Understanding non-fungible tokens (NFTs) isn’t easy. The technologies and systems that support NFTs are alarmingly complex, and every piece of infrastructure comes with a ton of jargon. And the problems don’t end there. There are acronyms everywhere and project roadmaps that read like calculus textbooks. It’s easy to get discouraged.
But don’t fret. We know getting onboarded to the NFT world can be daunting. That’s why we’ve put together the NFT Dictionary.
This is a living document that captures all the terms you’ll need to know to go from NFT confused to NFT enthused. To make things as easy as possible, we organized the dictionary so it can be read in order (from start to finish), and you’ll leave with a very comprehensive understanding of the NFT ecosystem. We used this methodology because the world has enough encyclopedic dictionaries that are massive in scale and impossible to navigate. We wanted to create a better, more user-friendly resource.
With this in mind, remember that this document is for you.
Know of a term that we seem to be missing? Something you’re still confused about? Shoot us a message. We’re here to help. We’ll be updating the dictionary regularly as the ecosystem evolves and new players and technologies enter the space. So bookmark it, and revisit it as you continue on your NFT journey.
Blockchains are distributed databases used to securely store data and information in a publicly accessible way. Rather than relying on a single centralized server, blockchain-powered crypto networks store data across distributed devices (nodes) worldwide. Ultimately, these distributed devices can be anything, such as computers, laptops, or even bigger servers. They serve as the framework of the blockchain, communicating with each other to enable the storage, spread, and preservation of data without the need for a trusted third party. Thanks to nodes, the blockchain provides an immutable record — it’s a decentralized proof of ownership vehicle that is unlike anything we’ve seen before.
Ethereum is the primary blockchain used in the Web3 ecosystem due to its size and security. It’s the most popular blockchain for NFTs for the same reason. Ether is the native cryptocurrency of the Ethereum blockchain. It’s used to power all transactions that happen on the blockchain, including peer-to-peer payments, NFT trading, crypto gaming, and more.
The Tezos blockchain rose to popularity towards the beginning of 2021. Although it’s not as widely used as the Ethereum blockchain, it also supports NFTs and is preferred by members of the community who want to reduce their energy use. Its Liquid Proof-of-Stake (LPoS) mechanism uses about two million times less energy than Ethereum. Its digital token is called a “tez” or a “tezzie.” If you want to know more about the energy required to complete NFT transactions, see nft now’s explainer article on NFTs and energy use.
Solana is another popular blockchain that supports NFTs. Its unique combination of proof-of-history (PoH) and proof-of-stake (PoS) consensus mechanisms lead to substantially reduced validation times. As a result, the Solana blockchain is far cheaper to use. Its cryptocurrency is called SOL.
An NFT is a digital token of information (data) that lives on a blockchain. Each NFT has its own identification code and metadata. As a result, NFTs are unique and non-interchangeable i.e., they are “non-fungible.” The data an NFT contains can be tied to digital files like photos, poems, songs, albums, videos, avatars, and more. In this respect, NFTs are most often used for buying and selling digital items (specifically, art). However, they can also be used to give the NFT owner access to exclusive merchandise and airdrops, tickets to live or digital events, and more.
An NFT Marketplace is a decentralized platform where people can buy, sell, and trade NFTs. The majority of NFT marketplaces are built on the Ethereum or Solana blockchains, with OpenSea and Magic Eden serving as the most popular marketplaces for each chain respectively. OBJKT is the largest and most popular marketplace on Tezos.
An NFT project roadmap is a bit like an investment deck. It’s a document that maps out the goals, milestones, and strategies of an NFT project to communicate the project’s value and utility. They help the NFT creators and NFT owners to align on expectations. As an NFT project progresses, its roadmap is updated with new features and releases. Notably, NFT roadmaps are not legally binding. So while creators may make many promises in their NFT roadmaps, they have no legal obligation to fulfill them.
A gas fee is the payment individuals make to complete a transaction on a blockchain. These fees are used to compensate blockchain miners for the computing power they have to use to verify blockchain transactions, and they are typically paid in the blockchain’s native cryptocurrency. The price fluctuates based on network congestion. As a result, the more people using the network, the higher the gas fee.
A gas war happens when users compete over whose transaction gets priority in the next block of the blockchain. Gas wars are common during popular NFT drops, as many people are competing over a finite number of NFTs. During highly-anticipated drops, only the earliest buyers will have the chance to mint an NFT. As a result, the demand to have mint transactions included in the next block rises. The more gas you pay, the quicker your transaction is validated, so gas fees increase substantially.
In simple terms, minting is the act of adding, validating, and recording an NFT to the blockchain. Once minted, the NFT is available for public consumption and can be viewed, bought, and traded on the open marketplace. That said, NFTs don’t have to be made public and can be kept private.
A one-of-one artwork or NFT is completely exclusive, never to be made again. These are a little like paintings in real life in that only one exists. Due to their rarity, 1/1s usually carry a much higher price tag than NFT editions.
A limited edition is an NFT collection in which there are a finite number of NFTs available to be minted. Many collections consist of 10,000 editions.
An open edition is an NFT collection where any number of items can be minted. However, don’t confuse “open” with “unlimited.” Many open editions are only available to mint for set periods of time before they’re gone.
A profile picture (PFP) NFT is a digital token or artwork that is designed to be displayed as a person’s social media profile picture. Many of the world’s most popular NFT collections (like CryptoPunks and Doodles) are PFPs.
The floor price of an NFT collection is the lowest listed price in the entire collection. The value of a collection is often dictated by its floor price.
