

Discover all the definitions of the NFT world, these are the definitions you need to know within this technological segment.
Currently, token and cryptocurrency are used as synonyms, but there are differences that we will highlight below.
A token represents a utility or a digital asset that can have very diverse purposes: it can be used as a means of payment, to participate in an online game, carry out a decentralized finance (DeFi) operation, register a smart contract and/or agreement between parties, give access to specific services on a platform or activate a reward in a loyalty program, among many other possibilities.
A cryptocurrency, on the other hand, is a token whose main purpose is to be used as a decentralized means of payment for products and services in the virtual environment, as well as as a store of value and savings.
For example, an NFT is a non-fungible token, it is clearly not a cryptocurrency but has other types of characteristics.
Each blockchain has its native token that functions as a cryptocurrency, for example ETH is the Ethereum token, MATIC is the Polygon token, BTC is the Bitcoin token and DAI is the MakerDAO token.
The best known definition says that fungible assets are objects that can be exchanged, having a value based on their number, size or weight.
That is, if for example you have a gold coin that weighs 5 grams, you can exchange it for 5 gold coins that weigh 1 gram each, and you would be exchanging assets but would keep the value.
Non-fungible assets are items that cannot be exchanged each other, since their value is totally different.
That is, if, for example, you have a work by Salvador Dalí, you cannot exchange it for a work by Vicent Van Gogh, since each work has a different value.
A blockchain is a chain of digital blocks that are built through the process of data mining. These digital blocks are characterized by keeping a secure, decentralized, synchronized and distributed registry through computers located all over the world.
The purpose of a blockchain is to record different types of transactions, for example a purchase/sale transaction, a cryptocurrency transfer and/or the registration of a digital asset. A blockchain can be compared to a gigantic ledger where all records are linked and encrypted to protect the security and privacy of transactions.
Being decentralized, copies of these blocks are being stored in hundreds of computers, these copies are useful to validate operations, therefore, to take an operation as valid, the digital blocks associated with the operation have to coincide with their copies scattered in the involved computers, unlike a centralized system where operations are stored on a central server exposing it to certain vulnerabilities such as hacking, etc. On the other hand, in a decentralized system, to adulterate an operation, it is necessary to violate hundreds of computers where each of its copies are stored. This characteristic makes the blockchain a secure and invulnerable system.
Being synchronized guarantees that the copies of the digital blocks associated with operations are updated almost simultaneously in all the computers involved. Depending on the congestion of the blockchain, this synchronization can take from a few seconds to minutes and hours, but in general it usually takes less than 5 minutes. As long as the synchronization of the operation is not completed, it will not be taken as carried out and/or valid.
In the crypto ecosystem there are several blockchains, each one of them works completely independently, that is, none is linked to another, except those blockchains that work as the second layer of a main blockchain, this is the case of the Polygon blockchain that We'll see later.
Although we have already delved into the definition of NFT in our article All about NFT: The definitive guide, here we will give a light definition.
An NFT is a non-fungible asset, hence its acronym “Non Fungible Token”. An NFT is a digital asset that cannot be exchanged for another NFT, as each NFT is unique. This is the main reason why the art world has gotten fully involved in this technology and that is why people know it as digital art.
Since you cannot exchange an NFT for another NFT, you will need to resort to the cryptocurrencies that you will use to sell your NFT and then with those cryptocurrencies you can buy another NFT, the difference in value between one and the other will be the cryptocurrencies that you have in your balance. Yes, you have deduced it well! A cryptocurrency is a fungible asset!
An idea or vision for a new iteration of the web, based on a decentralized online ecosystem powered by blockchain technology.
Government-issued currencies such as the US dollar, the euro, and the British pound. These are not linked to the value of a particular product.
Stablecoins are tokens issued on the blockchain whose value is linked to an external asset, such as national currencies or precious minerals, generally linked to FIAT money. These are assets that function as digital representations of the dollar, the euro and even gold. That is, these are collateralized products that can be bought or sold within the cryptocurrency market.
In general, stablecoins are used as a "bridge" between FIAT money and the acquisition of a token in the crypto ecosystem, this token can be a cryptocurrency or an NFT for example. The most common practice to enter the crypto world is to exchange FIAT money for stablecoins and then exchange that stock of stablecoins with the different digital assets of your choice.
An Exchange is a virtual cryptocurrency exchange house. It fulfills several functions, but the main one is to exchange FIAT money for stable cryptocurrencies with parity 1 to 1 on the dollar and vice versa. Due to this, they have a centralized wallet to store these cryptocurrencies, so the exchange has control of our funds, similar to what happens with a Bank.
