It’s no secret that the NFT space is full of NFT terms, lingo, and jargon. And while some NFT-related terminology can be confusing, it often helps you navigate the NFT space better if you know what people are talking about.
This is a glossary of commonly used NFT terms
NFTs are a new technology, and it can be confusing to know how to talk about them. This glossary of common NFT terms will help you navigate the space with confidence!
Non-fungible token (NFT)
Non-fungible tokens (NFTs) are digital tokens that are unique and have a value based on their scarcity. They’re like collectibles, but unlike collectibles, they’re easily transferable on blockchains and can be used as collateral for loans.
In contrast to fungible tokens (FTs), where each unit of the same type has the same value as any other unit of that type–like coins–NFTs don’t share the same characteristics or properties. One NFT might be worth more than another because it has unique attributes such as age or history associated with it.
Non-fungible token standards
Non-Fungible Token (NFT) Standards refer to the set of guidelines and protocols that define how NFTs are created, traded, and managed. In essence, these standards ensure that NFTs are unique, indivisible, and easily interoperable across various platforms and marketplaces.
The most popular NFT standard today is the Ethereum-based ERC-721, which paved the way for the widespread adoption of NFTs in digital art, collectibles, gaming, and more.
ERC-721 and ERC-20 tokens
The primary difference between ERC-721 and ERC-20 tokens lies in their nature and use cases. ERC-20 tokens are fungible, meaning they are interchangeable and possess uniform value, much like a traditional currency. This standard is widely used for cryptocurrencies, utility tokens, and ICOs.
ERC-721 tokens are non-fungible, which means each token is unique and cannot be exchanged on a one-to-one basis. They are commonly used for digital art, collectibles, and virtual assets in gaming. The distinctiveness of ERC-721 tokens allows them to hold different values based on their rarity and desirability, making them ideal for representing one-of-a-kind digital items.
Smart contract
The relationship between smart contracts and NFTs lies in the fact that NFTs are often created, managed, and traded using smart contracts. When an NFT is minted, a smart contract is deployed to define the rules and characteristics of the NFT, such as its uniqueness, ownership, and transferability. This smart contract ensures that the NFT remains authentic and tamper-proof throughout its life.
When it comes to trading NFTs, smart contracts can be used to automate the process and guarantee that the terms of the sale are met.
NFT glossary continued…
Here’s a summary of some more commonly used NFT terms:
- Minting: The process of creating a new NFT by registering it on the blockchain. This ensures the digital asset’s uniqueness, provenance, and ownership.
- Gas fees: Transaction fees paid to the blockchain network (typically Ethereum) for processing and verifying NFT transactions, such as minting, buying, or transferring tokens.
- Wallet: A digital wallet used to store, manage, and transact with NFTs and cryptocurrencies. Wallets are secured with a private key that ensures sole access to the user’s assets.
- Metadata: The information attached to an NFT that describes its attributes, such as the creator, title, edition number, and other relevant details.
- Rarity: The scarcity or uniqueness of an NFT, often affecting its value. Rare NFTs are typically more sought after and can command higher prices in the marketplace.
- Floor price: The lowest price at which an NFT is currently available for purchase in the market. It serves as a useful indicator of an asset’s current value and demand.
- Royalties: A percentage of revenue generated from the resale of an NFT, which is automatically paid to the original creator. This feature is often coded into the NFT’s smart contract.
- Whitelist: A list of individuals who have been granted early or exclusive access to an NFT drop, sale, or event. This privilege is often given to supporters or engaged community members.
- Airdrop: A distribution method in which free tokens or NFTs are sent to wallet addresses of eligible participants, usually as a promotional or reward mechanism.
NFT terms can be confusing
As the NFT space continues to grow, a unique set of NFT terms and lingo has emerged to help enthusiasts navigate this dynamic world of these digital assets.
Understanding these NFT terms can help newcomers navigate the exciting world of NFTs and better engage with the community, marketplaces, and platforms that support this growing ecosystem of digital art and collectibles.