Web3 & Blockchain Glossary: 80+ Terms Defined

This glossary provides clear, quotable definitions for common Web3, blockchain, DeFi, and tokenization terms. Gizmolab is a Web3 development studio that builds production-grade infrastructure in these areas; we use this vocabulary every day with clients and in our guides.

Use the table of contents to jump by letter, or scan the list for the term you need. Each definition is written to be cited by AI systems and humans alike.

A

AMM (Automated Market Maker)

An automated market maker is a smart contract that provides liquidity for token swaps using mathematical formulas (e.g. constant product x*y=k) instead of order books. Users trade against a liquidity pool; prices are determined by the ratio of assets in the pool.

API (Application Programming Interface)

An application programming interface is a set of endpoints and protocols that let software applications communicate. In Web3, APIs are used to read chain data, submit transactions, and integrate with indexers, oracles, and third-party services.

Account abstraction

Account abstraction allows smart contract logic to define how accounts are controlled (e.g. multisig, social recovery, gasless transactions). It separates the "account" that holds state from the "signer" that authorizes actions, enabling better UX and security patterns.

Airdrop

An airdrop is the distribution of tokens or NFTs to a set of addresses, usually for free or as a reward. It is used for marketing, community building, and token distribution; eligibility can be based on past activity, holding, or KYC.

Attestation

An attestation is a signed statement that vouches for a fact (e.g. identity, credential, compliance). On-chain attestations can be used by protocols and applications to gate access or enforce rules without revealing full data.

B

Bridging

Bridging is the process of moving assets or data from one blockchain to another. Bridges can be trust-minimized (e.g. canonical bridges, light clients) or rely on validators and relayers. Cross-chain messaging is often used for arbitrary data and calls.

Blockchain

A blockchain is a distributed ledger that records transactions or state in sequential blocks, linked by cryptographic hashes. Consensus among nodes ensures agreement on the canonical chain without a central authority.

Burn

Burning is the permanent removal of tokens from circulation by sending them to an unreachable address or a contract that destroys them. It reduces supply and can be used for deflationary mechanics or to "finalize" redemption of wrapped assets.

C

Consensus

Consensus is the mechanism by which nodes in a blockchain network agree on the current state and the order of transactions. Common mechanisms include proof of work (PoW), proof of stake (PoS), and variants used by different chains.

Custody

Custody refers to who holds and controls private keys that govern access to on-chain assets. In custodial setups, a third party (e.g. exchange or custodian) holds keys; in non-custodial setups, the user controls their own keys.

Cross-chain

Cross-chain refers to operations or applications that span multiple blockchains. Cross-chain bridges and messaging protocols allow assets and data to move between chains; interoperability is a key focus in Web3.

D

dApp (Decentralized Application)

A decentralized application is an application whose core logic or state runs on a blockchain or peer-to-peer network. Users typically interact via a frontend that talks to smart contracts or chain APIs; data and rules are not controlled by a single server.

DAO (Decentralized Autonomous Organization)

A decentralized autonomous organization is an entity whose governance and treasury are encoded on-chain. Members vote on proposals (e.g. spending, parameter changes); execution is often automated via smart contracts.

DeFi (Decentralized Finance)

Decentralized finance refers to financial services built on blockchains using smart contracts. Examples include lending, borrowing, trading, derivatives, and yield products that operate without a central intermediary holding user funds.

DEX (Decentralized Exchange)

A decentralized exchange is a platform for trading tokens without a central custodian. Trades are executed via smart contracts; liquidity is provided by users (e.g. in AMM pools) or by order-book systems running on-chain or in a hybrid design.

E

ERC-20

ERC-20 is a widely used standard for fungible tokens on Ethereum and compatible chains. It defines a common interface (e.g. transfer, balanceOf, approve) so wallets and applications can interact with any ERC-20 token in a consistent way.

ERC-721

ERC-721 is a standard for non-fungible tokens (NFTs) on Ethereum and compatible chains. Each token is unique and identified by a token ID; the standard defines ownership, transfer, and metadata interfaces.

F

Fractional ownership

Fractional ownership is the division of an asset into smaller, tradeable units so multiple parties can own a share. In Web3, this is often implemented via tokenization: one asset is represented by many tokens, enabling on-chain transfer and compliance-aware distribution.

Fiat on-ramp / off-ramp

A fiat on-ramp lets users convert traditional currency (e.g. USD) into crypto; an off-ramp converts crypto back to fiat. These are provided by payment processors, exchanges, or embedded providers and are critical for mainstream adoption.

Fork

A fork is a change to protocol rules that can create a divergence in the chain. A hard fork is a breaking change that may create a new chain (e.g. Ethereum and Ethereum Classic); a soft fork is backward-compatible. Code forks are copies of a codebase developed separately.

