The most important NFT terms you need to know!

NFTs have become extremely popular in the last year. Almost everyone has heard of it now, and a large portion of these people have started researching more. Again, a large portion of these people were so interested in it that they would like to get involved in it.

However, what is very important before you can (really) start with NFTs is that you have 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 of this blog are very useful to know if you want to get off to a good start in the NFT world. For example, we look at the types of NFTs that exist, but also at the ways in which NFTs can be traded, we also look at the names of different data when it comes to NFTs, and more. Let’s get started soon!

Look quickly

What are the key NFT terms?

Non-fungible token – what is a non-fungible token?

NFT stands for non-fungible token and it means ‘non-replaceable token’. A better wording, however, is unique token† There is in fact only one of a non-fungible token, as opposed to a fungible token such as Bitcoin or Ethereum, of which there are millions of identical ones.

If you sell 1 BTC today and buy 1 BTC back tomorrow, you probably do not have the same BTC. However, you will never notice this and you may not even find out. If you sell Crypto Punk # 1234 today and buy it back next week, you’ll have exactly the same Crypt Punk in your wallet, and you might as well check this out.

Smart contract – what is a smart contract?

A smart contract is a programmed contract. It’s like one code snippet in which agreements are registered† A smart contract can be used to perform certain things automatically, such as a transaction.

Such a smart contract can control and therefore execute transactions automatically† If the request for a transaction fulfills all agreements, the transaction can be executed automatically. This means that no real person has to look at the transaction and the intermediary is removed.

For example, when it comes to NFTs, smart contracts are often used in the embossing process. The smart contract ultimately 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 charges – what are gas charges?

Gas fees are the cost you pay to make a transaction on a blockchain network† When you buy an NFT, you pay the gas charges for the network in addition to the cost of the NFT.

Gas charges exist to reward the validators / miners of a blockchain protocol. As a user of a network, you actually pay these gas fees to the validators / miners. Without them, the trade would not have taken place at all.

Floor price – what is a base price?

The floor price is it lowest price at which you can currently purchase an NFT of a collection† The floor price is often used to indicate approximately what an NFT project is currently worth.

BEP-721 – what is BEP-721?

Sometimes NFTs are built 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 NFTs on Binance Smart Chain† A token protocol is a set of rules that the (code for) token must adhere to.

ERC-721 – What is ERC-721?

Most NFT projects to date are built on the Ethereum network. Once an NFT is built on the Ethereum network, it often uses the ERC-721 token protocol. ERC-721 is therefore one token protocol for NFTs 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 elements in one NFT be packed. Consider, for example, a racing game. When you start, you need a car and a driver. These can then be packed together in an ERC-1155 NFT.

Minting – what is embossing?

Mint is ‘creates’ NFT† This is the process by which NFT actually becomes part of the network (eg Ethereum or Binance Smart Chain). As a buyer of a new project, you shape NFT and make it part of the relevant blockchain by running the smart contract.

Minting is called that because it comes from the English pronunciation ‘minting coins’, which means to mint coins.

Want to know more about how to make an NFT? Matt from AllesOverCrypto explains it to you in the video below.

Burning – what burns?

By burning, a a certain amount 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 of reducing supply by making tokens disappear. With a fungible token, this can be a smart trick to increase the price, namely by reducing the supply. But in an NFT project, the supply is in most cases already very small. When burned, it often means that the demand is (too) small to be sold out.

Ethereum – What is Ethereum?

Ethereum is one blockchain networks where smart contracts are possible† Most NFTs to date use the Ethereum network.

Ethereum can be seen as new internet† It is a decentralized network on which decentralized applications (dApps) can be built using smart contracts. In theory, the possibilities are endless.

Whitelist – what is a whitelist?

As we mentioned earlier, allocating seats on the white list was a solution to the gas wars. That whitelist is a list of people who have priority over the rest in the mint phase† They can impress in the pre-sale.

