Glossary Category: Crypto Web3

A blockchain groups transactions into “blocks,” then chains each new block to the one before it using cryptographic hashes — a mathematical fingerprint that changes completely if even one character of the data is altered. Thousands of computers (“nodes”) around the world hold copies of the same chain and use a consensus process, such as proof-of-work or proof-of-stake, to agree on which new block is valid before it’s added. That agreement process is what lets strangers who don’t trust each other still trust the record, without a bank, government, or company sitting in the middle to vouch for it.

For founders, the useful distinction is that a blockchain is a data structure and a coordination mechanism — it is not, by itself, a cryptocurrency, a business model, or a guarantee of legitimacy. Bitcoin and Ethereum are blockchains with their own native currencies; plenty of other blockchains exist for entirely different purposes, like tracking supply chains or recording ownership of digital collectibles. Founders should treat “we use blockchain” as a technical claim worth interrogating, not a selling point on its own — most ordinary business problems (payments, record-keeping, loyalty points) can be solved more cheaply with a normal database, and a blockchain is worth the added complexity only when no single party should be trusted to hold the master record.

🇵🇭 Philippine Example

Most Filipino founders and investors encounter blockchain indirectly rather than by building one from scratch — for example, by using a Bangko Sentral ng Pilipinas (BSP)-licensed exchange like Coins.ph or PDAX, both of which run on top of existing public blockchains rather than operating their own. Philippine banks and fintechs have also piloted blockchain for interbank settlement and remittance, though specific pilot outcomes vary and are worth verifying directly with each institution rather than assuming a project has scaled to production.

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Unlike a blockchain’s native currency (like Bitcoin on the Bitcoin blockchain or Ether on Ethereum), a token is created using that blockchain’s existing infrastructure — commonly via a standard like ERC-20 for fungible tokens or ERC-721 for unique ones. This is why so many crypto projects can launch quickly: they don’t need to build and secure their own blockchain, just deploy a token contract on one that already exists. Tokens are generally grouped into rough categories — utility tokens (grant access to a product or service), governance tokens (grant voting rights over a protocol), and security-like tokens (represent an ownership or profit-sharing claim, which triggers securities law in most jurisdictions).

The nuance founders most often miss is that calling something a “utility token” doesn’t automatically exempt it from securities regulation — regulators generally look at the economic substance of the offering, not the label the project chose. A token sold to the public with an expectation of profit from the efforts of a promoter can be treated as a security-like offering regardless of what it’s called in the whitepaper.

🇵🇭 Philippine Example

The Philippine SEC's Memorandum Circular No. 4, Series of 2025 formalized rules for Crypto-Asset Service Providers, requiring anyone offering a crypto-asset (including tokens) to Filipinos to file a public disclosure document with the SEC at least 30 days before marketing or sale, and requiring platforms serving Filipino users to be registered as a Philippine corporation with a minimum paid-up capital of ₱100 million. This puts real regulatory weight behind what used to be an unregulated token-listing free-for-all.

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“Non-fungible” means each token is unique and not interchangeable one-for-one, unlike a peso or a Bitcoin where any unit is equal to any other. An NFT’s record on the blockchain points to a specific asset — often an image, video, or in-game item — and tracks who owns it, making resale and provenance verifiable in a way that’s hard to fake. Beyond digital art, NFTs have been used for event tickets, in-game items, membership passes, and domain names.

The nuance many beginners miss: owning an NFT usually does not automatically give you the copyright or commercial rights to the underlying image or content — that depends entirely on the specific terms the creator attached to it, which are easy to overlook. The market has also swung through extreme boom and bust cycles; many NFT collections that traded for significant sums in 2021 became largely worthless within a year or two, so treating NFT value as stable or guaranteed is a mistake.

🇵🇭 Philippine Example

The Philippines produced one of the most-documented real-world NFT/play-to-earn stories globally: during the pandemic, the blockchain game Axie Infinity (built by Vietnam-based Sky Mavis) drew roughly a third of its daily active users from the Philippines, and Filipino entrepreneur Gabby Dizon co-founded Yield Guild Games (YGG) in the Philippines in 2020 specifically to lend Axie NFTs to Filipino players — called "scholars" — so they could earn income without buying in themselves. Reported earnings for many scholars later fell sharply as the game's in-game token lost most of its value, a widely covered cautionary tale about play-to-earn economics rather than a simple success story.