A whitelist is a group of users who are given early access to purchase an item from an NFT collection before the project is publicly available. The whitelist is usually small in size, with a select group of users who are handpicked by the NFT creators as a way of generating interest before the public mint.
The art reveal is often the most exciting moment in an NFT collection launch where, after a period of waiting, holders and the general public can finally see the specific artwork they’ve minted. Smaller art reveals often serve as pre-mint teasers, generating interest around the project.
Airdropping is the process of distributing NFTs or coins directly to users’ wallets, often for free. There are several kinds of Airdrops. For example, individuals may get an airdrop in exchange for sharing a social media post or signing up for a newsletter. Exclusive airdrops are sent to holders of a specific NFT collection or cryptocurrency as thanks for their loyalty. Airdrops are a great way for blockchain projects to attract new users or reward existing ones for their support.
A hot wallet is a digital wallet that is kept online. It’s connected to the blockchain, allowing you to store, send, and receive tokens. It can be accessed from any device, anywhere in the world, as long as you have an internet connection and your private keys. Since they are connected to the internet, they tend to be less secure and subject to hacking. MetaMask is an example of a hot wallet.
A cold wallet is a more secure kind of cryptocurrency wallet that is stored offline. Examples of cold wallets include paper wallets and hardware wallets. Hardware wallets are physical devices, many of which look like USB drives. Top brands include Ledger and Trezor. A paper wallet is simply a piece of paper with your private and public keys printed on them. Of course, it’s easy to lose or destroy a piece of paper. As a result, hardware wallets are typically seen as the most secure and safe way to store tokens.
A royalty is a set amount of proceeds that one receives in exchange for owning, creating, or licensing a work. Many NFT creators receive secondary royalties or a predetermined percentage of the sale price every time their work is sold on an NFT marketplace. As such, NFT creators don’t just make money the first time their work sells. They make money off of every transaction.
A smart contract is a computer program that lives on the blockchain. It is governed by rudimentary “if/when…then” statements. For example, “if ‘a’ happens, then execute step ‘b.’” Once these predetermined terms are met, the transaction automatically executes and is recorded in the blockchain. This increases transparency and trust, as the transaction is immutable (it can’t be disputed or changed) and no third-party intermediaries are needed to complete it. NFTs are minted and traded using smart contracts that assign ownership, access assets within the NFT, manage the transferability of the NFT, and so on.
Decentralized Applications (dApps) are just like any other website or application you use, except that these applications are built and run on top of a decentralized network, like the Ethereum blockchain. dApps are powered by smart contracts and, because they run across a decentralized network, don’t require a centralized third party or gatekeeper to operate. An NFT dApp is a decentralized application that incorporates NFT use into its software. Most NFT marketplaces, like OpenSea, are dApps.
A DAO (a decentralized autonomous organization) is a type of organization that is run on the blockchain through the use of smart contracts. The smart contracts lay out the rules that govern the DAO and are used to execute decisions. Unlike traditional businesses and organizations, where decisions are governed by centralized primary shareholders, DAOs are operated by a community of token holders. All governance token holders in a DAO are able to vote and have a say in key decisions. If a proposal achieves a predefined level of consensus (like a certain number of votes), it is accepted and executed according to the rules within the smart contract. Many NFT projects create DAOs that enable the NFT owners to vote on the future of the project.
A governance token is a token that functions as a democratic system for collective decision-making within a DAO. Governance tokens provide holders with voting rights on major decisions affecting the future of the project, such as funding allocation, key hires, creative direction, and more.
A utility token is a cryptocurrency that provides access to (and is used to interact with) a decentralized application or service. It’s important to note that these are not financial securities, although they are sometimes speculated on as such. Rather, the tokens are used in the internal economy of a specific project. An example is the $APE token associated with the BAYC NFT project.
Play-to-earn (P2E) is a type of online game where gamers are awarded utility tokens for successful game performance. These utility tokens can be used to purchase in-game virtual goods and can be even converted into other crypto or fiat currencies.
The metaverse is best defined as a blending of physical and virtual reality — as a kind of digital extension of the real world. According to this futuristic vision of tomorrow, everyday reality will be transformed, and people will live, play, shop, and work with others around the globe in a totally immersive, interoperable augmented world. Many Web3 protocols, such as NFTs, may be used in the future metaverse. For example, the Bored Ape Yacht Club (BAYC) NFT collection has centered a lot of its utility on gaming experiences and digital events that unite physical and virtual reality in the metaverse.
Most digital platforms and games are currently siloed, meaning that users can’t move their data from one application to another. For example, gamers aren’t able to wear their Fortnite skins while playing Call of Duty. Interoperability is the ability to carry your data and virtual items with you across decentralized applications and virtual environments. This is one of the core tenants of Web3 and is valued because it gives users more control of their data and true ownership of their digital purchases (which is obviously important when it comes to NFTs).
Discord is a voice, text, and video instant messaging platform. Users can converse and share files in private messages or in more public communities called “servers.” Each server can contain a number of chat rooms. Discord has become the primary means of communication for many NFT and Web3 communities. Most NFT projects have a dedicated Discord where creators, NFT holders, and the general public can connect and share updates. To access these servers, users need an invite link.
Creative Commons Zero (CC0) is the most liberal form of copyright protection in which creators must forgo any copyright protection and allow the public to use, adapt, or profit off of their work.
Crypto staking is the process of locking up a proof-of-stake cryptocurrency in a wallet or exchange over a set period in return for interest rewards. The longer the crypto is staked, the greater the reward.
On-chain refers to a digital token that lives on a blockchain. This term is also used to represent any transaction or interaction with a token or contract on the blockchain.