.

16. Wrapped Token: A cryptocurrency from another blockchain network, e.g., WBTC for Bitcoin on Ethereum.

17. Liquidity Pool Token (LP Token): The receipt for users who contribute liquidity to a betting pool. LP Token holders earn a portion of the betting pool fee.

Betting Mechanics

In this section, we’ll dive into betting terms in more detail and look at the most common ones:

18. “On-Chain”: This type of betting occurs on the blockchain using a smart contract. The process is transparent, traceable, and immutable.

19. Prediction Market: This is a market in which individuals participate in betting on real-life events, such as elections, sports, or even the price of cryptocurrencies. Polymarket and Kalshi are the pioneers in this space.

20. Odds: This is a probability-based multiplier used to determine the returns that can be achieved from the bet placed. Odds are displayed in decimal, fractional, or moneyline formats on Web3 betting platforms.

21. Liquidity: This is the amount of money available in the betting pool for the bet placed. It is important to know that the more liquidity, the better the odds, the bigger the bets that can be placed.

22. Market Maker: An entity or system that provides liquidity in the market. Without it, the order book would be empty, and tokens would be highly volatile.

23. Automated Market Maker (AMM): This is a system that uses smart contracts to make the odds and offer liquidity. It does this without human involvement.

24. House Edge: This is the mathematical edge given by the platform. In Web3 betting, this is fully transparent. This is a significant improvement over traditional betting.

25. Provably Fair: This is a system that allows the user to verify that the game has not been rigged. This is the gold standard for Web3 betting.

26. Oracle: This is a system that uses data feeds and passes this information to smart contracts. Chainlink is the most popular in crypto.

27. Resolution: A system that determines and finalizes a bet outcome. In decentralized betting, this is done by passing the result to a smart contract via an oracle (For example, UMA Oracle on Polymarket).

28. Escrow: Money that is being held by the smart contract during an active bet. Neither party has access to the money until the result has been verified and the smart contract is executed.

29. P2P Betting (Peer-to-Peer): This refers to a betting system in which players bet against each other, not against the casino (house). Smart contracts are used as an intermediary.

30. Parlay/Accumulator: This refers to a type of bet whereby the player is betting on more than one outcome. For the player to win the bet, all the outcomes have to win. This is now possible thanks to Web3 and smart contracts.

DeFi & Protocol Concepts

Here we’ll dive deeper into the DeFi environment and explore its key terms:

31. DeFi (Decentralized Finance): This is the larger financial system enabled by blockchain technology but without traditional financial intermediaries. Managed by smart contracts.

32. Yield Farming: This is the process of earning interest or rewards for providing liquidity or staking in a DeFi protocol. Some platforms allow liquidity providers to earn rewards based on their volume.

33. Staking: This is the process of earning interest or rewards for providing liquidity or staking in a blockchain protocol. Many Web3 platforms allow staking participants to earn a share of income generated by other platforms.

34. DAO (Decentralized Autonomous Organization): This is a system in which token holders vote to decide the direction of the protocol. Many Web3 platforms are DAOs.

35. Governance Token: A token that represents voting rights in a DAO. Owning a governance token in a protocol gives you a voice in how it’s developed.

36. TVL (Total Value Locked): The total volume of cryptocurrency deposited in the protocol. Keep in mind that a high TVL doesn’t always indicate a trusted platform (FTX crash, Luna collapse, etc.).

37. APY (Annual Percentage Yield): A measure of interest earned on assets staked or provided, including compounding interest. Web3 platforms offer APY to liquidity providers.

38. Slippage: The difference between expected and actual odds/prices is due to low liquidity or high market volatility. You should always be cautious about this, as high slippage can lead to significant losses.

39. Impermanent Loss: A potential loss to liquidity providers due to a change in asset value compared to holding it directly. This concept is important for a liquidity provider to an AMM-based protocol.

40. Cross-Chain: Interoperability between multiple blockchain networks. A cross-chain Betting protocol allows you to use assets from Ethereum, BNB Chain, Solana, etc., for user proposals.

Security & Risk

This section contains the main terms related to crypto security:

41. Rug Pull: This is one of the most common types of scams, where developers/founders build up their projects and then abandon them at the peak to flee with users’ money. 

Therefore, always check smart contracts, especially the commands, before using a new platform.

42. Smart Contract Audit: At this stage, blockchain experts audit smart contracts by analyzing their code. Reliable Web3-based platforms provide audit reports, such as those from CertiK or Hacken. This helps prevent future hacking issues for both platforms and users.

43. KYC (Know Your Customer): This is typically an identity verification process required by some platforms (mostly exchanges). Fortunately, many decentralized platforms don’t require KYC, which is a major advantage for many users. However, the situation has changed significantly in many countries recently (due to legislative changes).

44. AML (Anti-Money Laundering): A set of regulations that prevent money laundering. Today, decentralized systems are also being assessed for AML compliance across various regions.

45. Phishing: A type of attack in which attackers try to steal your wallet’s credentials or seed phrase by tricking you. Always be careful with URLs and avoid connecting your wallet to suspicious ones.

46. Multisig Wallet: A type of wallet that requires signatures from various private keys to initiate a transaction. It’s a security mechanism used by various platforms to hold funds in a treasury wallet.

Emerging Trends

Here are the main narratives of the crypto industry for the coming years, which go hand in hand:

47. SocialFi: It is a combination of social media and decentralized finance. People earn money based on social media metrics, influencer forecasts, and social media community involvement, all of which are powered by tokens and smart contracts.

48. GameFi: It is a combination of gaming and decentralized finance. In-game items have real economic value in the blockchain world. You can sell and use in-game items outside the game.

49. RWA: stands for Real World Assets and is a tokenization of real-world assets such as real estate, stocks, bonds, and commodities. It allows users to trade financial instruments in a real-world economy without any intermediaries.

50. ZK-Proof: stands for Zero Knowledge Proof and is a cryptographic tool that allows users to prove that they know something without revealing what that something is. A simple example is that you know your age is over 18 without revealing your ID. In Web3, it is used for private transactions that are still verifiable.

Why This Glossary Matters

Web3 betting is revolutionizing the betting industry, with transparency replacing trust, code replacing bookmakers, and users replacing corporations in capturing value. Understanding this language isn’t just theoretical; it’s the distinction between being an informed user and an uninformed mark.

Save this glossary, pass it on to your fellow bettors, and keep coming back as the space continues to evolve. The space is moving quickly, but with this primer, you’ll always be one step ahead of the curve.