An Exchange also has a complete platform for trading in the cryptocurrency markets provided with various tools that allow statistics and monitoring of investments in cryptocurrency.
A wallet is an application that allows us to store cryptocurrencies and NFTs registered in a blockchain. There are centralized and self-custody wallets.
A centralized wallet resides in an Exchange that is responsible for the custody of our funds.
Instead, a self-custody wallet allows us to have control over our funds without depending on the regulations or guidelines of a third party. In general, it is recommended to store our cryptocurrencies and NFTs in a self-custodial wallet, since it is decentralized and we are not exposed to what an Exchange may determine. This implies a responsibility for us since we must correctly manage the use of keys and the seed phrase that our application provides us and by which we will have control of our funds. If this seed phrase falls into the wrong hands our funds will be at risk. But we will go deeper into this in the article “The definitive guide to the Metamask wallet to store your NFTs and cryptocurrencies”
You will also find the terms “Cold Wallet” and “Hot Wallet”.
Cold wallets, as their name indicates, are cold-stored cryptocurrency wallets, which means that they are completely disconnected from the network. They are similar to a physical usb pen drive where your cryptocurrencies and NFTs are stored inside, you need to connect it to the PC so that it connects to the network and be able to carry out operations with them.
On the other hand, hot wallets are applications that are installed on your device and/or PC. These are cryptocurrency wallets that are always connected to the network in case you have an internet connection.
A marketplace is a platform that fulfills two roles in the world of NFTs, we will describe them below:
Mint your own NFT: NFT creators can mint their NFT on this platform by entering all the features and attaching their associated image, audio or video file. Then the marketplace will be in charge of creating the smart contract within the digital block chain that will identify that work as a unique and unrepeatable asset within the blockchain.
Trading with NFTs: basically a marketplace works like a supermarket of NFTs where they can be bought and sold using a cryptocurrency as a means of payment. It provides search tools and even acts as a mediator to help identify if an NFT is authentic or could be a copy or imitation of a genuine NFT, that is, according to the records of the smart contract, it corresponds to its original author. If your intention is to invest in an NFT, you will need to choose a marketplace to carry out the operation.
The most popular marketplace by excellence is OpenSea, but there are also other marketplaces such as Rarible, SuperRare and Enjin. Among the most exclusive marketplaces for well-known artists in the art world are Foundation and Nifty Gateway.
A collection of NFTs is a group of NFTs that refer to the same theme. We can compare it with an album of figurines, where each figurine refers to a graphic moment of the theme represented by mentioned album. In general, NFT collections are usually 500, 1,000, 5,000 or 10,000 individual assets registered in the blockchain, but we can find collections of lesser amounts or even 1 NFT.
Around many collections, communities are generated on Twitter, Discord and other social networks where users and collectors usually comment on the NFTs of the collection, exchange them and/or buy and resell them.
NFT collections usually have different rarities between their list of assets or tokens. These rarities generally deviate from the standard of most of the NFTs minted in the set. For example, on a collection of 1,000 NFTs we can find a distribution between the following categories:
Where Rare, Legendary, and Mystic are considered rarities within the collection, therefore will have a higher value due to low supply.
These are digital works of art generated by a computer program from digital art created by a human artist. In general, the artist generates a batch of pieces of digital art following a series of parameters.
For example, if the artist wants to draw a face with a landscape behind it, he will manually create variants of that face, variants of outfits, variants of landscapes, etc. that follow the parameters of the x/y axes on the digital canvas. He then runs a computer program that will take all that information and generate all the possible combinations, getting hundreds of images from a very small manually created batch.
Examples of generative art are the NFT collections of “Bored Ape Yacht Club”, “Cool Cats” and “Pudgy Penguins” among others.
It is called pre-sale of NFTs when assets from a future NFT collection are offered at a promotional price before being minted with their smart contracts in a marketplace. In general, electronic commerce platforms are used to carry out this operation and are paid by credit card, debit card or other means of payment using fidiusiary money.
When you participate in a pre-sale process, you generally do not know what NFTs will be assigned to you, only when the artist mints them in the marketplace will they have the commitment to transfer them to you. The artist will use their own discretion to determine which NFT to assign to you. But how can I buy an NFT without knowing it? The pre-sale has a presentation of the collection that will give you several indications of the format of NFTs that are being offered. It is also accompanied by a roadmap that will be essential before making the decision on whether or not you want to participate in the project.
