The web3 ecosystem is riddled with technical jargon that is often difficult for a layperson to understand.

These are some of the key terms to understand if you are interested in web3. Because of the length, this article, ‘20 Web3 Terms You Should Know,’ has been divided into three(3) parts for ease of reading.

1 . Cryptographic Hashing Function: These are formulae or procedures used to secure information and communication through scrambled words and codes achieved with mathematical calculations known as algorithms.

Cryptography is used in communication so that it will be almost impossible for messages to be intercepted or changed by third parties before they get to the person the message is meant for.One of the mathematical functions used in cryptography is Hashing, also referred to as hash functions.

2 . What is Hashing?

Hashing is one of the cryptographic functions. It is the scrambling of info or data beyond recognition. It is also used to securely store passwords, find duplicate records, quickly store and retrieve data, etc. for instance, when you create an account on an app or a website, your passwords are hashed and stored in a database. Since the same input always gives the same hash output, a slight mistake in your password gives an error message because the hash output changes drastically.

A hash function is used to convert input into output also known as Hash Digest. These functions are irreversible by design. That means you cannot get the input by reversing the calculations or passing it through the same hash functions. A hash output cannot be converted to its original plain text input.

For a better understanding of hashing read this article

3 . Network Difficulty: a measure of how difficult it is for miners to mine a new block. That is, how difficult the new blockchain hashing puzzle is. Advancement in technology means that more sophisticated computers with higher speed and computing power will be used for mining, therefore drastically reducing the mining time and ultimately affecting the security of the network.

The difficulty helps to maintain an average of 10 minutes of mining time. It is adjusted every 2016 block: every two(2) weeks approximately.

The protocol checks if it took 2 weeks to mine 2016 blocks by looking through the average time stamps on the blockchain to adjust the level of the next network difficulty. If it took longer than 2 weeks, the difficulty level is lowered, and, if it took less than two weeks, it is increased.

To calculate Network difficulty(Target):

Target = Previous target Time/2016 10 minutes

Previous target = old target value

Time = time spent to generate previous 2016 blocks

4 . Consensus Mechanism:

The protocols or techniques used to have a group of people agree on a decision. As a decentralized ledger, the Blockchain requires protocols or rules to coordinate the operations of the miners or nodes.

They take unified decisions on the transactions or data that should be added to a block and the blockchain. They also ensure that all nodes on the blockchain are in sync with one another, among other measures, to ensure the security of the blockchain data.

Some of the known Blockchain consensus mechanisms are: Proof of Work; Proof of Stake; Proof of History; Proof of Authority; Delegated Proof of Stake; Proof of Weight; Proof of Space and Time etc.

5 . Hash Rate:

the speed at which a computer is able to perform a hashing computation: the number of guesses mining hardware makes to find the nonce of a hash output. The hash rate of a network such as Bitcoin is how much computing power is being used to process transactions. Hashrates are predictors of the health of a blockchain network. The higher the hash rate, the more difficult it is for a rogue miner to attack a network because of the cost involved.

A lower hash rate means it is less expensive and less decentralized therefore making it easy to carry out a 51% attack.

At the time of this writing, the total hash rate of the bitcoin network: the combined hash rate of all the mining pools on the network is 256EH/s. For a better understanding, below are the units of measurement.

1 MH/s = 1,000,000 (one million) hashes per second.

1 GH/s = 1,000,000,000 (one billion) hashes per second.

1 TH/s = 1,000,000,000,000 (one trillion) hashes per second.

1 PH/s = 1,000,000,000,000,000 (one quadrillion) hashes per second.

1 EH/s = 1,000,000,000,000,000,000 (one quintillion) hashes per second.

6 . Sybil Attack: When a single person or actor tries to take over a network by establishing multiple accounts or identities. In the case of a blockchain, this is accomplished by establishing and maintaining multiple nodes.The following are the reasons:

Outvote honest nodes;

launch a 51% attack: if the person gains control of 51% of the network. As a result, can reverse transactions and allow double-spending.