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DeFi protocols use smart contracts to replicate financial services — lending, borrowing, trading, earning yield — without a bank, broker, or centralized company holding the funds or approving transactions. Because the protocols are typically open and permissionless, anyone with a compatible wallet can use them, and different DeFi protocols can be combined like building blocks (sometimes called “money legos”) to create more complex financial products.

The tradeoff founders and investors should weigh carefully: DeFi removes a trusted middleman, but it also removes the protections that middleman usually provided. There’s typically no deposit insurance, no customer support line to call if something goes wrong, and no guarantee the smart contract code is bug-free — DeFi protocols have lost hundreds of millions of dollars historically to exploited code vulnerabilities. Regulatory treatment of DeFi also remains unsettled in most jurisdictions, the Philippines included.

🇵🇭 Philippine Example

The BSP has generally cautioned the Philippine public that DeFi platforms typically operate outside the licensed Virtual Asset Service Provider (VASP) framework that governs regulated exchanges like Coins.ph and PDAX — meaning users interacting directly with DeFi protocols don't get the same regulatory oversight or recourse. Beyond that general regulatory posture, this session did not find a specific, citable BSP circular dedicated solely to DeFi, so this is deliberately described in general terms rather than attributed to a specific rule.

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Smart contracts are written in code — commonly Solidity on Ethereum and Ethereum-compatible chains — and deployed onto a blockchain, where they execute exactly as programmed whenever triggered, without needing a court, escrow agent, or company to enforce the terms. This is what powers most of DeFi, NFT marketplaces, and DAOs: the rules of the arrangement are public, verifiable, and self-executing.

The nuance that trips up newcomers is the industry phrase “code is law” — a smart contract does exactly what its code says, not necessarily what the parties intended if the code contains a bug or an unanticipated edge case. Because blockchain transactions are generally irreversible, a flaw in a smart contract’s logic can lead to permanent loss of funds with no customer-service department to appeal to, which is why serious projects pay for independent security audits before launch.

🇵🇭 Philippine Example

There is no dedicated Philippine law yet that specifically addresses the legal enforceability of smart contracts; existing contract law and e-commerce legislation (the Electronic Commerce Act) are generally the closest applicable framework, and how a Philippine court would treat a dispute arising purely from smart contract code has not been extensively tested. Founders building anything smart-contract-based for Filipino users should get Philippine-specific legal advice rather than assuming an overseas legal opinion transfers directly.

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A crypto wallet doesn’t actually store your coins inside it — the coins’ ownership record lives permanently on the blockchain. What the wallet stores is your private key, a secret code that proves you control a given address and lets you authorize transactions from it. Wallets come in two broad flavors: “hot” wallets (connected to the internet, more convenient, e.g. a mobile app) and “cold” wallets (offline hardware devices, more secure for large holdings).

The most important distinction for beginners is custodial versus non-custodial. A custodial wallet — like the wallet inside most exchange apps — means the exchange holds the private keys on your behalf, similar to a bank holding your money. A non-custodial wallet means you alone hold the private key (usually backed up as a “seed phrase” of 12-24 words), and if you lose that phrase, there is no password reset and no customer support that can recover your funds — this is the origin of the crypto community’s phrase “not your keys, not your coins.”

🇵🇭 Philippine Example

Most Filipinos' first crypto wallet is custodial and built into a BSP-licensed platform — such as Coins.ph (operated by Betur Inc., BSP-licensed since 2017) or GCash's GCrypto feature, which is powered by PDAX (BSP-licensed since 2018). These custodial wallets trade some self-custody control for the convenience and consumer protections that come with using a regulated Virtual Asset Service Provider rather than a fully self-managed wallet.

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Centralized exchanges (CEXs) work much like a stock brokerage: the company holds custody of user funds, matches buy and sell orders, and typically requires identity verification. Decentralized exchanges (DEXs) instead let users trade directly from their own non-custodial wallets via smart contracts, with no company taking custody of funds — but also generally no customer support or dispute process if something goes wrong.

For founders and investors, the practical question when choosing or evaluating an exchange is whether it’s actually licensed to operate where its users live. An exchange operating without local authorization can still be technically accessible to users, but that doesn’t mean it’s legally serving them, and users of unlicensed platforms typically have far less recourse if the platform fails or is hacked.