The RoadMap is an action plan linked to a collection of NFTs. Its main purpose is to add more value to the collection, seeking to create and increase a community behind the project. It is also useful for interested parties to evaluate buying these NFTs in a pre-sale process.
RoadMap example:
Each step of the example generates an added value to the collection because it grows a community around the project, a good collection of NFTs to invest should have a very clear and realistic RoadMap, but there are also RoadMaps that do not fit, in that case it is not recommend getting into that project.
Tokenomics is a main point that every NFT collection should have in order to promote the growth of the community around it. Although there are many collections without this feature, it adds vital value to the project. As its name indicates, tokenomics consists of establishing a list of NFT tokens in terms of their distribution, which must be informed before releasing the collection to the public.
The distribution of the tokens (NFTs) is usually established in percentages of the total NFTs in the collection and is divided into two distributions.
The first distribution refers to how those will be sold, how those will be minted, etc. For example, 5% is kept by the development team, 10% will go to marketing, 25% to a first pre-sale, 10% to a second pre-sale and the remaining 50% will be launched for sale on the OpenSea marketplace.
The second distribution refers to the destination of the funds collected by the project, as sales are made. For example, 10% will go to an investment pool, 30% will go to the team, 5% will go to charity, etc. That is, how the profits will be distributed in order to make the project bigger.
In short, the distribution of tokens in the process of creation, marketing and sales, and subsequently the distribution of profits, must be clearly defined from the outset. Publishing this information is attractive to the community. Of course, over time, while the project is being implemented, the distribution may change, but it is important to start from something.
The term whitepaper is not exclusive to NFTs or the crypto world, since it is usually used to describe the characteristics of a specific project, being exactly the opposite of what its name indicates: "blank paper".
An NFT collection that has a very clear and well-written whitepaper undoubtedly adds fundamental value to the collection. The whitepaper is a document where all the points of the NFT collection have to be explained. From how the project is financed, what are the marketing strategies, the work team, the roadmap, the tokenomics, all the project information.
The whitepaper is of paramount importance since it has the mission of defining the project whose main purpose is to attract potential investors.
Basically, the fundamental elements that should be in every whitepaper for NFT are:
An NFT airdrop is a process by which the creators of an NFT collection give away various NFT assets to a community that decides to follow them on their social networks. In this way, an attempt is made to achieve a certain critical mass of users for the initial phase of the project. Or put another way, the more people know and talk about the project, the better. The purpose is to significantly increase the value of NFT assets by generating interest and demand.
The editions are the number of copies of the same NFT unit that we will mint to put up for sale. It is important not to confuse unit with edition. The unit is a piece such as a work by Salvador Dalí, that is a unit, but if I determine that I want to sell that work to 10 different people, then I must mint 10 editions of that unit.
Basically it is a person or entity that buys NFTs in general linked to digital art in order to save them or sell them in the future hoping that their value will appreciate in order to obtain a profit. We are all within reach of being collectors of NFTs.
Minting an NFT draws a parallel in minting a physical coin. The action of mining creates a record in the blockchain that identifies the digital asset as unique and unrepeatable. Before putting an NFT up for sale it is necessary to mint it.
To mint an NFT you can use one of the many platforms out there like Opensea, Mintable, SuperRare or Rarible.
Holding an NFT is keeping it for a long time under your ownership within your wallet, at least 1 or 2 years, waiting for its value to appreciate in order to obtain a significant profit.
The floor price refers to the base price or minimum price of an asset. In the case of NFTs, it refers to the lowest price of a specific NFT in a collection. For example, the floor price is indicated in the header of each NFT collection in the OpenSea marketplace, and is usually used as a metric or KPI to measure the success of that collection.
For example, if you enter the “Bored Ape Yatch Club” collection or a similar collection, you will be able to see which is the NFT that is selling the lowest of the entire collection where the Floor Price is highlighted.
We have written an article that delves into this topic Meaning of metaverse. Metaverse means. How metaverse works, but in short, it is a virtual world where each component of that world is represented in a specific NFT obviously registered in the blockchain as unique and unrepeatable.
Each metaverse is a different virtual world with its own rules and characteristics. In general, the creators of a metaverse are companies or groups of developers. The most popular metaverses are “Descentraland” and “Sandbox”.
To connect with the metaverse we need a series of devices that will make us think that we are really inside it. It would be like teleporting to a new world through virtual reality glasses and other accessories that will allow us to interact with it. It will seek to create a kind of alternative reality in which we can do the same thing we do today outside the home but without moving from our room.
