We've all been there: you open Google looking for "Web 3" for the first time. You open the first credible article and read the first paragraph — you find the word “blockchain.” And you think, “What is that? Oh, it has a link!”.

You opened that link hoping you'd learn what a blockchain is. But then the “smart contracts” term comes up… And “tokens,” “fungible tokens,” “NFTs,” “ledger,” “hash,” “block,” and many more!

You keep opening the links and reading through the content. You now realize you have 30 browser tabs opened. Then 50 tabs. I feel you! That was exactly when I realized the need to summarise as much information as possible in a single place.

My take is to share a glossary of the key terms and then connect them. Are you ready? Welcome to the incredible world of Web 3!

The building blocks

Token

A token is a digital asset's ownership record, which gives users property right over pieces of media and the ability to transact them. And they can be of two types:

1. Fungible: they're replaceable, i.e., two fungible tokens are worth the same, the same way a 10-dollar bill is worth the same two 5-dollar bills. Besides dollars, cryptocurrencies like Bitcoin or Ethereum are examples of fungible tokens.
2. Non-fungible: well known as NFTs — one of the most trending concepts of Web 3 — they're records of ownership that give the user the ability to own digital assets, which can be of multiple types: art, photography, code, music, games (or game objects), access passes, or whatever piece of digital asset we can come up with.
   
   Each of these assets has its own value — thus the non-fungibility — and the original is always worth more than a replica. As opposed to physical assets, we can mathematically prove the authenticity of a digital asset and ensure it hasn't ever changed or has been counterfeit.
   
   Once they're given a unique ID within a blockchain (more on it ahead), each corresponding asset can be transparently identified along with their ownership by that same ID, for example, among replicas.
   
   This is very powerful once it allows anyone to create, issue, own, and trade tokens using cryptocurrency in a very efficient, borderless way. People no longer need to introduce their creations into marketplaces or submit them to centralized platforms, where commissions, among other expenses, must be paid.

Virtual wallet

A virtual wallet is somehow like a container where we keep all our tokens, be it fungible — cryptocurrencies — or non-fungible, like NFTs. Additionally, they contain our personal and identity information that allows us to connect to platforms and third parties in the same way we previously used Facebook's or Google's single sign-on capabilities. The user can log in to multiple apps and websites with a single set of credentials — but, this time, we are the ones who control our data and decide which parts to share with which entities.

Virtual wallets don't truly store crypto assets, but rather store two essential keys that identify them:

• a public key that is linked to an address, which lets us send and receive transactions (more or less like an email address);
• a private key that proves that we own the tokens associated with our public address (like a password).

Blockchain

A blockchain, like Ethereum, Solana, or Filecoin, is the technology that allows peers (computers) to work together to form a distributed ledger. Imagine having a digital system where a list of immutable token transaction records is simultaneously maintained at multiple points throughout a network while being open to everyone, which is virtually impossible to be changed.

These are the three main characteristics of blockchains:

• decentralization: transactions are stored in a network of computers (nodes) and not in a centralized database;
• immutability: transactions can't be changed once they're committed;
• openness: transactions can be viewed by anyone.

Blocks

By definition, the blockchain comprises blocks, where each block is a list of token transactions. Every block has a reference to the previous block, allowing it to be linked chronologically, composing a chain of blocks. And each block contains:

1. data: its composition varies depending on the type of the blockchain — for example, the Bitcoin blockchain stores transaction details like the sender, the receiver, and the amount transacted;
2. hash: a unique identifier for a block and all its content, like a fingerprint that gets calculated once a block is created;
3. previous block's hash: it turns the system into an incredibly secure chain of blocks.