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Sea Launch

Sea Launch

2 years ago

đź“– Guide to NFT terms: an NFT glossary.

NFT lingo can be overwhelming. As the NFT market matures and expands so does its own jargon, slang, colloquialisms or acronyms.

This ever-growing NFT glossary goal is to unpack key NFT terms to help you better understand the NFT market or at least not feel like a total n00b in a conversation about NFTs on Reddit, Discord or Twitter.


#

1:1 Art

Art where each piece is one of a kind (1 of 1). Unlike 10K projects, PFP or Generative Art collections have a cap of NFTs released that can range from a few hundreds to 10K.

1/1 of X

Contrary to 1:1 Art, 1/1 of X means each NFT is unique, but part of a large and cohesive collection. E.g: Fidenzas by Tyler Hobbs or Crypto Punks (each Punk is 1/1 of 10,000).

10K Project

A type of NFT collection that consists of approximately 10,000 NFTs (but not strictly).


A

AB

ArtBlocks, the most important platform for generative art currently.

AFAIK

As Far As I Know.

Airdrop

Distribution of an NFT token directly into a crypto wallet for free. Can be used as a marketing campaign or as scam by airdropping fake tokens to empty someone’s wallet.

Alpha

The first or very primitive release of a project. Or Investment term to track how a certain investment outdoes the market. E.g: Alpha of 1.0 = 1% improvement or Alpha of 20.0 = 20% improvement.

Altcoin

Any other crypto that is not Bitcoin. Bitcoin Maximalists can also refer to them as shitcoins.

AMA

Ask Me Anything. NFT creators or artists do sessions where anyone can ask questions about the NFT project, team, vision, etc. Usually hosted on Discord, but also on Reddit or even Youtube.

Ape

Someone can be aping, ape in or aped on an NFT meaning someone is taking a large position relative to its own portfolio size. Some argue that when someone apes can mean that they're following the hype, out of FOMO or without due diligence. Not related directly to the Bored Ape Yatch Club.

ATH

All-Time High. When a NFT project or token reaches the highest price to date.

Avatar project

An NFT collection that consists of avatars that people can use as their profile picture (see PFP) in social media to show they are part of an NFT community like Crypto Punks.

Axie Infinity

ETH blockchain-based game where players battle and trade Axies (digital pets). The main ERC-20 tokens used are Axie Infinity Shards (AXS) and Smooth Love Potions (formerly Small Love Potion) (SLP).

Axie Infinity Shards

AXS is an Eth token that powers the Axie Infinity game.


B

Bag Holder

Someone who holds its position in a crypto or keeps an NFT until it's worthless.

BAYC

Bored Ape Yacht Club. A very successful PFP 1/1 of 10,000 individual ape characters collection. People use BAYC as a Twitter profile picture to brag about being part of this NFT community.

Bearish

Borrowed finance slang meaning someone is doubtful about the current market and that it will crash.

Bear Market

When the Crypto or NFT market is going down in value.

Bitcoin (BTC)

First and original cryptocurrency as outlined in a whitepaper by the anonymous creator(s) Satoshi Nakamoto.

Bitcoin Maximalist

Believer that Bitcoin is the only cryptocurrency needed. All other cryptocurrencies are altcoins or shitcoins.

Blockchain

Distributed, decentralized, immutable database that is the basis of trust in Web 3.0 technology.

Bluechip

When an NFT project has a long track record of success and its value is sustained over time, therefore considered a solid investment.

BTD

Buy The Dip. A bear market can be an opportunity for crypto investors to buy a crypto or NFT at a lower price.

Bullish

Borrowed finance slang meaning someone is optimistic that a market will increase in value aka moon.

Bull market

When the Crypto or NFT market is going up and up in value.

Burn

Common crypto strategy to destroy or delete tokens from the circulation supply intentionally and permanently in order to limit supply and increase the value.

Buying on secondary

Whenever you don’t mint an NFT directly from the project, you can always buy it in secondary NFT marketplaces like OpenSea. Most NFT sales are secondary market sales.


C

Cappin or Capping

Slang for lying or faking. Opposed to no cap which means “no lie”.

Coinbase

Nasdaq listed US cryptocurrency exchange. Coinbase Wallet is one of Coinbase’s products where users can use a Chrome extension or app hot wallet to store crypto and NFTs.

Cold wallet

Otherwise called hardware wallet or cold storage. It’s a physical device to store your cryptocurrencies and/or NFTs offline. They are not connected to the Internet so are at less risk of being compromised.

