Published
Sep 24, 2021

A Non-Exhaustive NFT Lexicon

As innovation in cryptocurrency and blockchain continues to occur at a breakneck speed, so too does the coining of new jargon used by those at the bleeding-edge of the ecosystem. Below are 26 summaries of key technologies and popular projects that will help get you up to speed on the ever-expanding world of NFTs.

NFT

Shorthand for non-fungible tokens, a medium of asset ownership which has flourished into one of the killer applications of the blockchain. The principle of fungibility refers to assets which are one-to-one interchangeable; since NFTs are by definition non-fungible, each NFT is unique and theoretically commands its own value. NFTs confer ownership rights over physical or digital assets onto their holders, and their existence on an open blockchain means they are protected from counterfeiting. The ownership layer enabled by NFTs has made them central to the development of the Metaverse.

Blockchain

In its most popular conception, the blockchain is a decentralized, immutable, and permissionless ledger which records transactions and tracks the provenance of assets, essentially providing a trail of breadcrumbs to audit an asset’s movements. The integrity of data stored on the blockchain is secured by a network of miners who compete to solve cryptographic puzzles in exchange for cryptocurrency rewards. These puzzles entail the use of hash functions – one-way mathematical operations that consume arbitrary-length inputs and produce fixed-length outputs – to yield a hash which meets some pre-specified criteria for correctness. Other variations of this model for securing the network, known as the consensus protocol, are being developed to allow for less energy-intensive block mining.

Smart contract 

A medium through which business logic can be encoded into self-executing blockchain-based programs. Upon some arbitrary condition(s) being realized as defined in the code, the smart contract will automatically execute to perform tasks on behalf of its author. For instance, a smart contract could be written to hold funds in escrow and release them to the appropriate party only when they have provably satisfied their end of an agreement (e.g., delivery of an asset).


Ethereum

An open-source, programmable blockchain which underlies the second largest cryptocurrency by market capitalization, ether (ETH), and powers much of the innovation in the NFT and decentralized finance (DeFi) ecosystems. Created in 2014 by University of Waterloo dropout Vitalik Buterin, Ethereum introduced a smart contract platform and a Turing-complete programming language which served as logical extensions to the limited programmability of the Bitcoin blockchain. The evolution to Ethereum 2.0 is ongoing and will introduce a less energy-intensive consensus protocol to increase transaction throughput and make the blockchain more viable as a payment network.

ERC & EIP

Shorthand for Ethereum Request for Comment and Ethereum Improvement Proposal, respectively. ERC refers to a set of technical standards leveraged by smart contract developers to ensure their projects, once deployed to the Ethereum blockchain, behave as expected. On the other hand, EIPs are crowdsourced suggestions and ideas for the improvement of the Ethereum platform, and can pertain to features of the blockchain ranging from its consensus protocol to its networking layer. The process to formalize an ERC into a community-wide standard also involves the submission of an EIP.

ERC-721

A smart contract standard developed for the Ethereum platform and intended to provide the scaffolding for users to build and mint new NFTs. In conforming to such a standard, developers can rest assured their NFTs will behave as expected and interface with the blockchain correctly. An increasingly popular extension to this standard is ERC-1155, which enables the ownership and transfer of semi-fungible assets in lots rather than being limited to non-fungible assets in single quantities. Neither of these frameworks should be confused with ERC-20, which is among the earliest technical standards on the Ethereum blockchain and is meant for the creation of fungible – that is, non-unique and interchangeable – tokens as opposed to NFTs.

Composables

An innovative extension to the aforementioned bedrock NFT standards. The concept of composables was originally proposed in ERC-998 and allows for NFTs to claim ownership of other digital assets. Thus, when one NFT which itself has ownership of another NFT is sold, both NFTs are effectively transferred to the buyer.

Metaverse

Viewed by many as a sort of spiritual successor to the Internet, the Metaverse is regarded as being the foundation for a future virtual environment that will rival the real-world Universe. It will feature persistent identity and ownership of assets, synchronous and real-time experiences, overarching interoperability between disparate virtual spaces, and unparalleled ability to support concurrent users. In a nutshell, the Metaverse will offer everything the Universe does without all of the pesky constraints posed by human physiology and real-world physics. If interested, you can learn a great deal more about the NFT-Enabled Metaverse here.

Metadata

A set of attributes that is specific to each NFT and is queried by platforms to distinguish one particular digital asset from another. For instance, in the case of CryptoKitties, each NFT-based cat has attributes to specify its name, appearance, and description, among other uniquely identifying characteristics.

On-chain vs. off-chain

Developers can choose to either store an NFT’s metadata within the originating smart contract (on-chain) or in a database detached from the blockchain (off-chain). Generally, on-chain storage is reserved for NFTs whose metadata is intended to endure for a long time or must be readily accessible by the smart contract. In contrast, off-chain storage can be used where instant access is not a requirement of the project and the developer wishes to avoid the storage limitations of the blockchain.

IPFS

Shorthand for InterPlanetary File System, which represents a decentralized file storage system that is an alternative to storing metadata on-chain. A growing segment of Ethereum developers has come to favour IPFS for storage because it can allow for less cost- and time-intensive data querying as compared to what might be achievable when metadata is stored directly on the blockchain. Popular alternatives to the peer-to-peer file sharing capabilities of IPFS include Swarm.

DApp

Shorthand for decentralized applications, which are largely comparable to traditional web-based applications but are built atop a blockchain infrastructure. At a high-level, they are constructed using smart contracts deployed to the blockchain as well as a front-end for enhanced user experience. The functionality of many DApps hinges on the usage of NFTs, which can serve an array of different functions.

