NFTs have become extremely popular in the last year. Almost everyone has heard of it by now and a large part of those people have started to investigate further. Once again, a large part of those people were so interested in it that they want to be involved in it.
However, what is very important, before you can get started (correctly) with NFTs, is that you have some knowledge about them. Investing without knowledge is actually the same as gambling. This blog is a good starting point.
Today we look at the most important NFT terms. All the terms in this blog are very useful to know if you want to get off to a good start in the world of NFTs. For example, we look at what types of NFTs exist, but also the ways NFTs can be traded, we also look at the names of different data when it comes to NFTs, and much more. Let’s start soon!
What are the main NFT terms?
Non-fungible token: what is a non-fungible token?
NFT stands for non-fungible token and stands for “non-replaceable token”. However, a better wording is unique token† There is really only one of a non-fungible token, as opposed to a fungible token, like Bitcoin or Ethereum, of which there are millions of identical ones.
If you sell 1 BTC today and buy 1 BTC again tomorrow, you probably don’t have exactly the same BTC. However, you will never realize this and cannot even find out. If you sell Crypto Punk #1234 today and buy it again next week, you will have the exact same Crypto Punk in your wallet and you can check this too.
Smart contract: what is a smart contract?
A smart contract is a programmed contract. it’s like a code snippet in which agreements are recorded† A smart contract can be used to do certain things automatically, for example a transaction.
Such a smart contract can verify and therefore execute transactions automatically† If a transaction request meets all agreements, the transaction can be executed automatically. This means that no real person has to see the transaction and the middleman is eliminated.
For example, when it comes to NFTs, smart contracts are often used in the minting process. Ultimately, the smart contract ensures that the NFTs actually become part of the blockchain, after you have made a “request” for this transaction by pressing the Mint button.
Gas rates: what are gas rates?
Gas rates are the costs you pay to make a transaction on a blockchain network† When you buy an NFT, you pay network gas fees in addition to the costs of the NFT.
Gas fees exist to reward validators/miners of a blockchain protocol. As a user of a network, you actually pay these gas fees to validators/miners. Without them, the transaction would not have taken place at all.
Minimum price: what is a minimum price?
The minimum price is lowest price at which you can currently buy an NFT from a collection† Floor price is often used to roughly indicate the current value of an NFT project.
BEP-721: what is BEP-721?
Sometimes NFTs are based on Binance Smart Chain. When this is the case, they will often use the BEP-721 token protocol. because this is it token protocol for NFT on Binance Smart Chain† A token protocol is a set of rules that the token (code) must adhere to.
ERC-721: what is ERC-721?
Most of the NFT projects to date are based on the Ethereum network. When building an NFT on the Ethereum network, it often uses the ERC-721 token protocol. ERC-721 is therefore a token protocol for NFT on Ethereum†
ERC-1155: what is ERC-1155?
Another token protocol on the Ethereum network is ERC-1155. ERC-1155 is often used when multiple items in an NFT be packed. For example, consider a racing game. When you start you need a car and a driver. These can be packaged together in an ERC-1155 NFT.
Coinage: what is coinage?
mint is ‘creating’ the NFT† It is the process where the NFT actually becomes part of the network (for example, Ethereum or Binance Smart Chain). As a buyer of a new project, you mint the NFT and make it part of the relevant blockchain by executing the smart contract.
Minting is so called because it comes from the English pronunciation ‘minting coins’, which means minting coins.
Burning – What is burning?
When burning, a certain number of NFTs sent to a non-existent walletso these NFTs are lost.
When this happens with NFTs, it is often not a good sign. Burning is a process to reduce supply by making tokens disappear. With a fungible token, this can be a clever trick to increase the price, i.e. reduce supply. However, in an NFT project the supply is already very small in most cases. When it burns, this often means that the demand is (too) small to sell.
Ethereum: What is Ethereum?
Ethereum is a blockchain network on which smart contracts are possible† Most NFTs to date use the Ethereum network.
Ethereum can be seen as the new internet† It is a decentralized network on which decentralized applications (dApps) can be built, through smart contracts. In theory, the possibilities are endless.
White list: what is a white list?
As we mentioned earlier, whitelisting places was a solution to gas wars. the whitelist is a list of people who have priority over the rest in the mint phase† May mint on presale.
Not only do they have the guarantee of an NFT, but they can also avoid pressure on the network, which means that they will probably pay lower gas rates. It also often happens that the mint price is cheaper for people on the white list. For example, remember that they pay 0.035 ETH, instead of 0.05 ETH.