At the beginning we mentioned that each component of this virtual world is represented in an NFT. For example, imagine that in the metaverse you buy a hat or a pair of sneakers, these elements are represented in an NFT, just like in NFT games you can buy characters that you can then sell in a marketplace.
Just as there is the NFT-based metaverse, there are also blockchain-based video games. These games contain items to interact with within them, each of these items are represented in NFTs. Blockchain gaming allows gamers to verify that their items are unique through NFTs.
The most popular case is the video game “Axie Infinity”, we have already written something about this in the article Which are the best NFTs to invest in?, but basically it is a game based on the blockchain and NFT.
With time and money, each player participates in constructing the virtual world and obtains economic benefits from this. The main asset is an "Axie" that allows the player to interact in this virtual world. You must purchase this "Axie", but due to the high prices of these NFTs, communities have arisen that rent these NFTs so that other players can generate money with them for a certain time and thus, be able to cover the rental cost and obtain a profit while playing. These NFTs are also often lent to those who want to play with them to generate money for a commission of the money generated.
To understand a smart contract, let's first remember what a contract means. A contract is simply an agreement between two or more parties.
In a contract you put some conditions that another person accepts. For example, a rental contract, you pay an amount of money in exchange for living in an apartment for a certain time. In a contract you put some rules of the game that allow all the parties that accept it to understand what it will consist of.
Until today there were only written or verbal contracts, which were subject to the laws of a territory. All these contracts have to be signed by a notary assuming losses of time and money.
We could say that smart contracts solve all these issues. A smart contract is capable of fulfilling itself, just as you read it! The requirements of the operation are executed and met without the mediation and/or intervention of a notary, avoiding all the problems of traditional paperwork.
How is this achieved? Thanks to the registration in the blockchain and the scripts that write on it, the scripts are computer codes written with programming languages. This means that the terms of the contract are 100% lines of code replicated on computers around the world thanks to the blockchain, so it is impossible to adulterate and/or modify.
To mint / create an NFT, it is necessary to create a Smart Contract, that is, each NFT is associated with a smart contract. All marketplaces such as OpenSea automatically generate a smart contract in the blockchain every time an NFT is minted, although you have the option of creating the smart contract with your own script in case you want to give it some kind of customization. Then the marketplace allows you to import that smart contract to recognize your NFT and put it up for sale.
FOMO comes from “Fear of Missing Out” which means fear of missing something. In the NFT sector it happens to many people, they see that you can generate a lot of money in a short time and for fear of missing out they buy NFT without doing their own research. Normally when this happens you usually lose all the money you have invested, so that you have to have a very cool head, there is always time to generate money. We have written an article to help you make the decision to invest in an NFT Which are the best NFTs to invest in?
Flippinmg in NFT means buying and selling it quickly in order to make a profit. To flip on NFT we need to find a seller to buy it and then find a buyer to sell it. It is not something simple like the cryptocurrency market and/or stock market where you can do this trade without relying on finding buyers and sellers.
This practice can be similar to that of holding an NFT, the difference is that in the case of HOLD we need to allow a long time to pass, sometimes years, while FLIPPING should be in a shorter period of time, from one day to weeks or at most a few months.
A bot is a program or script that is designed to perform a particular task automatically. Common uses of bots include social media commenting, signing up as followers, executing trades, verifying identity, identifying cheap NFTs after listing, etc.
Shilling consists of promoting an NFT project, usually a collection, and encouraging others to invest in those NFTs as a marketing strategy. These actions are carried out by who call themselves shillers. Many times the strategies used are on the edge of the anti-ethical, for example, they resort to the use of bots to add fictitious followers to a community that with a brief investigation said maneuver can be discovered.>
Royalties are the money earned by an NFT creator through reselling the token. For example, in the most popular marketplace OpenSea, and in almost all marketplaces, this value can be configured in percentage format. For life, each time an NFT is sold from one owner to another, the configured percentage of cryptocurrencies resulting from the total amount of the operation will be credited to the creator's wallet.
We speak of a "bull market" when we see an upward trend in the price of assets. This generally occurs in a favorable economic environment, that is, when employment and activity are high and the economy in general is strong.
We speak of a "bear market" when we see a downward trend in the price of assets. Not only are prices falling, but expectations are also negative. There is no common agreement on this trend, but it is generally accepted that a market is down when its price falls by 20% or more in a period of at least two months. The main reasons for encountering this trend can be: an economic crisis or the collapse of a financial bubble. Unlike during the bull market, investors show mistrust and uncertainty.
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