Collection

A set of NFTs under a common theme as part of a NFT drop or an auction sale in marketplaces like OpenSea or Rarible.

Collectible

A collectible is an NFT that is a part of a wider NFT collection, usually part of a 10k project, PFP project or NFT Game.

Collector

Someone who buys NFTs to build an NFT collection, be part of a NFT community or for speculative purposes to make a profit.

Cope

The opposite of FOMO. When someone doesn’t buy an NFT because one is still dealing with a previous mistake of not FOMOing at a fraction of the price. So choosing to stay out.

Consensus mechanism

Method of authenticating and validating a transaction on a blockchain without the need to trust or rely on a central authority. Examples of consensus mechanisms are Proof of Work (PoW) or Proof of Stake (PoS).

Cozomo de’ Medici

Twitter alias used by Snoop Dogg for crypto and NFT chat.

Creator

An NFT creator is a person that creates the asset for the NFT idea, vision and in many cases the art (e.g. a jpeg, audio file, video file).

Crowsale

Where a crowdsale is the sale of a token that will be used in the business, an Initial Coin Offering (ICO) is the sale of a token that’s linked to the value of the business. Buying an ICO token is akin to buying stock in the company because it entitles you a share of the earnings and profits. Also, some tokens give you voting rights similar to holding stock in the business. The US Securities and Exchange Commission recently ruled that ICOs, but not crowdselling, will be treated as the sale of a security. This basically means that all ICOs must be registered like IPOs and offered only to accredited investors. This dramatically increases the costs and limits the pool of potential buyers.

Crypto Bags/Bags

Refers to how much cryptocurrencies someone holds, as in their bag of coins.

Cryptocurrency

The native coin of a blockchain (or protocol coin), secured by cryptography to be exchanged within a Peer 2 Peer economic system. E.g: Bitcoin (BTC) for the Bitcoin blockchain, Ether (ETH) for the Ethereum blockchain, etc.

Crypto community

The community of a specific crypto or NFT project. NFT communities use Twitter and Discord as their primary social media to hang out.

Crypto exchange

Where someone can buy, sell or trade cryptocurrencies and tokens.

Cryptography

The foundation of blockchain technology. The use of mathematical theory and computer science to encrypt or decrypt information.

CryptoKitties

One of the first and most popular NFT based blockchain games. In 2017, the NFT project almost broke the Ethereum blockchain and increased the gas prices dramatically.

CryptoPunk

Currently one of the most valuable blue chip NFT projects. It was created by Larva Labs. Crypto Punk holders flex their NFT as their profile picture on Twitter.

CT

Crypto Twitter, the crypto-community on Twitter.

Cypherpunks

Movement in the 1980s, advocating for the use of strong cryptography and privacy-enhancing technologies as a route to social and political change. The movement contributed and shaped blockchain tech as we know today.


D

DAO

Stands for Decentralized Autonomous Organization. When a NFT project is structured like a DAO, it grants all the NFT holders voting rights, control over future actions and the NFT’s project direction and vision. Many NFT projects are also organized as DAO to be a community-driven project.

Dapp

Mobile or web based decentralized application that interacts on a blockchain via smart contracts. E.g: Dapp is the frontend and the smart contract is the backend.

DCA

Acronym for Dollar Cost Averaging. An investment strategy to reduce the impact of crypto market volatility. E.g: buying into a crypto asset on a regular monthly basis rather than a big one time purchase.

Ded

Abbreviation for dead like "I sold my Punk for 90 ETH. I am ded."

DeFi

Short for Decentralized Finance. Blockchain alternative for traditional finance, where intermediaries like banks or brokerages are replaced by smart contracts to offer financial services like trading, lending, earning interest, insure, etc.

Degen

Short for degenerate, a gambler who buys into unaudited or unknown NFT or DeFi projects, without proper research hoping to chase high profits.

Delist

No longer offer an NFT for sale on a secondary market like Opensea. NFT Marketplaces can delist an NFT that infringes their rules. Or NFT owners can choose to delist their NFTs (has long as they have sufficient funds for the gas fees) due to price surges to avoid their NFT being bought or sold for a higher price.

Derivative

Projects derived from the original project that reinforces the value and importance of the original NFT. E.g: "alternative" punks.

Dev

A skilled professional who can build NFT projects using smart contracts and blockchain technology.

