Cryptocurrencies have a lot of uses as an investment, as a currency for payments, as a store of value, as well as others. Like any investment, it’s vital to know what you’re talking about and more importantly, what the person trying to sell you something is really saying. And like any other field of finance, industry, art or basically every human endeavor, it has its own lingo, acronyms and definitions — and especially in matters of law and finance, definitions matter.
In this series of articles, we’re going to create a number of glossaries for various parts of the crypto industry, which we’ll combine into a larger reference tool. Today, we’re talking about one of the most hyped part of the crypto world: The NFT, or nonfungible token.
The tokens — no two are alike — can hold any type of media, including art, audio, video and documents. That means you can put an album on an NFT, but also a bond or a deed. They also provide proof of ownership and the provenance of the NFT itself.
They have been embraced by marketers even more than the metaverse. That’s because NFTs exist, whereas metaverses are largely in the early stages of construction, at best.
Another thing worth noting is that the media on an NFT is not necessarily — in fact, not generally — stored on the cryptocurrency token itself — meaning the artwork, music, video, whatever hasn’t been written onto the immutable blockchain, as that can be hugely expensive. That means it is stored somewhere else on the internet — which means if the wrong server or cloud goes down, the NFT could be destroyed.
Airdrop: To give away cryptocurrency tokens, including NFTs, to a set group by sending them directly to participants’ wallets — which requires a preexisting community like early token buyers or existing NFT owners.
Attribute: Many NFT collectibles are built on a base image — say, of a Bored Ape — with randomly selected features (fur color, accessories like hats, clothing, facial features, etc.) called traits. Generally, some are rarer than others, making them more valuable. For example, nine CryptoPunks have the “alien” trait of blue skin, 115 have a top hat, 261 are frowning, 961 have a cigarette, 2,459 have an earring, and 6,039 are male. The number of traits or attributes can also affect rarity. See Trait.
Avatar: A representation of yourself, this can be a profile picture (PFP) or an animated character that you control, as in a video game. In this context, an NFT avatar is a metaverse or gaming character. It can often be accessorized with other NFTs to add items like clothing or game pieces like a magic sword.
Beeple: Digital artist Mike Winklemann. He put NFTs in the broader public’s eye on March 11, 2021, when a collage of his works, “Everydays: The First 5,000 Days” sold at auction at Christie’s for $69.3 million in ether, making Winklemann the fifth-highest-selling living artist, after Jasper Johns, Damien Hirst, Jeff Koons and David Hockney. Note that the owner did not receive any rights to either the collage or individual artworks it is made of. All he received was ownership of the NFT, the non-exclusive right to display it publicly, and blockchain immutability proving it is the only real, original NFT of that artwork. This is why you can see the full work on Christie’s website.
Bored Ape Yacht Club (BAYC): One of the top NFT collections, the 10,000 bored apes have many attributes created by generative art. They often sell for hundreds of thousands of dollars and rare ones have sold for more than $2 million. One of the reasons for its success is developer Yuga Labs’ decision to build a community with features ranging from a private Discord channel to exclusive events for owners to drops of NFTs from related collections. They also gave owners full commercial rights to the NFTs’ artwork, leading to things like branded marijuana lines and actor Seth Green’s in-production TV show “White Horse,” which will feature his Bored Ape as the main character — which builds the brand.
Burn: To destroy a cryptocurrency token, including an NFT. Despite the destructive moniker, this is generally done by sending the token to an address no one can access, making the private key inaccessible and the token untransferable. See PYMNTS Cryptocurrency Glossary: The Basics. In the case of an NFT, the artwork may remain on the blockchain.
Collectible: Any NFT designed to be collected and displayed — not unlike baseball cards. Avatars and generative art are prime examples.
CryptoKitties: The NFT collectible/game that started it all. The first breakout hit, CryptoKitties were the first cryptocurrency to badly clog Ethereum, back in late 2017. The game basically required you to “breed” two cats the produce another one. Attributes and rarity made them highly collectible.
