What is an NFT and why should you care? Is there an NFT glossary of terms that can make it easier to understand NFTs? While the world of NFTs is constantly evolving, we’ve compiled the best list of beginner-friendly NFT terms glossary to help you get started in Web3 and learn more about the power of blockchain-based developments. An NFT is short for ‘non-fungible token’, a simplified way of saying the item is certified unique and stored on the blockchain for verification purposes. NFTs hold value, but they are not fungible (ie they are explicitly unique) and offer creators, small businesses, and artists new ways to monetize their audiences directly, without the need for a middleman or company. Talk about a power shift! The most popular blockchain for NFTs is currently Ethereum (ETH).
Do you really own anything?
It’s been a running joke around the NFT hype that pictures of kitties and apes are ridiculous because anyone can just ‘right-click’ and save a jpeg and now they “own” it. But the beauty of blockchain technology and specifically, smart contracts, is the creation of a digital trail of ownership that a right-click save action does not provide. When you buy a tangible item, you can hold it, touch it, and keep it safe on your person or in your residence. You own it and you know you own it in your physical presence. But what about digital assets? How do you know if you own anything in the digital age of ‘the metaverse,’ NFTs, and asset-backed cryptocurrency?
The Ultimate Beginner’s NFT Glossary
Keep in mind, digital items do not automatically make them into an NFT. When you take a picture on your cell phone it’s considered a digital image, recording a song is a digital audio file, but it takes adding it to the blockchain and then going through the process of turning it into an NFT. This leads to our first term, minting.
This is the process of turning a digital file (audio, photo, game skin etc) or physical good (trading cards, certificates of ownership, etc) into an NFT. After it becomes an NFT, it’s now a tradeable asset! Minting an NFT is a term borrowed from the physical process of minting metal coins and turning them into a tradeable asset.
As mentioned in the beginning, non-fungible means unique. There are lots of people who, when they hear NFT, think pictures of apes or rocks, but it’s more than that. There is a whole world of ownership that blockchain technology has made available. Blockchain has enabled a unique process that allows for certifications to be stored on-chain and these can not only represent digital assets but real-world assets too! Here’s a great example of how Web3 and real-world real estate are converging: “A House Just Sold as an NFT.”
This is the fee you’ll have to pay when you transact on the Ethereum blockchain or execute a contract. It allows you to complete a transaction successfully by paying the verifier, ie those supporting and securing the Ethereum network. With the recent switch from Proof of Work (PoW) to Proof of Stake (PoS) mechanisms on the Ethereum network, miners are now obsolete on ETH, leaving only validators to hold and stake tokens for the privilege of earning these transaction fees. Check out the great step-by-step explanation about how gas fees are calculated on the Ethereum blockchain here.
The floor is the bare minimum to get involved with an NFT project. OpenSea, one of the most well-known NFT marketplaces, does a great job of showing the price range on an NFT collection, including the unique characteristics for each piece of work with the percentage of the collection that has that unique characteristic. This is one aspect of the NFT that can give the prospective purchaser the ability to judge rarity and see if the price is justified. Other aspects of an NFT’s prospective success should include the community and utility.
NFT Marketplace – OpenSea
At the moment (Nov 2022), the largest NFT marketplace is OpenSea. Some have compared it to “the eBay of NFTs,” as it provides middleman protections for the buyer to be assured they are not receiving fake or replica goods. We’re still in the very early days of NFTs and the masses’ ability to understand and embrace digital ownership. We fully expect to see new competitors rise to the forefront. According to Dune Analytics, Blur, a new NFT marketplace, has had a 24-hour trading volume that is closing in on OpenSea at the end of Oct 2022.
This versatile term can be a noun, an adjective, or a verb. It stands for ‘fear, uncertainty, and doubt.’ In the emerging world of crypto, even the most educated can have the rug pulled out from under them, which makes having the ability to see through negative sentiments around projects that may be untrue a superpower. It’s kind of like a game of chicken for so many!
As mentioned under ‘FUD,’ having the rug pulled on you happens when you invest into a project and it’s either fraudulent, like the founders run away with all the funds and leave investors high and dry, or when there are promises of certain features but the developers disappear.
HODL / Diamond Hands
These terms came about simply because of a typo during the last bear market after the 2016/2017 ICO craze. Hodl simply means, hold! A large majority of enthusiasts you see during a bull run are only into crypto for the hype gains, but those of us who see the bigger vision of a future that is decentralized and has a restructured web that moves us from access to ownership, they have earned the nickname ‘diamond hands‘ and hold no matter the price.
Exactly as you’d expect, this is the opposite of the diamond hand hodlers. ‘Weak hands’ means you have lost faith in the long-term viability of the project. If you don’t self-custody your crypto, it’s not really yours and I’ll call you weak hands all day long. 😘
Trust, but verify. In Web3, especially on Twitter, there is a lot of FUD and hype. If you want to be successful in this industry, you’ll need to ‘Do Your Own Research.’ No matter what you’re investing in, this is sound advice. Before you buy cryptocurrency, stock, invest or collect anything, dig deeper than the headlines. For crypto projects, this can look like getting involved with the community on Discord or Telegram, following leaders in the space on Twitter, watching youtube interviews, and actively reaching out to other enthusiasts to get a full picture of what you’re about to buy.
After doing your own research, you may choose to finally pull the trigger and buy that NFT project, crypto coin or other Web3 investment. Welcome, you’re one of us now after ‘aping in.’
If you don’t do your own research, then you’re probably ‘Not gonna make it.’ It takes courage to be the first to try something new, especially true in a bear market so please DYOR so you avoid the NGMI curse.
More terms to come!