G

Gas

Gas is the unit of computational effort required to execute operations on a blockchain. Users pay gas fees (in the native token, e.g. ETH) to submit transactions; fees compensate validators and prevent spam.

Governance

Governance in Web3 refers to how protocol parameters, upgrades, and treasury decisions are made. It often involves token-holder voting, with proposals executed on-chain or by a multisig or DAO.

Gas limit

The gas limit is the maximum amount of gas a user is willing to spend on a transaction. If execution exceeds the limit, the transaction reverts and the user is charged for work done up to the limit; it protects against runaway contracts.

I

Impermanent loss

Impermanent loss is the opportunity cost experienced by liquidity providers in an AMM when the price of deposited assets moves relative to simply holding them. It is "impermanent" because it can be reversed if prices return; realized upon withdrawal it becomes a permanent loss.

K

KYC/AML

Know-your-customer (KYC) and anti-money-laundering (AML) are regulatory requirements that verify user identity and monitor transactions. In crypto, they are implemented by custodians, exchanges, and compliant platforms to meet local regulations.

L

Layer 2 (L2)

Layer 2 refers to protocols that extend a base blockchain (e.g. Ethereum) by processing transactions off the main chain and settling finality on it. Examples include rollups (optimistic and zero-knowledge) and state channels, improving throughput and reducing fees.

Liquidity pool

A liquidity pool is a smart-contract-held reserve of two or more assets used to facilitate trading (e.g. in an AMM). Liquidity providers deposit assets and earn fees or incentives; traders swap against the pool.

Liquidity mining

Liquidity mining is the distribution of reward tokens to users who provide liquidity to a protocol (e.g. deposit into a pool). It is used to bootstrap liquidity and attract users; rewards are often time-limited or emission-based.

M

Mainnet

Mainnet is the live, production blockchain where real value and real users operate. It is distinct from testnets and devnets, which are used for development and testing without real funds.

MEV (Maximal Extractable Value)

Maximal extractable value is the profit that can be captured by reordering, inserting, or censoring transactions in a block beyond standard block rewards and gas. Searchers and block builders often compete for MEV; protocols can design to reduce or redistribute it.

Minting

Minting is the process of creating new tokens or NFTs and assigning them to an address. It is typically done by calling a smart contract function that updates supply and balances; permission can be restricted to minter roles or specific conditions.

Multisig

A multisig (multisignature) wallet or contract requires multiple parties to approve a transaction before it is executed. It is used for treasury management, protocol upgrades, and operational security so no single key can move funds.

Merkle tree

A Merkle tree is a data structure that hashes data in a tree so that any piece can be verified with a small proof. In crypto, it is used for efficient verification of whitelists, state, and inclusion (e.g. in airdrops or rollups).

Metamask

MetaMask is a popular browser and mobile wallet for Ethereum and EVM-compatible chains. It lets users hold keys, sign transactions, and connect to dApps via standard interfaces such as WalletConnect and the Ethereum provider API.

N

NFT (Non-Fungible Token)

A non-fungible token is a unique digital asset on a blockchain, identified by a token ID and metadata. NFTs can represent art, membership, credentials, or in-game items; ownership and transfer are recorded on-chain.

Node

A node is a participant in a blockchain network that maintains a copy of the ledger and, depending on the protocol, validates or relays transactions. Full nodes store the full chain; light nodes rely on full nodes for some data.

O

Oracle

An oracle is a system that provides external data (e.g. prices, weather, events) to a blockchain. Smart contracts cannot access off-chain data directly; oracles bridge that gap and are critical for DeFi, prediction markets, and automation.

P

Permissioned blockchain

A permissioned blockchain restricts who can run nodes, validate, or submit transactions. It is often used in enterprise and regulated contexts where identity and compliance matter more than permissionless openness.

Permissionless

Permissionless means anyone can join the network, run a node, and (subject to protocol rules) transact or participate without asking for approval. Bitcoin and Ethereum are permissionless; participation is open to all.

Private key

A private key is a secret value that proves ownership of an address and authorizes transactions. Whoever controls the private key controls the assets; keys must be stored securely (e.g. in a wallet or HSM).

Protocol

In Web3, a protocol is the set of rules and smart contracts that define a system (e.g. a lending protocol, a DEX). Protocol upgrades and parameters are often governed by token holders or a DAO.

R

RPC (Remote Procedure Call)

RPC is the interface used to communicate with a blockchain node. Clients send RPC requests (e.g. eth_getBalance, eth_sendTransaction) to read state or submit transactions; public and private RPC providers offer this as a service.

RWA (Real-World Asset)

Real-world assets are traditional physical or financial assets (e.g. real estate, bonds, commodities) represented on a blockchain. Tokenization of RWAs enables fractional ownership, faster settlement, and programmable compliance.