CryptoPunk: The most valuable NFT generative art avatar collection by individual sale price. The 8-bit pixelated punks have attributes like mohawks, dyed hair and earrings. They very rarely sell for under $100,000, and many have sold for millions of dollars.
Discord: an instant messaging platform popular with NFT projects, including some (like Bored Ape Yacht Club) that have private Discord channels as a community-building tool
Drop: To release. As in to release a collection of NFTs for sale on a marketplace.
ERC-721: An open-source standard for an Ethereum-compatible token that is the most common used to build NFTs. An ERC-721 token is an NFT, essentially.
Ethereum: The No. 2 blockchain by market capitalization — and the first smart contract blockchain that gave blockchain technology the capacity to grow beyond bitcoin-style payments tokens. Like decentralized finance (DeFi), it is by far the most popular platform for NFTs. The high minting price, clogging blockchain and environmental concerns have left other blockchains like Algorand, BNB Chain (formerly Binance Smart Chain), Cardano and Solana competing for NFT business.
Floor price: The lowest price any NFT in a collection is being sold for at that particular time.
Fractional ownership: Ownership of an NFT can be divided up into smaller chunks that can be sold separately, managed via smart contracts.
Fungible: Something that is fungible is like any other of its kind. Any green M&M is fungible, as is any bitcoin. (Sort of. While bitcoins have unique public key codes, any bitcoin is worth the same as any other.) See Nonfungible.
Gas: The transaction fee on the Ethereum blockchain. Gas is denominated and paid in Gwei. A Gwei is 0.000000001 ETH.
Generative art: Essentially computer-generated, randomized art, generally starting with an image of some kind and adding various features. This can be attributes to an avatar collection, but the Art Blocks site allows minting of generative art for art’s sake based on works uploaded by creators. More than 35,000 people have bought and sold $1.3 billion worth of Art Blocks as of August 2022.
Marketplace: In this context, a site where NFTs are minted and sold.
MetaMask: One of the most broadly used and useful Ethereum wallets, it is a favorite for NFTs and usable on the top NFT marketplaces.
Metaverse: A 3D, immersive virtual reality in which people can socialize, engage in commerce, play games, view marketing, and more. It’s still more of an idea than a reality, based on the dystopian cyberpunk novel “Snow Crash.”
Mint: To create a new NFT. This includes adding the media (image, video, music) or other content stored on the NFT, as well as any smart contracts (for example, royalty smart contract can send the minter a percentage of any subsequent sale.
Nonfungible: Something that is unique, unlike anything else that is similar to it. Nonfungible tokens, unlike most cryptocurrencies, are not interchangeable — A painting is nonfungible.
OpenSea: The largest marketplace for Ethereum NFTs.
PFP: Profile Picture. As in, an NFT avatar collectable used as a profile picture on Twitter. Expensive and rare NFTs (like BAYC and CryptoPunks) are used to show membership in an exclusive club. More to the point, Twitter and other sites are using special frames for NFTs that indicate verified proof of ownership rather than copy-paste.
Play-to-earn: A controversial type of massively multiplayer online video game, these blockchain-based games use cryptocurrencies and NFTs to allow players to collect and make things that have value to other players, who buy them on exchanges. Those “things” are on NFTs.
Rarity: In this context, a trait in an NFT collection that gives an avatar value. See Attribute for examples. Only 78 CryptoPunks have Buck Teeth, but 696 have Hot Lipstick.
Rights: Owning an NFT isn’t necessarily the same thing as owning what’s on it. For example an NFT of an album would give you the right to listen to the music, and probably sell the NFT (possibly with a royalty going back to the musician or studio), but not ownership of the song’s rights. See Royalty. See Beeple.
Royalty: An NFT’s smart contract can be installed to automatically collect and send a percentage of any future sale to the person who owns the media on the NFT (or anyone else selected at the time of minting).
Smart contract: See PYMNTS Cryptocurrency Glossary: The Basics
Traits: See Attribute.
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