NFT Language explained - The Lingo

The Dawn of NFT's

NFT’s (non-fungible tokens) have been making headlines for the past few months and they just keep growing in popularity. Many brands and companies are trying to see who can dip their hands the furthest in this new, sweet honey pot.

As with any new tech, NFTs brings a whole new set of lingo that we've never heard. When we were first told about NFTs we just bobbed our heads. We acknowledged that there were words being said for sure… but who exactly is gassing what now??

A few months in and I believe that NFTs are here to stay long term. The price tags will waver, and this is not financial advice, but the technology underpinning NFT’s makes more sense than our current model.?

If you’re reading NFT blogs because you don't want to be left hanging like your grandad when dial-up came, then this is for you.?

A simplified dictionary of NFT terms to help you navigate the space. The more we collectively work at it, the more innovation there will be.?

Blockchain?

The technology powering this new wave of business and trade. In its simplest form, the use of the blockchain is to record and store information.

?As it stands right now, information (pictures, text, video etc) on the internet is stored in a central database (big computer file/table ) on a companies server (big computer). So for example, if you post something on Facebook, that information is stored on Facebook's server. If you deposit money into a bank then that information is stored on that bank's server.

The company you deal with records and stores any information you give them on their database(/systems) internally.?

BlockChain uses a different approach. Information is stored on multiple computers and servers.

These computers are not owned by one person, rather operate in a network of many. If something is done on the blockchain (such as a transaction)? then this information is encrypted and recorded in a coded “block”(instead of a database/table format), that same block is then distributed and stored across multiple computers. That block is linked with the next block of information, forming a chain.

This chain cannot be broken, and to try to remove/change the information means you would have to tamper with thousands of computers that are a part of the network.. at the exact same time. Impossible in today's world.

The chain allows us to trust the information stored to be true as the record is stored and verified across 1000s++ of computers in the network. This method of recording allows us to trade without having to have a 3rd party witness/trustee etc.??

Understanding why “trust” is important, is a whole different economics lesson. Web2.0 and web 3.0 instil trust in different ways.

CryptoCurrency?

One application of blockchain technology is money. Cryptocurrency in its simplest form is digital money designed to be used over the internet. Instead of using a bank or 3rd party to record transactions, we use the blockchain.?

Bitcoin is one example of digital money that would operate on a blockchain network (used to record transactions/store information) and it acts as a ledger of all transactions made with bitcoin. So bitcoin is the currency (token) used as payment on the bitcoin network (blockchain).?

The proposition is that because it’s built on the blockchain, no one person or entity can control or destroy it. It’s also not as vulnerable to disaster (such as a fire) than if it was all stored in one place.?

There are many different cryptocurrencies and with even more economic thought behind them I don't want you to get lost, so for the purpose of this article, they are used as a measure of trade. If You have crypto then you can buy stuff on the blockchain. It’s money. You will need crypto to buy an NFT.

Ethereum/Ether

Ether is money (like bitcoin) in the form of cryptocurrency and operates on the Ethereum network (its native blockchain network)?

Hopefully with the previous explanations that puzzle fits together nicely. The Ethereum network was important to the rise of NFT’s. (read on)?

Smart Contracts?

Are these contracts used to make its users more intelligent? Nope, that's what we thought too.?

Smart Contracts are computer programs (automation) built on a blockchain. Think of...if this happens then that happens.?

So instead of only having a record of information on the blockchain, we can also have automation that is executed when a predetermined condition is met. These are called Smart Contracts. They are pieces of code that execute agreements automatically. And just like any agreement, they lay out the terms.

The Ethereum blockchain was one of the first to enable smart contracts to be built within it. This is important - since we can execute agreements automatically - a lot of applications and experiences can now be built on top of it. And these agreements build trust as they are stored on the blockchain and executed automatically without human intervention.?

NFT’s?

What we’re here for -? NFT’s. I’ll tell you what you already know and heard a gazillion times… “it stands for Non-fungible tokens” woohoo

But so what ay, that sounds like an ancient mushroom money

It helps if we separate the terms to get a clearer picture

Tokens we already have gotten an idea of (right reader?) - it’s a piece of information on the blockchain that contains a value. Cryptocurrency is also often referred to as a token.?

