A Beginners’ Peek Into The Most Common NFT Terms 

In this article, we explore the origins and meaning of NFT. We cover the most important terminology for anyone interested in the NFT phenomenon. 

NFTs are all the rage right now, seemingly taking over the crypto-markets by storm. You might have heard about them, but what are they, exactly? Nonfungible tokens (NFTs) are a type of digital asset that is unique and cannot be replicated. This means that each NFT is different from any other, making them perfect for representing digital collectibles, artwork, credits, or anything else that carries unique, individualized value. In this article, you’ll learn about the origins of NFTs as well as the current state of the market. We will cover the most important concepts and terms used in the NFT community and take a glimpse of the newest trends. 

What are the origins of NFT?

In a nutshell, they are the result of the development of blockchain technology, especially Ethereum blockchain.  In the early days of cryptocurrency, people were mostly concerned with creating a decentralized, digital currency that could be used for peer-to-peer transactions without the need for a central authority. However, as blockchain technology evolved, so did the possibilities of what it could be used for. 

In 2015, Ethereum was launched with the aim of providing a decentralized platform that could be used to create smart contracts and decentralized applications (dApps). This was a game-changer, as it meant that developers could now create all sorts of digital assets on the Ethereum blockchain. And so, the first NFTs were born. 

What is an NFT? 

Like we said before, NFTs are non-fungible tokens that exist on a blockchain. Fungibility is the property of an asset to be interchangeable with other individual assets of the same type. In contrast, non-fungibility means that each asset is unique and cannot be replaced by another. This might sound confusing, so let’s use an example to illustrate. Let’s say you have a dollar bill. You can exchange that dollar for another dollar, and it won’t make any difference. This is because dollars are fungible: one dollar is interchangeable with any other dollar. Now, let’s say you have a piece of art. You can’t exchange that piece of art for another piece of art, because each piece is unique and has its own value. This is what it means for an asset to be non-fungible. 

NFTs are stored on a blockchain in the form of smart contracts. A smart contract is a computer protocol that executes automatically when certain conditions are met. For example, let’s say you have a contract with a delivery service that says they will deliver your package within three days. Once you’ve paid for the service, the contract is automatically executed and the package is delivered. With NFTs, smart contracts are used to store information about the asset, such as its owner, price, or any other relevant details. 

So far, the most popular use case for NFTs has been in the gaming industry. The first major game to make use of NFTs was CryptoKitties, a collectible card game that allows players to breed, trade, and sell digital cats. Each cat is an NFT stored on the Ethereum blockchain, and each one is unique. Since its launch in 2017, CryptoKitties has become extremely popular, with some cats selling for over $100,000. Other games that have followed suit include Decentraland, Axie Infinity, and Gods Unchained. 

Why are NFTs so expensive? 

This is a question that has been on a lot of people’s minds, especially those who are new to the world of NFTs. After all, if you can’t exchange one NFT for another, what gives them value? The answer lies in the fact that NFTs are digital assets that represent real-world value. For example, an NFT could represent a piece of digital art, a ticket to a virtual concert, or even a plot of land in a virtual world. The value of an NFT depends on what it represents and how rare it is. Just like with any other asset, the price of an NFT can fluctuate depending on supply and demand. 

What’s the difference between an NFT and a cryptocurrency? 

The main difference between NFTs and cryptocurrencies is that NFTs are non-fungible, while cryptocurrencies are fungible. Cryptocurrencies, such as Bitcoin or Ethereum, can be exchanged for other cryptocurrencies of the same type. For example, you can exchange one Bitcoin for another Bitcoin, or one Ethereum for another Ethereum. However, you can’t exchange an NFT for another NFT. This is because each NFT is unique and has its own value. 

What are some of the most popular terms in the NFT industry? 

Whether you’re aspiring to become an NFT art collector or just want to get a better understanding of the industry, it’s useful to know the following terms: 

1/1

Pronounced “one of one” and sometimes written as 1/1, a 1:1 is an NFT that has been issued as a single, unique edition. This property is written into the work’s code, and it cannot be replicated.

Airdrop

When a new digital asset is first introduced, its creators may “drop” or freely distribute a limited number of units to certain individuals, especially big collectors, in order to increase its visibility and jump-start trading.

Ethereum

Ethereum is a decentralized computing platform that runs smart contracts and enables the issuance and exchange of cryptocurrencies and other digital assets. It is the second-largest cryptocurrency by market capitalization, after Bitcoin.

Sweep the floor

A colloquial term for the process of taking all the unclaimed or orphaned tokens from a particular address and transferring them to another. This is sometimes used to denote buying out remaining tokens when they are at their lowest value. 

HODL

An acronym standing for “hold on for dear life,” this term is used to describe the strategy of buying and holding a cryptocurrency or other digital asset over a long period of time, regardless of market fluctuations. It also applies to NFTs and it describes the general philosophy of the community. 

PFP 

PFP stands for “profile picture”, which isn’t just an image representing an individual on social media or other online platforms. In the NFT context,  some artists are creating and selling PFPs as standalone works.

Whales

Large investors who hold a significant amount of a particular cryptocurrency or other digital assets. Their buying and selling can have a major impact on the market. For example, in NFTs, this would include major art collectors who purchase works for six- or seven-figure sums.

Dapp (decentralized application)

A software application that runs on a decentralized network and is not controlled by any single entity.

Minting

The process of creating a new NFT. This can be done using specialized software or a smart contract on a blockchain. For example,  an artist might mint a new NFT each time they create a new digital work. It can also be generated using AI.

Metadata

Data that provides information about other data. In the context of NFTs, metadata is often used to describe the work, such as its title, artist, or date of creation. Usually, a single NFT will contain up to seven characteristics written in its metadata. For example, in the Bored Apes collectible NFT,  the metadata includes the unique characteristics of the piece, but also the information about the artist, date, and collection.