Web3 glossary: must know concepts to be the smartest in the room
If you’ve ever been confused by some of the terminology in the web3 space, then you’re definitely not alone. From NFTs to Airdropping and Burning, many of the terms can feel inaccessible and confusing. It’s perhaps no surprise that some people are put off when articles read like a foreign language! But it doesn’t need to be that way.
Here’s our ultimate glossary of frequently used terms - designed to make sense of the jargon. Explained so your grandma can understand them! And we want you to add to it, too. Tell us the terms that have caught you out - or the ones you can simplify really well. We’re all ears!
Understanding NFTs isn’t as tricky as people would have you believe. Simply put, NFTs are non-fungible tokens, data stored on a blockchain, that can be sold and traded. Some tokens give you stuff (freebies, tickets to events etc), some are pieces of art, some are collectibles - there are loads of use cases for NFT tech.
Confused by the fungible bit? Non-fungible basically means that it is a unique digital item which you can’t exchange, replace for another or divide into smaller denominations.
Chances are you’re familiar with many great NFT creators already - but if you need any more inspiration, we’d recommend you check out Bored Ape Yacht Club, or BAYC, which features a variety of different NFT artworks but is best known for its collection of 10,000 animated ape avatars. Another collection you should definitely know about is Last Raptor - a 1923 generative artwork with hundreds one of a kind hand-drawn collectibles. Each NFT Art is iconic with its own color palettes, compositions, and features, and is making millions in sales on the secondary market.
Blockchain is the very first thing you’ll need to understand if you want to be an NFT creator. And the good news is that it’s exactly what it says on the tin - a chain of blocks.
Blocks contain digital information - picture them as packets of data, neatly tied up like a digital Christmas present - and allows companies to trade digital or real world goods. And the good bit is that all the blocks are tied together, (in a chain!) so you can’t edit one without changing the whole chain - meaning it’s impossible to hack, defraud or any other horrible stuff which can make people nervous about trading online.
In our world, NFTs are stored on a blockchain, and so can be sold and traded - securely.
3. Mint / Minting
This is where it all gets real. Minting is a process by which an NFT becomes part of the blockchain. Once an asset is put on the blockchain, it is “minted” as a token and can’t be altered. Think of it like launching your collection - once your NFTs are on the blockchain they can be bought (and sold), and you can start engaging your community.
For inspiration, check out Supreme Skulls - a collection of 6,666 high-quality walking 3D characters - which is minting this month. The cool artwork comes with short-term plans for merchandise, a new drop of free NFT characters for holders, and exclusive access to other project launches and networking with top figures in the space. Great stuff!
4. Burn / Burning
Another simple one, you’ll be pleased to hear. Burning refers to the complete destruction of an NFT - to get rid of it permanently. You can “burn” an NFT by sending it to the NFT contract address so that it’ll be destroyed and no longer be transferrable. Let’s hope there’s not too much of this needed in your own collection!
Airdropping is a token distribution method used to send cryptocurrency or tokens to holders’ wallets. It’s a great tool for existing creators who want to boost loyalty by sending holders new stuff to keep them engaged and sticky.
A good example of a valuable NFT airdrop is the Bored Ape Mutant Serum. Holders of Bored Ape Yacht Club NFTs were airdropped variations of what's known as the Mutant Serum NFT. Although these Mutant Serums were airdropped for free to holders, it didn’t take long for them to begin selling for thousands of dollars on secondary NFT marketplaces. In fact, one Mega Mutant Serum sold for more than three million dollars. That’s huge.
Whitelisting is all about making people part of an exclusive club - where they can get stuff before the crowd. Add people to your whitelist and they’ll get early access to your NFT collection before it drops to the general public.
ERC-721 is a standard for NFTs. In other words, it tells you that the type of token you’ve created (or bought) is unique and can have different value than another token from the same Smart Contract - maybe due to its age, rarity or the way it looks. Important stuff.
Or money, money, money! Ethereum first appeared in 2015, and it’s currently the second biggest cryptocurrency in the world. If you want to be totally accurate, Ethereum is the name of the network and Ether is the actual cryptocurrency - but the terms are fairly interchangeable in day-to-day speak.
9. Floor price
If you’ve been to an auction house, you’ll know this term. Simply put, the floor price is the lowest price in any given category of NFTs. To “buy the floor” is to buy the cheapest NFT in a project or collection.
10. Fractional ownership
Just like shared ownership schemes in real estate, fractional ownership is where you buy part of an NFT - more common when it comes to really expensive pieces. Sellers can sell percentages of a work and buyers can buy what they can afford - a good way to democratize the industry and get more people involved. Cryptopunks is a great example of this done well - its approach allows smaller buyers gain exposure to CryptoPunks and potentially profit if the punk sells above the reserve price.
There are several platforms which enable the fractionalisation of NFTs. These include Niftex, which was one of the first NFT projects to allow users to launch fractionalized NFTs, as well as DAOfi or Fractional.
11. Gas fees
Like a credit card fee, Gas Fees are a sum you pay to make a transaction on the blockchain. They’re largely specific to Ethereum, and the good news is that they ensure that transactions will be genuine - discouraging bad actors from spamming the network with a high volume of transactions.
Metadata is simply data about data. It means it is a description and context of the data - and importantly, it defines ownership and differentiates one NFT from another.
A good example of this in practice is CryptoKitties - a collection of more than 80,000 unique digital cats, all with different ‘cattributes’, that holders buy, sell, swap and even breed. For each kitty, the NFT’s metadata will tell holders exactly what they’re getting - from what it is, to its rarity value, to when it was created and by who.
MetaMask is a cryptocurrency wallet available as a browser extension for Chrome, Firefox, Opera and Brave. Thе wallet is a connection between your browser and the Ethereum blockchain.
This is the first and largest NFT marketplace by some way - and where most business in the industry is done. More than 80 million NFTs are currently on OpenSea - that’s huge.
Just like in the music business, money earned by an NFT creator through the token’s resale on the secondary market. Some NFTs automatically pay royalties each time an NFT is sold. What’s more, an NFT can be hardcoded to pay an artist royalties forever.
Royalties in the NFT world usually range from 2% to 10% - and every time an NFT changes hands, the creators gets this royalty - so it’s no wonder that many creators are betting big on secondary sales, believing that this is where the big money can be made.
16. Smart contracts
Each NFT has a smart contract. They are self-executing contracts directly written into lines of code, and each smart contract contains the terms of the agreement between buyer and seller so there's no surprise. The programming language used to create smart contracts is called Solidity.
A utility is giving real-world value to an NFT collection - essentially making it ‘useful’ - and more than ‘just’ a piece of art. For example, NFTs can double up as event tickets, or be redeemed against physical or digital goodies.
One good example is the Tarantino NFT collection — where holders don’t just get a fantastic piece of Tarantino-eque art, but also gain access to bonus content, including original, handwritten script pages, new commentary, and details about uncut scenes of the movie Pulp Fiction.
Legendary music festival Coachella is another brand showing the market how utility NFTs can be done. This year, as well as selling physical tickets, Coachella also offered some NFT tickets. And proving yet again that an NFT can be ‘more than just a jpeg,’ Coachella’s Sights and Sounds Collection featured ten photos from the Coachella polo fields which could be redeemed for a physical print to take home. Great stuff!
We think that utilities are a great way to keep holders sticky and engaged for the long-haul - and attract new potential holders.