The NFT market is gaining traction as new use cases emerge across various industries, including entertainment, automobiles, and the metaverse, among several others. As a result, many people are drawn to learning about the relatively new technology that is NFT.
As a blockchain and crypto marketing agency, AmaZix has devised several strategies to make the journey into the NFT space easy, especially for beginners. We believe one of the first steps to take when diving into the NFT space is to become familiar with all of the frequently used terms. Therefore, we have curated and explained some of the formal NFT terminologies you may encounter in the space alphabetically. If you are a newbie, this is especially for you, so sit tight and read on.
K
Key Pairs: A key pair in crypto combines a public and private key. Usually, a pair of keys is generated when a crypto wallet is formed. The private key is the most crucial and should be kept safe and not shared with anyone, but users can supply the public key to anyone who wants to send you funds or crypto tokens, including NFT.
Kimchi Premium: This term originated from South Korea, and it describes a situation among South Korean crypto exchanges in which valuations appear higher than they are on other international exchanges. However, this is not an unusual situation across varying NFT marketplaces.
KYC: Acronym for ‘Know Your Customer.’ The term describes a mandatory process adopted by crypto platforms that require customers to disclose specific information about themselves.
L
Layer 0: This is a network framework that runs beneath the blockchain; it often consists of protocols, connectivity, hardware, miners, and everything else that makes up the blockchain ecosystem.
Layer 2: Layer 2, called lightning network, refers to a scaling solution that permits large transaction throughput while fully maintaining the security of the underlying blockchain on which it is based.
Layer-1 Blockchain: A layer-1 blockchain is a collection of solutions that enhance the base blockchain, such as smart contracts, nodes, and other processing facilities.
Limit Order (buy/sell): A limit order refers to the instruction given to a broker or implemented on a digital asset marketplace to buy or sell an asset such as NFT at a specific price.
Liquidity: In crypto marketplaces, liquidity refers to the ease with which users can exchange tokens for other tokens (or, in some other cases, to government-issued fiat currencies). Most markets accomplish this by utilizing the orderbook trading model, which consists of a list of orders comprising various bids from buyers and sellers for a specific security or asset.
Liquidity Pool: This term describes the collection of funds locked in a smart contract; usually, a liquidity pool is used to facilitate decentralized lending, borrowing, and trading in general.
Liquidity Provider: Someone who provides funds for a liquidity pool is called a ‘Liquidity Provider,’ suggesting the literal provision of funds for those who need it for borrowing or trading purposes.
M
Metamask: This is the name of a popular crypto wallet used across decentralized finance (DeFi), web 3 Dapps, and NFTs. A Metamask wallet is a crypto wallet linked to an NFT marketplace as the reserve wallet where acquired, or users can store collected items.
Metaverse: A metaverse is a network of three-dimensional virtual worlds (3D) that imitate the real world to provide immersive experiences while enabling social connection among users.
Migration: This term describes a situation when a token or NFT is transferred from one blockchain to another during a blockchain changeover. This is typically done to avoid a situation in which an asset becomes inactive due to being listed on an obsolete smart contract, particularly one used before an update to a new smart contract.
Minting: The process of converting digital files into crypto collectibles or digital assets recorded on the blockchain as an NFT.
Mods: This is an abbreviation for ‘Moderator.’ Mods do basic things such as editing/deleting posts, moderating or banning people users who breach any community rules, and ensuring the safety of community members, particularly from external threats or cyberattacks. Mods are used in crypto or NFT Discord communities.
Moon: This term describes a situation in which the underlying value of a digital asset grows exponentially. Aside from volatile moments, people can consider an asset’s price to be ‘mooning’ when it rises above average or surpasses its prior all-time high.
Multisig: A “multi-signature wallet,” as it is called, is a wallet that requires more than one signature for a transaction. Multisig wallets are implemented across DAOs.
N
NFT: Acronym for Non-Fungible Token.
Non-custodial Wallet: As the name implies, a non-custodial wallet gives users complete access to their private keys. In contrast, a custodial wallet offers another entity (often a web-based exchange) access to your private keys. Metamask, Ledger Nano X, and Trezor One are some of the most popular non-custodial wallets.
Non-Fungible: This term refers to the non-interchangeability attribute of a crypto asset, implying that such an asset cannot be replaced by a replica or a unit of the representation.
O
Off-chain (metadata): This refers to the metadata stored outside a blockchain.
On-chain (metadata): This refers to the metadata that is incorporated within a blockchain, such as a smart contract’s programming code.
Open Edition: An open edition is an NFT collection for which any number of editions can be minted. This is in contrast to a limited edition NFT, which is limited to a specific number of editions.
Oracle: Crypto oracles are widely employed in dynamic NFTs and are secondary infrastructure that is used to query, validate, and authenticate external data before relaying it to the closed system, in this case, a static NFT.
OpenSea: This is the first and biggest dedicated NFT marketplace to launch in 2018.
P
Paper Hand: Paper hand is a term that describes someone who sold something (typically an NFT) at a price that’s thought to be lower than the standard or average cost.
Peer-to-peer: Peer-to-peer or P2P refers to transactions executed directly between two people (i.e., person-to-person) without the interference of a middleman.
PFP Project: A PFP can refer to either a sort of NFT collection designed to be used as a profile picture or a profile picture that uses an image from an NFT collection.
Pre-mine: Premining is the act of mining or creating a massive quantity of blockchain-based tokens or “coins” before a crypto project is launched publicly.