🇵🇭 Philippine Example

In the Philippines, crypto exchanges are regulated by the BSP as Virtual Asset Service Providers (VASPs) under Circular No. 1108 (2021). As of mid-2025 there were around nine actively licensed VASPs, including Coins.ph (Betur Inc.) and PDAX — but the BSP has kept new VASP license applications under an extended moratorium since 2021, most recently reaffirmed in an August 2025 memorandum. Separately, the Philippine SEC has issued advisories naming foreign exchanges — including OKX, Bybit, MEXC, KuCoin, Bitget, Phemex, CoinEx, BitMart, Poloniex, and Kraken — as operating in the Philippines without proper local registration under its 2025 Crypto-Asset Service Provider rules.

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The term “gas” comes from Ethereum, where every computational step a transaction requires costs a small amount of the network’s native token, paid to the validators who process and confirm it. Gas fees rise and fall with network congestion — the busier the network, the more users are effectively bidding against each other to get their transaction processed, which pushes fees up during high demand and down during quiet periods.

Not every blockchain uses “gas” terminology or fee structure identically — Bitcoin has its own transaction-fee model, and many newer blockchains are specifically designed to keep fees far lower than Ethereum’s historical peaks. Because fees change constantly with network conditions and even with the specific blockchain involved, any specific fee number quickly goes stale — it’s a variable cost to budget for, never a fixed one.

🇵🇭 Philippine Example

Filipino users moving crypto between a self-custody wallet and an exchange, or interacting directly with a DeFi protocol or NFT marketplace, should expect to pay a network gas fee on top of whatever fee the exchange or platform itself charges. Because both fee types fluctuate independently and constantly, this glossary intentionally avoids citing a specific peso or dollar figure — check current fees directly on the platform or network you're using rather than assuming a number from any article stays accurate.

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Stablecoins solve one of crypto’s most common complaints — extreme price volatility — by anchoring their value to something stable, most often the US dollar. They generally fall into three types: fiat-collateralized (backed by real cash and cash-equivalent reserves held by the issuer), crypto-collateralized (backed by other cryptocurrencies, usually over-collateralized to absorb price swings), and algorithmic (using code-based supply adjustments instead of real reserves to try to hold the peg).

The nuance that matters most: a stablecoin’s stability is only as strong as its backing and the issuer’s transparency about it. Algorithmic stablecoins in particular have a documented history of catastrophically failing under stress — most famously TerraUSD’s collapse in 2022, which wiped out tens of billions of dollars in value within days. Even fiat-backed stablecoins are only as trustworthy as the audits proving the reserves genuinely exist and can cover redemptions.

🇵🇭 Philippine Example

Recent BSP guidance has directed licensed Virtual Asset Service Providers to more closely scrutinize stablecoins they list — reviewing how tokens are issued, redeemed, and backed, verifying reserve composition, and ensuring clear redemption facilities exist for holders. This reflects a broader regulatory trend of treating stablecoins as needing bank-like scrutiny of their reserves, not just as "a coin that happens to be worth a dollar."

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The term “Web3” is used to contrast with today’s dominant “Web2” model, where large centralized platforms (social networks, app stores, cloud providers) store user data and control access to it. Web3 proponents envision an internet where blockchains and crypto wallets serve as the underlying identity and ownership layer — users hold their own assets and data via a wallet rather than a company’s database, and can move between applications without losing that ownership.

Founders should treat Web3 as a still-largely-experimental and contested term rather than a settled technology category. Much of what gets marketed as “Web3” today is really just a crypto-token layer bolted onto an otherwise ordinary app, and prominent technologists have publicly criticized the term as more marketing narrative than working reality. That doesn’t make every Web3 project worthless, but it does mean the label alone tells you very little about whether a given product actually delivers meaningful user ownership.

🇵🇭 Philippine Example

The clearest real-world Philippine example of Web3 gaming/ownership concepts in practice is Yield Guild Games (YGG), founded in the Philippines in 2020 by Gabby Dizon and Beryl Li, which built a community-owned model around lending blockchain game assets to Filipino players. Broader "Web3 app" adoption in the Philippines beyond gaming and crypto trading remains at an early, largely experimental stage — this glossary avoids overstating how mainstream Web3 usage actually is locally.

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