Non-fungible is more of an economics term. It means no two are alike/ no two pieces have the same value. The best example is a painting like the Mona Lisa. We can’t get another one like it and even if we did replicate it - it would be valued differently.?

For contrast - fungible means the opposite of non-fungible (no shit sherlock) - for example, money is fungible. My ￡1 coin has the same value as your ￡1 coin, even if we swapped. So… that would make cryptocurrency a fungible token. My 1 bitcoin is the same as yours. My 1 eth is the same as your 1 eth.?

With this in mind, this is why NFT’s have been a gift for artists and creators. It’s also why we’re seeing a lot of animated profile pictures. If it’s one of a kind…why not show it off? I’d tape the mona Lisa to my forehead if I owned it (...no, not really)?

Non-fungible tokens are one of a kind tokens stored on the blockchain.

Title deeds could be NFT’s. Contracts. Tickets. Collectables. Gaming skins. Avatars. Music Masters…. The list goes on.?

The information of these digital files can be coded into the blockchain thus creating an NFT. Because it’s on the blockchain it can be bought, sold and traded - all while keeping a decentralised record - providing that trust factor we spoke of before - and proving ownership that can't be tampered with.

Gas?

Gas or Gas fees in their simplest form are transaction fees you have to pay in order to fulfil a contract or transaction on the ethereum blockchain.?

You will have to pay a gas (transaction fee) when you buy an NFT for instance.?

The gas fee is used to pay the computers (also known as miners) that keep the blockchain (usually ethereum) network up to date. The exact explanation from ethereum is?

“Gas refers to the unit that measures the amount of computational effort required to execute specific operations on the Ethereum network.”

If you’ve been following then the gas fees are paid in Ether... Why? Because that's the money used on the ethereum network.?

Boom. We’re getting somewhere now?

Minting?

This is the process of recording files on the blockchain. Files like JPEGs and Gifs. Once a digital file/asset has been created or designed - it needs to be uploaded to the blockchain network. The term “minting” was born to name this process.

This is why you will often hear you need to “mint an NFT” when a new project arrives. You need to record your new purchase on the blockchain. Sometimes the seller will mint it for you, but often it’s the buyer.?

So in reference to our previous definitions - minting is recording and validating information thus creating a new block on the (ethereum) blockchain.?

Minting is not only limited to NFT’s. You can mint cryptocurrencies …anything that's recorded on the blockchain.?

There are commonly high gas fees attached to minting. So keep that in mind when buying your first NFT!

Wallet?

Just like a real-world wallet, a wallet in this context is an online space that stores your digital assets.?

So your wallet may hold cryptocurrencies, NFT’s and any other digital asset you pick up along the way. It’s where you keep your money and artwork. Your own virtual wallet.?

Exchange/Marketplaces?

Hopefully, you understand by now that blockchain takes out the need for 3rd parties. So if you wanted to send money to your mate, you would just send crypto from your wallet to their wallet. The blockchain would record that transaction and all the details, so you can always see it happened.?

However what happens if you have a bunch of bitcoin but none of your mates wants to buy it? What happens if you want to buy an NFT but don’t know anyone selling one??

This is the use case of exchanges and marketplaces. Just like a traditional market, they connect buyers and sellers in a central place.?

Common exchanges for cryptocurrency are coinbase and binance?

Common marketplaces for NFTs are opensea and rarible?

Utility?

I know this is an everyday English word but you’ll see this pop up the more time you spend in the NFT world.?

Utility simply refers to a token (NFT/crypto) with a wider functionality. So in addition to the digital asset (NFT), it will also come with extra perks and benefits. If you hold said asset (/token) that has utility then you get access to those benefits. These may be access to exclusive events or products, VIP Clubs, first to future products, conferences etc. Details of these functions would be coded into the smart contract.?

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If you enjoyed this and would like more Lingo defined in the NFT and Metaverse space then drop a comment below!