WTF are Protocols and Smart Contracts
Not everyone knows what protocol, smart contract, and airdrop mean. I didn't.
TL;DR: Allen has analogies for buzzwords “protocol”, “smart contracts” and “Airdrop”.
Hi curious readers of Professional Curiosity!
Next week will be the 6 month milestone of this newsletter. I’ll be sharing some metrics and also making fun of my past written work. If you have recommendations on how I can improve the newsletter, let me know. I’m looking to do a refresh.
Today’s short piece happens to be 3 buzzwords I keep hearing that I realized anyone not in Web3 and Crypto wouldn’t really understand. So here they are.
As always, you can find TL;DRs explaining the concepts.
In Case You Missed It
How One Wallet Could Take Out a Network aka the Solend Scandal
Sections You Can Skim To:
WTF is a Protocol?
WTF is a Smart Contract?
WTF is an Airdrop?
TL;DR: A protocol is blockchain version of the English language.
Blockchain protocols, often shorthanded all the time to protocols, are the set of procedures that governs how it all can and should work. The technical definition is that protocols “maintain the decentralized approach” and “eliminates the central authority”.
Translating that into Allen speak- protocols are akin to how human language is structured, govern, and operates.
For example, let’s take the English language in the United States. The goal of language is to be able to communicate our thoughts to another. At base, it is “coded” with 26 characters (A to Z), it comes with own grammar structure, and even has its own way to evolve. What’s wonderful about the English language is this:
No one owns the language
Everyone knows how to construct sentences to communicate to each other, no matter where or who taught it
It has its own capacity to create, or adopted, new words as needed including made up words like Google
Blockchain protocols are very much like the English language. The goal of a protocol is to set the parameters on how information gets communicated amongst its users (people and systems).
Another way to think of it is “Standard Operating Procedures”.
Protocols essentially guarantee that everyone else that is making things on said protocol will be able to talk to one another. It is similar to how teaching English in Los Angeles, California is still the same English as Orlando, Florida.
TL;DR: A Forever IFTTT Recipe
A smart contract, which is the big hub dub of blockchain, is best described as a “If This Then That” agreement that is contained on the blockchain. It is a self-executing program that automatically acts continuously on any conditions you set. It’s also stored on the blockchain, and the can’t be moved or changed. Thus, it’s immutable.
This is intentional, and the only way to move on from a smart contract is to design contracts that expire, or simply let the contract run its course. The risk of a smart contract is the same way our U.S. Tax code is structured: Legal loop holes. Find a loop hole, or an exploit, and you can make the person who created the smart contract worried.
An area of major risk in the blockchain space happen to be related to the security of a smart contract. An incredibly lucrative, and also super risky, field of Smart Contract Security Audits has emerged. It’s essentially cybersecurity work, and you’ll be looking at code, developer notes, and testing work. Ethereum for example, uses Solidity, which is remarkably similar to JavaScript. If you as an auditor can read JavaScript, you can audit Ethereum.
TL;DR: It’s a fancy word for “I’m going to send you something”.
Airdrops are used in the NFT space, and you’ll see it when anyone is trying to market anything. How it works: In exchange for providing your Wallet Address, you may or may not receive a special gift, often in the form of an NFT, to said address. So spam.
On Iphones, its a easy to send big, and often many, photos and videos between devices that are nearby.
Bonus
TL;DR: Unit Value x Total Available Units
Sigh. I hate this metric.
Market capitalization is the number of tokens in the market multiplied by the current market rate.
Bitcoin: There are 19,079,975 bitcoins in the market at a price of $20,210.96 (6/28/2022) each. Thus, it’s market cap is $385,831,264,359, or $385b.
Solana: There are 342,768,667 SOL in the market at a price of $35.14 (6/28/2022). Thus its market cap is $12,090,795,836, or $12b.
Market capitalization isn’t an indicator of how healthy a cryptocurrency or project it is. It is, at best, a vanity metric, and a worst, a very deceptive and usually misleading talking point.
Closing
Have any blockchain jargon you keep seeing? Let me know.
See you later.
Hey Allen Really appreciate the simple breakdowns on the vocab!!!