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NFTs are, for many, the most disruptive trend since Bitcoin. Not only are they abstract, but there are dozens of buzzwords used in this new space. With jargon such as “metaverse” and “P2E,” they almost sound like code names.<\/p>\n
If you’re feeling confused by all these new words, this glossary will help you catch up. Here is the most-used terminology in the NFT community.<\/p>\n
Scroll through the whole page or click to jump down to the alphabetical group:<\/p>\n
An airdrop is a crypto marketing<\/a> strategy that works like a giveaway, but with a few differences. It’s a tactic that rewards users who meet certain conditions, such as following their media channels, buying their token or joining a limited waitlist.<\/p>\n Airdrops typically offer variable rewards and involve upfront investing. For example:<\/p>\n In crypto exchanges<\/a>, you first buy the coin and lock it until the end of the airdrop. Your reward depends on how much and how early you locked.<\/p>\n<\/li>\n<\/ul>\n If there’s no investment, it’s a giveaway.<\/p>\n Alpha refers to future announcements kept in secret to avoid price manipulation. Like insider information. Users who somehow find “alpha” can invest early and profit the most.<\/p>\n Often, the NFT community are divided into those who own the NFT and those who don’t (but who just follow the project). NFT owners are the first to receive announcements and aren’t allowed to sell those secrets. The alpha nearly guarantees a positive return of investment.<\/p>\n Blockchain is a digital database type secured by a digital infrastructure known as <\/span>distributed ledger technology<\/span><\/a> (DLT). Essentially, it\u2019s a way for digital information <\/span>to be stored and distributed, but not copied.\u00a0<\/span><\/span><\/p>\n In practice, this means:<\/span><\/p>\n Dive Deeper:<\/strong> Blockchain Explained: The Ultimate Peer-to-Peer Network<\/a><\/p>\n Blue-chip investments have proven to perform well in the long term regardless of market conditions. According to public opinion, blue-chip NFTs are stable and consistently appreciated over time. Examples of these include the Bored Apes Yacht Club<\/a>, Crypto Punks<\/a> or The Sandbox LAND<\/a>.<\/p>\n Blue-chip collections have three things in common:<\/p>\n NFT owners find more benefits in holding the asset than by selling it, either due to popularity, passive income or ownership perks.<\/p>\n Book My Free NFT Marketing Consultation<\/span><\/a><\/p>\u00a0<\/b><\/p>\n Consensus models are systems designed to guarantee reliability and trust. Traditionally, parties delegated consensus to neutral third parties (banks, escrow companies). Blockchains<\/a>, however, use <\/span>computer algorithms and <\/span>peer-to-peer networks to validate transactions.<\/span><\/p>\n Common consensus models:<\/span><\/p>\n To choose who validates a block, there is a random and a voting component. To get the most voting power in PoW, you have to have the highest computing power in the network. To get the most voting power in PoS, you have to “stake” (lock) the most tokens for the longest time possible. <\/span>And because it’s random, you get the highest chance (though never guaranteed) to win.<\/span><\/p>\n CROss-chain interoperability allows you to access all independent blockchains<\/a>. It’s the equivalent of “blockchain bridges,” except they work for any network. And without this feature, the metaverse<\/a> potential would be quite limited.<\/span><\/p>\n As an example, suppose your Web3 wallet has $100 on the ERC-20<\/a> chain. But you want to buy a $100 NFT<\/a> on a marketplace built only on the Binance Smart Chain (BSC). You cannot access your $100 balance on BSC, so instead, you need an app to bridge your $100 from ERC-20 to BSC.<\/span><\/p>\n CROss-chain networks (like Avalanche, AVAX) solve this problem. If you want to spend money on an AVAX dApp<\/a>, you can use the balance from Avalanche Mainnet, ERC-20 chain, BSC, or any other. Because of this advantage, cross-chain platforms have high demand among dApp developers.<\/span><\/p>\n Cryptocurrency<\/strong> is a digital money system backed by blockchain<\/a> technology. This separates it from traditional virtual currency, as there is no central authority regulating transactions. Instead, cryptocurrencies rely on computer algorithms and users to validate transactions.<\/span><\/p>\n Originally, cryptocurrencies like Bitcoin were synonymous with payment methods. Now that there are thousands of cryptos with different purposes, it has become a broad term to group all forms of blockchain-backed tokens.<\/span><\/p>\n Fiat currency<\/strong>, by contrast, is legal tender with value backed by government-issued currencies. USD, for example, is fiat currency, whether it comes in the form of coins, bills or numbers on a screen. <\/span>On trading platforms, “crypto-fiat” means you can exchange cryptocurrencies for fiat currencies like USD, EUR, GBP, etc.<\/span><\/p>\n When the value of a cryptocurrency is backed by government-issued currency, it gives place to <\/span>stablecoins<\/a> like Tether (USDT). Thus, 1 USDT always equals $1, with an error margin under 1%.<\/span><\/p>\n Decentralized Applications (dApps<\/strong>) are applications built and run on decentralized blockchains<\/a> that support smart contracts. Developers choose dApps because they offer better privacy, scalability, and cost-efficiency. While apps store data on the dev servers<\/a>, dApps store it on the blockchain.<\/span><\/p>\n Not to be confused with decentralized programs (smart contracts<\/strong>), <\/span>apps <\/span><\/em>are lines of code designed to interact with the user, while <\/span>programs <\/span><\/em>self-execute in the background. Thus, <\/span>smart contracts are programs coded by dApp developers to automatically execute agreements between buyers and sellers.