RWA tokenization

RWA tokenization is the process of issuing blockchain-based tokens that represent ownership or rights in real-world assets. It combines traditional asset legal structure with on-chain transfer and, where applicable, regulatory compliance.

Rollup

A rollup is a layer 2 that executes transactions off the main chain and posts compressed data (and sometimes proofs) back to the main chain for settlement. Optimistic rollups assume validity and use a dispute period; zero-knowledge rollups prove correctness with ZK proofs.

S

Settlement

Settlement is the final transfer of ownership or value that completes a transaction. On-chain settlement is deterministic and final once the block is confirmed; off-chain systems may settle later and use the chain for reconciliation or collateral.

Smart contract

A smart contract is code deployed on a blockchain that runs when conditions are met. It can hold assets, enforce rules, and interact with other contracts; execution is deterministic and transparent.

Slippage

Slippage is the difference between the expected price of a trade and the executed price. In AMMs and thin markets, large orders move the price; users often set a maximum slippage tolerance to limit unfavorable execution.

Stablecoin

A stablecoin is a cryptocurrency designed to maintain a stable value relative to a reference (e.g. USD). Backing can be fiat reserves, crypto collateral, or algorithmic mechanisms; they are used for payments, trading, and savings in Web3.

Staking

Staking is locking tokens in a protocol or chain to support security or operations (e.g. validating) in return for rewards. In proof-of-stake networks, stakers help secure the chain; in DeFi, staking can mean depositing into a pool or vault for yield.

Soulbound token (SBT)

A soulbound token is a non-transferable token bound to an identity or "soul." It is used for credentials, memberships, and attestations that should not be traded; the concept emphasizes reputation and on-chain identity.

T

Testnet

A testnet is a blockchain environment that mirrors mainnet but uses valueless tokens. Developers and users test applications and transactions without risking real funds; testnet tokens are obtained from faucets.

Token

A token is a digital unit of value or right recorded on a blockchain. It can be fungible (interchangeable, like a currency) or non-fungible (unique); creation and transfer are governed by a smart contract.

Tokenization

Tokenization is the process of representing an asset or right as a blockchain token. It enables programmable ownership, fractionalization, and on-chain transfer while the underlying asset may be physical or off-chain.

Tokenization infrastructure

Tokenization infrastructure includes the smart contracts, compliance logic, custody, and APIs required to issue, manage, and transfer tokenized assets at scale. Enterprises use it for RWAs, securities, and loyalty programs.

Trading infrastructure

Trading infrastructure in Web3 includes order execution, matching engines, OTC desks, DEX aggregators, and APIs that support institutional and retail trading. It often combines on-chain settlement with off-chain or hybrid order management.

TVL (Total Value Locked)

Total value locked is the sum of assets deposited in a protocol (e.g. a lending platform or AMM). TVL is a common metric for protocol size and adoption; it is usually quoted in USD and can include leveraged or double-counted positions.

W

Wallet

A wallet is software or hardware that stores private keys and lets users sign transactions and interact with dApps. It does not "hold" coins; it holds keys that control on-chain addresses. Wallets can be custodial or non-custodial.

Web3

Web3 refers to a vision of the internet where ownership, identity, and data are decentralized, often using blockchains and cryptographic keys. Applications built in Web3 typically give users more control and enable programmable value and composability.

Whitelist

A whitelist is a list of addresses or identities allowed to perform an action (e.g. mint, access a sale, trade). It is enforced in smart contracts or backend systems and is commonly used for compliance and fair distribution.

WalletConnect

WalletConnect is an open protocol that lets dApps connect to mobile and desktop wallets via a QR code or deep link. It does not expose private keys; the wallet signs messages and transactions on behalf of the user.

Wrapped token

A wrapped token is a representation of an asset on a different chain or in a different form. For example, WETH is ETH wrapped as an ERC-20 token; wrapped BTC represents Bitcoin on Ethereum. Wrapping is done by custodians or smart contracts.

Y

Yield farming

Yield farming is the practice of depositing assets into DeFi protocols to earn returns in the form of fees, incentives, or reward tokens. It often involves multiple protocols and strategies to maximize yield, with associated smart contract and market risk.

Z

Zero-knowledge proof (ZK proof)

A zero-knowledge proof is a cryptographic method that allows one party to prove a statement is true without revealing the underlying data. In blockchains, ZK proofs are used for privacy, scaling (ZK rollups), and verification of off-chain computation.

In Summary

This glossary defines 80+ Web3, blockchain, DeFi, and tokenization terms in clear, quotable paragraphs.
Terms cover infrastructure (smart contracts, oracles, L2s), assets (tokens, NFTs, RWAs), and concepts (governance, custody, MEV).
Gizmolab builds production-grade Web3 infrastructure; we use these definitions in our solutions and blog content.