These are 10 analogies for understanding concepts in web3.

These analogies are far from perfect, but I’ve found them useful in explaining crypto to my friends trying to learn about the space for the first time.

#1. NFTs: a regular baseball could be considered a fungible “token”. A non-fungible token (NFT) is akin to a baseball signed by Mickey Mantle. One is common, the other has a unique signature.

#2. DAOs: imagine a non-profit, but organized by strangers on the internet with a united cause. And you can track where all of the funds are going. And contributors can vote on how funds are used. And sometimes it can be for-profit. That’s a DAO.

#3. Proof of work: everyone does their math homework independently and the first to get to the right answer receives credit.

#4. Proof of stake: one person is selected to do the math homework and everyone else reviews the proposed solutions to make sure it’s correct.

#5. Decentralization: imagine a Zoom call with hundreds of thousands of people (and no individual host). One person (or 10, or 100) can log off and the call will keep running. In web3, those “people” are nodes or miners, and the network/blockchain is the equivalent of the call.

#6. DEX (decentralized exchange): like an online farmer’s market, but for tokens. Multiple vendors may be selling the same good, and each vendor is analogous to a liquidity pool in a DEX. Prices change instantaneously based on each vendor’s supply and demand.

#7. Central Bank Digital Currencies: these are actually aren’t cryptocurrencies (they’re not built on the blockchain). Often, they are basically digital dollars with some cool additional policy tools. You can read more here.

#8. Layer 1s and 2s: L1s are like open, composable versions of the cloud. There are different versions of the “cloud” (from AWS to Azure) just like there are different L1s (Eth, Solana, etc). L2s are everything you can build in the cloud. Chris Burniske also describes this well:

#9. Gas fees: toll booths for the blockchain. Each time you want to conduct a transaction, you have to go through a toll.

#10. Metaverse: metaverse? Metaverses? Is Roblox in the metaverse? Is Roblox a metaverse of its own? What about VR, and Minecraft, and Axie, and… well, maybe just skip this one.

If you have suggestions on how to improve these analogies — or other analogies you think are useful — leave a comment or tweet me!