The most important NFT terms you need to know!

NFTs have become extremely popular in the past year. Almost everyone has heard of it by now, and a large portion of these people have started doing more research into it. Again, a large portion of these people were so interested in it that they want 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 in 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 the ways in which NFTs can be traded, we also look at the names of different data when it comes to NFTs, and much more. Let’s get started quickly!

Take a quick look

What are the main NFT terms?

Non-Fungible Token – What is a Non-Fungible Token?

NFT stands for non-fungible token and it means ‘non-replaceable token’. However, a better wording is unique token. There is really only one of a non-fungible token, unlike a fungible token such as Bitcoin or Ethereum, of which there are millions of identical ones.

If you sell 1 BTC today and buy back 1 BTC tomorrow, you probably won’t 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 will have the exact same Crypt Punk in your wallet and you can also check this.

Smart contract – what is a smart contract?

A smart contract is a programmed contract. It’s like one piece of code in which agreements are registered. A smart contract can be used to perform certain things automatically, for example a transaction.

Such a smart contract can check and therefore carry out transactions automatically. If the request for a transaction meets all agreements, the transaction can be executed automatically. This means that no real person has to look at the transaction and the middleman is removed.

For example, when it comes to NFTs, smart contracts are often used in the minting process. The smart contract ultimately ensures that the NFTs actually become part of the blockchain after you make a ‘request’ for this transaction by pressing the mint button.

Gas Charges – What are Gas Charges?

Gas charges 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 fees 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 transaction would not have taken place at all.

Floor price – what is a floor price?

The floor price is that lowest price at which you can currently buy 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 the 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) the token must adhere to.

ERC-721 – what is ERC-721?

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

Minting – what is minting?

Mint is ‘creates’ NFT. It is the process where the NFT actually becomes part of the network (e.g. 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 running the smart contract.

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

Want to know more about how to create 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 to reduce supply by making tokens disappear. With a fungible token, this can be a clever trick to increase the price, namely by reducing the supply. But in an NFT project, the supply is already very small in most cases. When there is a fire, it often means that the demand is (too) small to be sold out.

Ethereum – What is Ethereum?

Ethereum is one blockchain network 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, distribution of places 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 have an impact on sales.

Not only are they guaranteed an NFT, but they can also avoid the pressure on the grid, meaning they’re likely to pay lower gas charges. It also often happens that the mint price is cheaper for the people who are 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 NFT, so to speak. 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 properties it has. It is, so to speak, a passport that contains all the NFT’s data.

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 floor price are bought. This causes the floor price to rise 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 it can also be done by a whale (an investor who invests very large amounts of money).

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 larger NFT project. Gas charges then increase very quickly 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 a digital wallet where you can store your NFTs. Such a smart contract is secured with a private key, and therefore 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 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 – Today’s largest NFT marketplace

OpenSea – what is OpenSea?

OpenSea is largest NFT marketplace at the moment. OpenSea makes it possible to trade NFTs on the Ethereum blockchain and the Polygon network. The biggest collections at the moment all went big on OpenSea, and according to many, it’s 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. Rarible is second largest NFT marketplace currently. 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 covered earlier can be used for the Ethereum network and some other (smaller) networks. However, by no means are 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 list royalties on their NFTs. This means that part of this NFT always remains theirs so to speak, at least part of the profit right of this NFT. When the NFT is then sold on, they will receive a portion of this amount.

Suppose the creators of a project set a royalty rate of 5% so that they get 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 among artists because it can generate a source of passive income for them. Want to know how you too can earn passive income through NFTs? You can read more about that in this blog!

10k project – what is a 10k project?

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

Examples of larger 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 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 who are interested in the NFT project.

Conclusion

Today we have looked at the key concepts when it comes to NFTs. Understanding all 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 several examples of how it can actually be used.

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

Of course, you also want to avoid being cheated, because unfortunately this also happens all too often within the world of NFT. For this it is useful to read the blog ‘The most common NFT scams’.

Have questions about NFTs? We would love to hear from you in our AllAboutCrypto Facebook Group! You can also find answers to your questions about NFTs quickly and easily in our FAQ or by googling your question + AllesOverCrypto.

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