As non-fungible tokens (NFTs) gain momentum in digital marketplaces, grasping the essential terminology associated with this unique realm of digital assets is crucial for creators, collectors, and investors. In this article, we present an NFT glossary that will aid you in mastering the language of non-fungible tokens, empowering your journey through the fascinating world of digital art, collectibles, and more.
Non-fungible Token (NFT)
A non-fungible token represents a distinct digital asset, such as art, collectibles, or virtual goods, that holds unique attributes and value. Stored on a blockchain, each NFT is indivisible and non-interchangeable, unlike cryptocurrencies.
Blockchain
A blockchain is a decentralized digital ledger that records transactions across multiple devices in a sequential chain of blocks. Blockchain technology underpins NFTs, providing transparency, security, and permanence.
Smart Contract
A smart contract is a self-executing digital agreement with the terms between parties programmed directly into code. NFT creators and collectors use smart contracts to generate, buy, sell, and manage the distribution of digital assets.
Minting
Minting refers to the process of creating a new NFT by submitting a transaction to the blockchain. Minting usually involves paying a gas fee to the network and setting the specific attributes of the token, such as its metadata and associated royalties.
Gas Fee
A gas fee is a variable transaction cost associated with performing operations on a blockchain network. Gas fees are influenced by factors like network congestion and transaction complexity, and they compensate miners and validators who process and verify transactions.
ERC-721 and ERC-1155
ERC-721 and ERC-1155 are token standards for creating NFTs on the Ethereum blockchain. The ERC-721 standard deals with unique NFTs, whereas the ERC-1155 standard supports both non-fungible and fungible tokens within the same contract.
Digital Wallet
A digital wallet is a secure software or hardware solution for storing, managing, and transferring cryptocurrencies, tokens, and NFTs. Digital wallets maintain the private keys needed to access and manage digital assets.
Royalty
A royalty is a percentage of the sale price that the original creator of an NFT receives upon each subsequent sale of the token. Royalties ensure that artists benefit from future transactions involving their digital artwork.
Metadata
Metadata refers to the additional information embedded within an NFT that provides context and details about the digital asset. Metadata can include the creator’s name, a description of the digital asset, and unique attributes specific to the content.
Marketplace
An NFT marketplace is an online platform where digital assets can be minted, bought, sold, and traded. Marketplaces facilitate transactions and smart contract execution, while also providing a space for artists to showcase their digital creations.
Whitelist
In the context of NFTs, a whitelist is a list of approved participants who are granted early or exclusive access to limited edition drops or events. Artists and developers often use whitelisting to reward loyal supporters or manage access to exclusive offerings.
Fungible vs. Non-fungible Tokens
Fungible tokens, such as cryptocurrencies, hold equal value and can be exchanged interchangeably. In contrast, non-fungible tokens possess unique characteristics and varying values, which means they cannot be exchanged on a one-to-one basis.
Common Types of NFTs
NFTs come in various forms and categories, ranging from digital art, collectibles, and virtual real estate, to in-game items, domain names, and event tickets. Understanding these categories can help collectors and investors make strategic decisions and identify trends within the NFT market.
In conclusion, familiarizing oneself with NFT terminology provides a strong foundation for engaging in the world of digital art and collectibles. This glossary empowers artists, collectors, and investors to navigate the NFT marketplace and make better-informed decisions while seamlessly communicating with fellow enthusiasts.