ENS

Shorthand for Ethereum Name Service, which is a lookup system similar to the Internet’s Domain Name Service (DNS). Both ENS and DNS serve a similar role, providing the ability to link any given website or DApp to a specific name. DNS was crucial to early adoption of the Internet as it allowed users to access websites by typing in a human-readable name as opposed to a long string of digits representing an IP address; the ENS will prove equally important to the attraction and onboarding of new blockchain users.

DAO

Shorthand for decentralized autonomous organization, which describes a novel framework for corporate structure that relies on a series of smart contracts to dictate the investing and operational decisions of the DAO. With all of their financial transactions being readily viewable on the blockchain, such organizations provide transparency that is unrivaled by traditional corporations. A number of DAOs have been formed with the express purpose of actively investing in NFTs (e.g., FlamingoDAO).

DEX

Shorthand for decentralized exchanges, which are analogous to their more recognizable centralized counterparts in the crypto-economy (think Coinbase, Binance, Kraken, etc.) save for the fact that they are built on a peer-to-peer model without need for a central party to oversee operations or custody assets. NFT commerce occurs primarily on such self-sovereign DEXs.

MakerDAO

Among the trailblazing applications of decentralized finance, this project is composed of a DAO and a cryptocurrency known as Dai. The direction of the DAO itself is dictated by a network of users holding governance tokens, blockchain-based assets which empower its holders to vote on the DAO’s operational decisions. Further, Dai falls under a special-purpose subset of cryptocurrencies known as stablecoins and has its value pegged to the US Dollar. The overarching purpose of the MakerDAO project is to provide Dai loans to users in exchange for collateral in the form of other cryptocurrencies; in essence, it facilitates the exchange of volatility for stability.

CryptoKitties

An Ethereum-based game where users breed virtual cats to generate unique hybrids, all of which are represented by NFTs. While there has been debate as to whether CryptoKitties constitutes a true game or a mere set of collectibles, there is little question that its viral success helped catapult NFTs to the mainstream and paved the way for future, more sophisticated gamification using digital assets.

CryptoPunks

The pioneering attempt at developing a set of NFT collectibles, which consists of 10,000 unique 8-bit rendered characters. Given their scarcity and popularity amongst the earliest adopters of NFTs and the Ethereum blockchain at large, CryptoPunks have been described as potentially the first digital-native antiques.

Hashmasks

A digital art project built through a collaboration of over 70 artists and introduced by Switzerland-based Suum Cuique Labs. Comprised of 16,000 abstractionist pieces, each Hashmask has a fixed-rate emission of Name Change Tokens (NCTs) which enable the holder of the artwork to confer upon it a unique name.

Play-to-earn

A novel gaming business model being popularized by blockchain-based video game Axie Infinity. Games following this model reward users for their playing time and contributions to the ecosystem by gifting them tokens as they achieve different milestones. These tokens may have utility within the game, but also boast an active market which allows players to liquidate their holdings in exchange for fiat currency. Thus, players stand to realize real-world gains for their in-game achievements.

Beeple

A US-based digital artist formally known as Mike Winkelmann. He came to prominence in the NFT and blockchain spheres after selling a collection of 5,000 original pieces of artwork in the form of an NFT for over USD$69M on March 12, 2021.

NFT Marketplaces

Platforms that are akin to cryptocurrency exchanges, allowing users to buy, sell, and mint (i.e., create and issue) NFTs. Popular marketplaces include OpenSea, Rarible, and Nifty Gateway, among others.

ECOMI

A Singapore-based company best known for its development of the VeVe marketplace, which serves as a forum for the exchange and exhibition of premium licensed digital collectibles. The company also develops a hardware wallet for the safeguarding of NFTs and issues OMI tokens to power commerce on their platform.

Loot boxes

A concept borrowed from the world of video games, loot boxes are virtual goods containing a randomized assortment of other virtual goods. The practice of selling loot boxes in video games has gained immense traction as developers have come to understand the potential upside to monetizing in-game assets and realizing a more recurring stream of revenues. NFT loot boxes have been marketed as a corollary to those sold in video games, offering a wide range of digital assets from popular projects as well as NFTs developed in-house by the loot box curators.

Coloured coins 

A precursor to the concept of NFTs implemented on the Bitcoin blockchain. Given its blockchain was not designed to be fully programmable, bitcoin usage was inherently limited to monetary exchange and speculative investment. However, by “colouring” their bitcoins, users could ascribe specific attributes to each one and thus allow them to represent other non-monetary assets. This approach became redundant with the introduction of programmable blockchains such as Ethereum.

Flow

A programmable blockchain built with the specific mission of empowering developers to create more ambitious games and NFTs. Introduced by Dapper Labs – the same group behind CryptoKitties – Flow is meant to address the scaling challenges plaguing Ethereum which make the development of large-scale blockchain-based games simply impracticable.

References

Bradbury, D. (2013, June 14). Colored Coins Paint Sophisticated Picture for Bitcoin. Retrieved from CoinDesk.

Finzer, D. (2020, January 10). The Non-Fungible Token Bible: Everything You Need to Know About NFTs. Retrieved from OpenSea.

Hayward, A. (2021, July 2). What is Flow? The Blockchain Built for NFTs. Retrieved from Decrypt.

McCormick, P. (2021, July 19). Infinity Revenue, Infinity Possibilities. Retrieved from Not Boring.

Tran, K. C. (2020, April 13). What is the Ethereum Name Service (ENS)? Retrieved from Decrypt.

Xie, L. (2021, March 12). A Beginners' Guide to DAOs. Retrieved from Linda.Mirror.xyz.



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