The debate about NFTs continues to rage across the tech industry, with the recent downturn bringing into focus some of the issues the fledging technology has, while others continue to support, create and invest in NFTs. However, the largest contingent out there is people that have heard of NFTs and blockchain in passing, but really don’t know or understand how they work. In order to get those people better informed and more prepared to enter conversations, here is a brief overview of the key terms of the NFT world and what you need to know.
What is an NFT, and What Do They Do?
At their core, NFTs, standing for Non-Fungible Token, are unique digital identifiers that cannot be copied, substituted, or subdivided, that are recorded in a blockchain, and are used to certify authenticity and ownership. Essentially, an NFT is proof of ownership of a certain asset in the digital space.
NFTs are decentralized, which means the transfer of control and decision-making changes from a centralized entity to a distributed network (group of people). The effect of this is putting power into the hands of its users while eliminating middlemen, gatekeepers and governance.
How Are NFTs Created?
An NFT is created, or “minted” from digital objects that represent both tangible and intangible items, including graphic art, GIFs, videos, sports highlights, collectibles, virtual avatars and video game skins, designer sneakers, music, and many more at the current moment, while the future promises more applications in industries in real estate, insurance, finance and anything that involves an intermediary. These assets can be one of one or part of a collection where your NFT signifies that your asset is number 23 out of 50, for example. Although they have been around since 2014, NFTs came to the limelight after an artist named Peeble sold his "Everydays: The First 5000 Days" digital artwork for $69M in partnership with Christie's auction house.
What Does NFT Ownership Work?
While holding an NFT does signify ownership of an asset, when it comes to things like copyright usage and royalties, things are dependent on the smart contract of the project you purchase. Some give owners complete rights, some allow for the creator to continue to collect royalties but give future marketing rights to the owner, and others just give NFT owners the art itself and none of the trademarks. As with any purchase or investment, it is important to do your due diligence to fully understand what you are selling and/or purchasing when it comes to NFTs.
NFT Terms You Need to Know
NFT: Non-Fungible Token, see above.
Smart Contract: Programming put on the blockchain to implement an NFT sale, these smart contracts ensure that the NFT being sold cannot be replicated or divided. They also can authenticate the asset and proper ownership along with tracing the history of the asset.
Solidity: The programming language used for writing smart contracts.
Minting: The process of turning your asset into an NFT. This is done on different exchange platforms such as OpenSea or Rarible. This process is done by creating your asset (digital art, music, trading card, etc.), connecting your cryptowallet to your platform of choice (if you are just getting started with cryptocurrency as a whole, here’s an article on how to set up a cryptowallet), uploading your asset to the platform, create the NFT, and if you wish to sell it, set your price and upload it on the marketplace.
Gas: The fees and charges needed to pay when buying/selling on NFT platforms. Usually paid in cryptocurrency, gas fees vary from platform to platform to cover the computing costs of recording a transaction on the blockchain.
Hashrate: The measure of computational power being used on a blockchain, this is a vital way to measure the security and health of a blockchain, and therefore, an NFT.
DAO: Decentralised Autonomous Organization. A popular setup for many NFT projects, DAOs are designed to give governing power to the supporters of the project, as opposed to a singular person or entity. This is done by setting up a set of rules via smart contracts, making all decisions transparent, with changes only allowed to be made via a community vote. Also, DAOs allow people to invest in a fraction of an NFT, which is normally not possible.
Metaverse: An online, 3D virtual universe where NFTs are used to signify ownership of land, gain access to specific parts of the universe, and enhance the overall experience of being in the metaverse.
Floor Price: The lowest price in a certain collection of NFTs.
Airdrop: A free NFT collectible from a certain collection.
Looking to Learn More About the Future of NFTs?
Tech in Motion will be holding a micro summit on the future of NFTs on June 16th. This free-to-attend virtual event will host thought leaders of the NFT community, including NFT creators, authors on the subject, podcast hosts, and consultants sharing their thoughts and visions on what’s to come in the world of NFTs. Make sure to save your spot and RSVP today.