Not only do they have an NFT guarantee, but they can also avoid the pressure on the grid, which means they are likely to pay lower gas taxes. It also often happens that the price of mint is cheaper for the people on the white list. Remember, for example, that they pay 0.035 ETH instead of 0.05 ETH.

Metadata – what is metadata?

The metadata is, so to speak, NFT. It is a JSON file in which all data from NFT is stored† For example, when you open the metadata for a particular Bored Ape, you can see exactly which Bored Ape this 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 that contains all the data from the NFT.

This data 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 sweeping – what is a floor sweeping?

A floor sweep is the phenomenon where the NFTs that are at / close to the base price are purchased† This causes the base price to rise because all NFTs that are at / close to the base price are sold.

A floor sweep is often performed by the creators of a project, but it can also be performed by a whale (an investor who invests very large sums).

Gas war – what is a gas war?

A gas war occurs when many people want to perform a transaction on a network at the same timefor example, when the coin opens for a major NFT project. Gas taxes are rising so very fast because many people want to make a transaction at the same time. The whitelist was invented as a solution to this, which we will return to later.

Software wallet – what is a software wallet?

A software wallet is one digital wallet where you can store your NFTs† Such a smart contract is secured with a private key and you are the only one who has access to your wallet. So you are the only one who can access your NFTs as long as you actually keep your private key private.

The most used software wallet at the moment is MetaMask. The MetaMask wallet can be used for almost any blockchain network. However, not all. For example, you can not use MetaMask for Solana (SOL). You have different purses for this, for example the Phantom purse.

OpenSea – Today’s largest NFT marketplace

OpenSea – what is OpenSea?

OpenSea is largest NFT marketplace at present† OpenSea makes it possible to trade NFTs on the Ethereum blockchain and the Polygon network. The biggest collections at the moment were all big on OpenSea, and according to many, it’s 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. Rarible is second largest NFT marketplace at present† Rarible also uses the Ethereum network, but Flow (FLOW) NFTs and Tezos (XTZ) NFTs can also be traded via Rarible.

Solsea – what is Solsea?

The NFT marketplaces we discussed earlier can be used for the Ethereum network and some other (smaller) networks. However, it is by no means all networks on which NFTs exist.

This is also possible, for example, on the Solana network. The largest marketplace on Solana is Solsea

Royalties – what are royalties?

Creators of an NFT project can set royalties on their NFTs. This means that part of this NFT almost always remains theirs, at least part of the right to profit for this NFT† When NFT is then resold, they will receive a portion of this amount.

Assume that the creators of a project set a royalty percentage of 5% so that they will receive 5% of each subsequent sale. So when a buyer resells 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. Want to know how you can also earn passive income through NFTs? You can read more about this in this blog!

10k project – what is a 10k project?

’10k project’ is a term used to describe one 10,000 characters NFT collection to point out. This term arose because, of course, a lot of 10,000 projects were released in the past year because these proved to be successful.

Examples of major 10,000 projects are Crypto Punks, Bored Ape Yacht Club, Doodles and World of Women.

Crypto Punks – What Are Crypto Punks?

Crypto Punks is with the Bored Ape Yacht Club one of the largest NFT collections to date† They are 10,000 unique pixel art characters, and at the time of writing (January 24, 2022) Crypto Punks have been traded for nearly 800,000 ETH.

The now well-known Crypto Punks

Discord – What is Discord?

Discord is one chat service where almost all NFT projects have their own communities† You can join and chat with others interested in the NFT project.

Conclusion

Today, we have looked at the key concepts when it comes to NFTs. 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. Learning this more can be done, for example, on the basis of blogs that 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 more examples of how it can actually be used.

If you want to create your own NFT, you can read the blog ‘How to make an NFT? – complete explanation for beginners can help you further.

You also want to avoid being cheated, because unfortunately it 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 questions about NFTs? We would very much like to hear from you in our AllAboutCrypto Facebook group† You can also find answers to your NFT questions quickly and easily in our FAQ or by google your question + AllesOverCrypto.

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