Presale: A presale of crypto, NFT items, occurs before the main sale or, in the case of most crypto projects, before the official debut.
Private Key: A private key, as opposed to a public key, is a cryptography variable used with an algorithm to encrypt and decode data. It is critical to the operation of a crypto wallet and should be kept secure and not shared with anybody.
Proof of Stake (POS): This consensus mechanism requires multiple validators to agree that a transaction is accurate before adding a new block to the blockchain network. PoS uses randomly selected miners based on the number of coins staked in the blockchain network to validate transactions and are rewarded with tokens. This procedure is more energy efficient than Proof of Work.
Proof of Work (POW): This was the first verification mechanism used to verify crypto transactions. Here, miners must solve hashing problems to validate or verify new transactions before being added to the blockchain network to earn crypto rewards. This concept is more secure than POS but consumes significant energy because it requires a lot of computational power.
Public Key: Like your local account number, a public key is an alpha-numeric address to which users can send a crypto asset like cryptocurrency or NFT.
Pump and Dump: This is a type of scheme in which a group of investors (usually whales) jointly invest in a crypto asset, such as an NFT collection, and possibly persuade others to invest in the same investment to increase its value. When the price peaks, they swiftly take enormous profits, causing the value to depreciate and wrecking several other unaware investors.
Q
QR Code: although it works almost the same manner as QR codes, they are not the same. Nonetheless, QR codes, essentially 2D barcodes, are frequently used for marketing NFT items since they operate as a repository or link to an actual NFT item when scanned with a camera.
R
Rarity: This term describes how hard it is to find an NFT item of a kind, further suggesting how valuable it is. The rarer an NFT, the more valuable it is expected to be.
Ring Signature: A ring signature is a sort of digital signature in cryptography that can be performed by any member of a group of users with keys. This cryptographic mechanism enables the co-ownership of an NFT item.
Roadmap: This is a visual or contextual representation of the long-term vision of a crypto or NFT project. Usually, an NFT roadmap is visualized such that interested investors or users can have a one-time glance and can understand briefly what the project is all about and aims to achieve both in the short and long term.
Royalties: NFT royalties are a percentage paid on an NFT item to the creator every time it is sold at a secondary market. The amount is payable from the first time an NFT item is resold to a new buyer.
Rug Pull: This term describes a scheme in which crypto developers attract early investors to a project and then quickly abandon it, thereby absconding with investors’ funds.
S
Sharding: This term refers to splitting a blockchain protocol or network into smaller petitions (i.e., shards). Although interconnected, each shard contains its metadata, allowing each to operate independently and differently.
Shilling: In crypto, shilling is the process of promoting, advertising, or marketing crypto or NFT project. In other words, it could mean a pretentious mechanism for creating hype around new crypto projects by someone of a higher reputation. Shilling an NFT is promoting it regardless of motive.
Smart Contract: Smart contracts are programs designed to operate within a blockchain such that they self-execute only when a predefined condition has been met. This program automatically implements the agreement so all stakeholders can ensure the outcome without an intermediary’s interference or delay.
Snapshot: This term describes a decentralized voting system that provides flexibility on how voting power is calculated for a vote.
Solidity: This is the name of a programming language used to develop decentralized applications on a blockchain. Solidity is often used to implement smart contracts on various blockchain platforms.
Staking: The process of depositing a crypto asset, including NFT, to receive higher rewards at the end of a given time. This is a common phenomenon among decentralized lending and borrowing protocols.
Sweeping: This refers to a situation in which a buyer purchased not just one item from an NFT collection but the entire listed collection at the original price.
T
Tokenomics: This is a term that describes the economics of a token. It outlines the elements that influence a token’s use and value, such as the creation and distribution of the token, supply and demand, incentive systems, and token burn schedules.
Token: This describes a crypto asset.
TPS: Acronym for ‘Transaction Per Second.’ TPS is a crucial indicator for measuring how long a transaction takes to be processed on a specific blockchain.
U
Utility: this is another way of saying use-case or a purpose for which crypto or NFT project is designed to function.
V
Vault: Similar to a crypto wallet, a crypto vault or cold wallet is essentially a custodian service provided by an exchange or other reliable blockchain protocol to help users store cryptocurrency, NFTs, or any other digital asset offline.
Verified Contract: A verified contract, also known as a contract verification, allows developers to prove and publish the source code of contracts deployed on-chain. Similarly, project users can inspect and independently verify that a specific contract function accomplishes what it is supposed to do by creating an originating point for the contract source code.
Volatility: This term describes a price fluctuation of a financial instrument or asset. Unlike typical cryptocurrencies, NFTs are less susceptible to price volatility as they are often listed for a fixed price. In contrast, the token value for which an NFT is listed may be vulnerable to volatility.
W
Web 3: This refers to the third iteration of the internet, which, unlike the previous iteration (web 2), is entirely decentralized and is powered by blockchain technology.
Whale: The term whale describes an investor with a significant crypto asset holding far more than an average investor would have in possession.
Whitelist: A whitelist, also known as an allowlist, is a registering system that grants registered users access to exclusive privileges, services, or products, among other accessible offerings. In the NFT market, people who enlist on a project’s whitepaper gain early access to specific NFT items or collections.
Whitepaper: A white paper is an informational document published by a company, government agency or non-profit organization to highlight the benefits of a solution or product. In crypto, a whitepaper frequently offers a comprehensive project overview, including the technical execution strategy employed.
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