<\/span><\/p>\n However, all smart contracts require Ethereum<\/a> tokens to run (also known as gas fees<\/a>).<\/span><\/p>\n Here is a <\/span>dApp marketplace<\/span><\/a> so you know what they look like. Aave, for example, is a financial service platform. Whether you want to borrow or lend crypto, each service executes with a smart contract after you pay the gas fee and confirm.<\/span><\/p>\n Degen (AKA degenerate, and can be a noun or a verb) is an investing style associated with high risk, speculation, and betting. Degens may buy NFTs<\/a> because they expect others to believe they will become more valuable. They’re not trading NFTs but, rather, opinions.<\/p>\n The term has negative connotations, as the trader relies on luck more than risk management. When Degens “ape in,” it means:<\/p>\n Degens don’t invest in blue-chip NFTs<\/a>, only in the (riskier) collections with the highest reward.<\/p>\n “Hands<\/strong>” refer to the way investors hold their NFTs.<\/p>\n Diamond hands<\/strong> (AKA HODling<\/strong>, which can be used more or less the way “holding” is used) means you don’t sell until you make a profit, even if it takes years.<\/p>\n Paper hands<\/strong> mean you’ll panic-sell if the collection depreciates too much.<\/p>\n While similar, flipping<\/a> and paper hands aren’t the same. Paper hands is a reaction to price decrease, while flipping is a short-term exit strategy. Flippers may hold the NFT<\/a> if it doesn’t reach the ideal price. When collections have lots of diamond-hand owners, you can expect the floor price to be high and stable.<\/p>\n Digital wallets<\/strong> are money storage systems backed by software providers (such as banks, payment processors, and trading platforms). You create a digital wallet by signing up with these providers with your personal information and password. You then use that information to access the wallet and manage your balance.<\/span><\/p>\n Crypto wallets<\/strong> are <\/span>cryptographic private keys<\/span> (often provided as a seed phrase of 12 words). Depending on who keeps the key, there can be:<\/span><\/p>\n Like digital wallets, <\/span>crypto wallets rely on payment software, except that this software is backed by a blockchain<\/a> (like Bitcoin). The way you create this wallet depends on the type, and they all require a username and password to access.<\/span><\/p>\n Both types can store crypto either online or offline. These are known as<\/span> hot wallets<\/b> (more convenient) and<\/span> cold wallets<\/b> (more secure).<\/span><\/p>\n Ethereum<\/strong> is the open-source blockchain that first introduced smart contracts and dApps<\/a>, hence why so many developers still build on it. Even though newer blockchains are cheaper and faster, <\/span>there are over 3,000 dApps on Ethereum.<\/p>\n As for tokenomics<\/a>, Ethereum is a cryptocurrency backed, originally, by the proof-of-work consensus algorithm. Since the 2.0 update, ETH uses the proof-of-stake algorithm, which has improved its security and speed.<\/span><\/p>\n ERC-20<\/strong> tokens are smart contracts created for simplicity and interoperability. This means developers can use smart contracts from other apps, which makes development easier. <\/span>For traders, interoperability means you can trade ERC-20 tokens from Ethereum dApps. For example:<\/span><\/p>\n Check this source<\/span><\/a> to see the types of ETH tokens. Ethereum NFTs, for example, are ERC-721 tokens.<\/span><\/p>\n Similar to day trading, flipping involves buying assets cheap and selling them for a higher price weeks (or sometimes hours) later. Flippers disregard long-term price potential. If they expect a pump-and-dump<\/a>, they’ll buy it.<\/p>\n Flippers reinvest in more expensive NFTs<\/a> to increase profits. Or if the risk is too high, they can split among smaller collections. Either way, it’s misleading trading activity and makes the collection appear more valuable.<\/p>\n The lowest NFT price in the collection, excluding bid offers, is the floor price. When someone buys the lowest NFT<\/a>, it becomes unavailable until the new owner relists it at a new price. Then the floor price will update to the next cheapest asset.<\/p>\n Since flippers<\/a> buy at floor prices, you have the best chance of selling when you sell at that price or below. You can price infinitely higher and still sell the NFT, but unless it’s very rare, people will want the lower ones first.<\/p>\n Dive Deeper:<\/strong> How to Promote Your NFTs the Right Way<\/a><\/p>\n Gas fees are equivalent to “smart contract activation fees.” They power the programs that make dApps<\/a> work.<\/span><\/p>\n\n
Alpha<\/strong><\/h3>\n
Blockchain<\/strong><\/h3>\n
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Blue-chip NFTs<\/strong><\/h3>\n
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Consensus Models<\/strong><\/h3>\n
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CROss-Chain Interoperability<\/strong><\/h3>\n
Cryptocurrency and Fiat Currency<\/strong><\/h3>\n
Decentralized Application (dApp) and Smart Contracts<\/strong><\/h3>\n
Degen<\/strong><\/h3>\n
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Diamond (or Paper) Hands<\/strong><\/h3>\n
Digital Wallet and Crypto Wallet<\/strong><\/h3>\n
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Ethereum and ERC-20<\/strong><\/h3>\n
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Flipping (or Flippening)<\/strong><\/h3>\n
Floor Price<\/strong><\/h3>\n
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Gas Fees<\/strong><\/h3>\n