Metadata: what is metadata?
The metadata is, so to speak, the NFT. It’s a JSON file in which all the NFT data is stored† For example, when you open the metadata for a certain Bored Ape, you can see exactly what Bored Ape it is. You can see the name (for example Bored Ape Yacht Club #1234), but also what features it has. It is, so to speak, a passport containing all the data of the NFT.
This information is often what makes one NFT more expensive than another, because one NFT has rarer features than another. All this is reflected in the metadata.
Floor sweep: what is a floor sweep?
A floor sweep is the phenomenon where NFTs that are at/near the minimum price are bought† This causes the floor price to go up, because all NFTs that are at/close to the floor price are sold.
A floor sweep is often done by the creators of a project, but so can a whale (an investor who invests with large amounts of money).
Gas war: what is a gas war?
a gas war occurs when many people want to transact on a network at the same time, for example, when the mint opens for a major NFT project. Then gas rates go up very quickly, because so many people want to do a transaction at the same time. Whitelisting was invented as a solution to this, which we’ll come back to later.
Software wallet: what is a software wallet?
A software wallet is a Digital wallet where you can store your NFTs† Said smart contract is secured with a private key and you are the only one with access to your wallet. Therefore, you are the only one who can access your NFTs, as long as you keep your private key private.
The most widely used software wallet at the moment is MetaMask. The MetaMask wallet can be used for almost all blockchain networks. However, not all. For example, you cannot use MetaMask for Solana (SOL). You have different wallets for that, for example the Phantom wallet.
OpenSea: what is OpenSea?
OpenSea is the largest NFT market right now† OpenSea makes NFT trading possible on the Ethereum blockchain and the Polygon network. The biggest collections right now went big on OpenSea and according to many it is the place to be when it comes to NFTs.
Rarible – What is Rarible?
However, OpenSea is not the only option, for example you also have Rarible. Rare is he second largest NFT market right now† Rarible also uses the Ethereum network, but Flow (FLOW) NFTs and Tezos (XTZ) NFTs can also be traded through Rarible.
Solsea – What is Solsea?
The NFT markets we discussed above can be used for the Ethereum network and some other (smaller) networks. However, these are by no means all the networks on which NFTs exist.
This is also possible, for example, in the Solana network. The biggest market in Solana is Solsea†
Royalties – What are royalties?
The creators of an NFT project can set royalties on their NFTs. This means that a part of this NFT, so to speak, always remains theirs, at least a part of the benefit right of this NFT.† When the NFT is resold, they will receive a portion of this amount.
Suppose the creators of a project set a royalty percentage of 5%, so they will receive 5% of each subsequent sale. So when a buyer resells the NFT for $10,000, the creators get $500.
Adding royalties to an NFT project is popular with artists as it can generate a source of passive income for them. Do you want to know how you can also earn passive income through NFT? You can read more about it on this blog!
10k project – What is a 10k project?
’10k project’ is a term used to describe a 10,000 character NFT collection point. This term originated because of course a lot of 10k projects were launched last year, because they turned out to be successful.
Examples of major 10k projects are Crypto Punks, Bored Ape Yacht Club, Doodles, and World of Women.
Crypto Punks: What are Crypto Punks?
Crypto Punks, along with Bored Ape Yacht Club, is one of the largest NFT collections to date† That’s 10,000 unique pixel art characters and at the time of writing (Jan 24, 2022) Crypto Punks have traded for nearly 800,000 ETH.
Discord – What is Discord?
discord is a chat service in which almost all NFT projects have their own communities† You can join and chat with other people interested in the NFT project.
Today we take a look at the key terms when it comes to NFT. Understanding all of these terms will go a long way when it comes to analyzing the NFT market.
However, it is always good to learn more about NFTs so that you can start investing with even more knowledge. More about this can be learned, for example, on the basis of the blogs we wrote earlier. Here are some suggestions:
‘What is a non-fungible token? (NFT)’, in this blog, my colleague Matt explains exactly what an NFT is and gives you several examples of how it can actually be applied.
If you want to create your own NFT, the blog ‘How do you make an NFT? – The complete explanation for beginners can help you more.
Of course, you also want to avoid getting scammed, because unfortunately this also happens too often in the world of NFTs. For this it is useful to read the blog ‘The most common NFT scams’.
Do you have any questions about NFTs? We’d love to hear from you at our AllAboutCrypto Facebook Group† You can also find answers to your NFT questions quickly and easily in our FAQs or by Googling your question + AllesOverCrypto.