Consensus mechanisms are put in place by networks to protect against Sybil attacks. This is known as Sybil defence : making it economically costly and infeasible to launch the attack. The de-incentivizing result is unthinkable and Impractical. For instance, the cost of electricity and computing power it would require to carry out a Sybil attack will run into millions of dollars on some blockchain networks

7 . Ethereum Virtual Machine(EVM):

a software or a distributed Virtual CPU that runs on a client-server known as GEth(Go Ethereum).It is installed by each node of the Ethereum network to maintain consensus throughout the network. To run EVM, Geth is first installed in OS(Ubuntu, Windows, Mac, etc.), then the EVM is installed.

It is responsible for running and executing smart contracts. It is a state machine: for every block that is added to the blockchain, the rules are specific. That means no two blocks are added to the blockchain using the same rules. The EVM determines the rules. It also runs and compiles smart contract codes into machine-readable codes known as byte codes.

8 . Tokenomics:

the analysis of the value created by a cryptocurrency project. It is derived from the words token and economics. It is the study of how factors such as, but not limited to, demand and supply affect the project's value. Some of the questions considered include:

How the tokens are generated: are all tokens ever issued pre-mined, or will they be released gradually over time? How long will it take for the maximum supply to be released?

Inflationary or deflationary: is the supply increasing or shrinking? Token burning is a deflationary mechanism because it reduces the total supply of tokens.

Fungible or Non-Fungible: In the case of NFTs, how rare is each token available?

Token distribution: how are the tokens allocated to the stakeholders? Do the founders and major stakeholders own more tokens than the general public? For example, if the founders own approximately 60% of the tokens, this could be a red flag for the project. Do they keep those tokens for an extended period of time? The price of a token is determined by demand and supply, or the perception of demand and supply. Three major types of token supply:

Circulating supply: the total number of tokens that have been created, released, or mined and are now trading on exchanges (CEX or DEX). Tokens that have been locked by farming, staking, or the network's founders and are not immediately available for purchase are not included. It also does not include tokens that have been burned.

Total supply: the total number of tokens that are present on the blockchain, including tokens that are locked by staking, farming, or by the network's founders and are not immediately for sale.

Maximum supply: the highest amount of coins that will ever exist during the cryptocurrency's existence.

This includes tokens that are currently in use, locked tokens, tokens that will be mined in the future, and tokens that will be mined for the lifecycle of the coin.

With a total and maximum supply of 36,666, the price of one yearn.finance(YFI) token was over $90,000 at its all-time high(source, Coingecko).

The total supply of Shiba Inu is 1 quadrillion (1,000,000,000,000,000), and the price of one token was $0.00008616 at its all-time high

9 . Sidechain:

a separate blockchain that is linked to another via a two-way peg or bridge.They are in charge of their own security, and they have their own validators and consensus mechanism.They do not inherit the Ethereum network's security.

Bridges transfer assets from the side chains to the Eth mainnet. They can execute smart contracts written for the EVM. They are compatible with smart contracts written in Solidity or any other EVM-compatible language.

Side chains aren't completely decentralized. To achieve scalability, they either sacrifice decentralization or security in exchange for faster block times, larger block sizes, and lower gas fees. E.g Polygon, Loom Network.

10 . Layer2: These are also scaling solutions for Layer 1 blockchains like Ethereum and Bitcoin's transaction speed. Low transaction per second(tps) is one of the Layer 1 chain's major flaws. Bitcoin has an average of 7 tps, while Ethereum has a rate of 20 tps. As more people use the network, congestion, high gas fees, and slow DApps result.

Layer 2 solutions relieve Layer 1 of the burden of transactions while inheriting Layer 1's security and decentralization properties. They handle transactions in groups. Instead of performing transactions one by one, they can combine up to or more than 10,000 transactions into one and send them back to the mainnet for review and falsehood verification after compressing them into a single piece of data (the hash).

While Layer 1 is responsible for security, decentralization, and data provision; layer 2 is responsible for transactions. E.g are Rollups(ZK rollups, Optimism, Arbitrum)