Web 3 and Decentralized AI Glossary
Web 3 layers, primitives and stack.
This week we have a long weekend in Mexico, celebrating Independence Day. By having a time restriction and a patriotic spirit due to the holiday. I thought the fastest way to write something valuable for you is to write down a comprehensive glossary about Web 3 and try to explain the value further than the infamous cryptocurrencies.
Web3 new paradigm relies on users reclaiming control. Blockchain is the core, offering security, transparency, and decentralization. But Web3 goes far beyond cryptocurrencies; it's about reshaping the internet’s infrastructure from the ground up. At the foundation lies Layer 1, where blockchains like Ethereum settle transactions and smart contracts automate processes, ensuring seamless, trustless interaction. Layer 2 picks up the slack, solving the scalability problems that have been the challenge of the last 10 years in the major networks today, allowing for cheaper and faster transactions.
At the forefront of Web3 are decentralized applications (dApps) offering everything from decentralized finance (DeFi) to immersive gaming experiences. Decentralized Autonomous Organizations (DAOs) are creating new governance models that remove traditional middlemen, giving power back to the users. Meanwhile, Oracles and Cross-Chain Bridges ensure that blockchain remains connected, providing real-world data and enabling interoperability across ecosystems. The Metaverse blurs the lines between digital and physical reality, offering fully owned virtual assets like avatars and land. As for finance, DeFi and GameFi are flipping traditional industries on their heads, with automated strategies to maximize yield and in-game economies that offer real-world value.
But Web3 doesn’t stop at financial freedom and virtual ownership. The next frontier is Decentralized AI, where artificial intelligence systems are governed and owned collectively. In the end, the data required to sequence the correct chain of thoughts and knowledge needs to be reinforced through daily activities and human interaction. Federated learning is the best way to go when it comes to leveraging collective data-driven to specific reasoning outcomes. These AI models leverage blockchain to operate securely, sharing data and insights across decentralized networks without the need for centralized authorities, and the need for a central data node. That is expensive, risky, and closed-ended. This opens up unprecedented possibilities for autonomous decision-making in industries like finance, healthcare, and supply chains. I have written before about AI-powered DeFi protocol that adapts in real-time to market conditions, owned and governed by the users themselves. Decentralized AI adds another layer of autonomy, further empowering individuals and communities in the Web3 space.
With each layer of Web3—be it infrastructure, scaling solutions, decentralized applications, or now AI—the possibilities are amazing. Decentralized AI is poised to supercharge innovation by making intelligent systems more transparent, fair, and community-driven. Whether you're an investor, developer, or curious observer, Web3 and decentralized AI are here to stay, transforming everything we know about finance, governance, and the digital economy.
I think this change is going to be gradual, at a different pace than open-sourced or centralized AI. We still depend on the crypto market cycles and adoptions. But is going to happen and we can begin building since now decentralized tools on the application layer. Here is a comprehensive glossary of Web 3 layers, primitives and stack.
Layer 0: Network Infrastructure
Cross-Chain Bridges: Protocols that allow assets and data to be securely moved between independent blockchains.
Layer 0 Networks: Infrastructure that supports cross-chain communication, enhancing interoperability across blockchains (e.g., Cosmos, Polkadot).
Layer 1: Blockchain Foundation
Blockchain: The decentralized digital ledger that records transactions across multiple computers.
Smart Contracts: Self-executing contracts with the agreement terms directly embedded into the code.
Nodes: Hardware that runs blockchain software, maintaining the decentralized network by validating transactions.
Transaction Settlement: Finality of transactions that occur on the blockchain, often secured by native cryptocurrencies (e.g., ETH, BTC).
Assets
Coins: Native blockchain assets used to fuel network transactions and smart contracts (e.g., ETH on Ethereum).
Tokens: Non-native assets built on top of blockchains, representing digital or real-world objects (e.g., ERC-20, ERC-721).
Stablecoins: Tokens pegged to stable assets, commonly fiat currencies like the USD (e.g., USDC, DAI).
Layer 2: Scalability Solutions
Layer 2 Protocols: Solutions that offload transaction processing from Layer 1 to improve scalability, speed, and cost-efficiency (e.g., Optimism, Polygon).
Optimistic Rollups: Layer 2 scaling solutions that assume transaction validity but incentivize fraud-proof submission.
Zero-Knowledge Rollups: Layer 2 solutions that bundle transactions with cryptographic proofs to ensure security and scalability.
Application Layer: Decentralized Applications (dApps)
Decentralized Finance (DeFi): Financial services on blockchains, removing intermediaries in lending, borrowing, and trading (e.g., Aave, Uniswap).
Decentralized Autonomous Organizations (DAOs): Blockchain-based organizations where governance is controlled by token holders (e.g., MakerDAO).
Oracles: Systems that provide external data to blockchains, enabling smart contracts to function with real-world information (e.g., Chainlink).
Wallets: Software or hardware tools for storing and managing digital assets.
Hot Wallets: Internet-connected wallets, convenient but less secure.
Cold Wallets: Offline wallets, are typically used for more secure storage of assets.
Liquidity Provider (LP) Tokens: Tokens representing a user's share of liquidity pools, are used in decentralized exchanges to enable trading and yield farming.
Primitives
Metaverse: Virtual spaces where users interact through avatars and own digital assets like land and goods (e.g., Decentraland).
GameFi: A blend of gaming and decentralized finance, where in-game assets hold real-world value and can be traded or used across platforms.
Web3 Optimizers: Applications that aggregate and maximize returns through automated DeFi strategies (e.g., Yearn Finance).
Decentralized AI: Artificial intelligence systems that are developed, trained, and deployed using decentralized infrastructure, ensuring transparency, user control, and autonomy.
AI Oracles: Specialized oracles that bring external AI-generated data to blockchain networks, enabling smarter contract execution and decision-making.