Dex

Decentralised Exchange that allows for peer-to-peer trustless transactions that don’t rely on a centralized authority to take place. E.g: Uniswap, PancakeSwap, dYdX, Curve Finance, SushiSwap, 1inch, etc.

Diamond Hands

Someone who believes and holds a cryptocurrency or NFT regardless of the crypto or NFT market fluctuations.

Discord

Chat app heavily used by crypto and NFT communities for knowledge sharing and shilling.

DLT

Acronym for Distributed Ledger Technology. It’s a protocol that allows the secure functioning of a decentralized database, through cryptography. This technological infrastructure scraps the need for a central authority to keep in check manipulation or exploitation of the network.

Dog coin

It’s a memecoin based on the Japanese dog breed, Shiba Inu, first popularised by Dogecoin. Other notable coins are Shiba Inu or Floki Inu. These dog coins are frequently subjected to pump and dumps and are extremely volatile. The original dog coin DOGE was created as a joke in 2013. Elon Musk is one of Dogecoin's most famous supporters.

Doxxed/Doxed

When the identity of an NFT team member, dev or creator is public, known or verifiable. In the NFT market, when a NFT team is doxed it’s a usually sign of confidence and transparency for NFT collectors to ensure they will not be scammed for an anonymous creator.

Drop

The release of an NFT (single or collection) into the NFT market.

DYOR

Acronym for Do Your Own Research. A common expression used in the crypto or NFT community to disclaim responsibility for the financial/strategy advice someone is providing the community and to avoid being called out by others in theNFT or crypto community.


E

EIP-1559 EIP

Referring to Ethereum Improvement Proposal 1559, commonly known as the London Fork. It’s an upgrade to the Ethereum protocol code to improve the blockchain security and scalability. The major change consists in shifting from a proof-of-work consensus mechanism (PoW) to a low energy and lower gas fees proof-of-stake system (PoS).

ERC-1155

Stands for Ethereum Request for Comment-1155. A multi-token standard that can represent any number of fungible (ERC-20) and non-fungible tokens (ERC-721).

ERC-20

Ethereum Request for Comment-20 is a standard defining a fungible token like a cryptocurrency.

ERC-721

Ethereum Request for Comment-721 is a standard defining a non-fungible token (NFT).

ETH

Aka Ether, the currency symbol for the native cryptocurrency of the Ethereum blockchain.

ETH2.0

Also known as the London Fork or EIP-1559 EIP. It’s an upgrade to the Ethereum network to improve the network’s security and scalability. The most dramatic change is the shift from the proof-of-work consensus mechanism (PoW) to proof-of-stake system (PoS).

Ether

Or ETH, the native cryptocurrency of the Ethereum blockchain.

Ethereum

Network protocol that allows users to create and run smart contracts over a decentralized network.


F

FCFS

Acronym for First Come First Served. Commonly used strategy in a NFT collection drop when the demand surpasses the supply.

Few

Short for "few understand". Similar to the irony behind the "probably nothing" expression. Like X person bought into a popular NFT, because it understands its long term value.

Fiat Currencies or Money

National government-issued currencies like the US Dollar (USD), Euro (EUR) or Great British Pound (GBP) that are not backed by a commodity like silver or gold. FIAT means an authoritative or arbitrary order like a government decree.

Flex

Slang for showing off. In the crypto community, it’s a Lamborghini or a gold Rolex. In the NFT world, it’s a CryptoPunk or BAYC PFP on Twitter.

Flip

Quickly buying and selling crypto or NFTs to make a profit.

Flippening

Colloquial expression coined in 2017 for when Ethereum’s market capitalisation surpasses Bitcoin’s.

Floor Price

It means the lowest asking price for an NFT collection or subset of a collection on a secondary market like OpenSea.

Floor Sweep

Refers when a NFT collector or investor buys all the lowest listed NFTs on a secondary NFT marketplace.

FOMO

Acronym for Fear Of Missing Out. Buying a crypto or NFT out of fear of missing out on the next big thing.

FOMO-in

Buying a crypto or NFT regardless if it's at the top of the market for FOMO.

Fractionalize

Turning one NFT like a Crypto Punk into X number of fractions ERC-20 tokens that prove ownership of that Punk. This allows for i) collective ownership of an NFT, ii) making an expensive NFT affordable for the common NFT collector and iii) adds more liquidity to a very illiquid NFT market.

FR

Abbreviation for For Real?

Fren

Means Friend and what people in the NFT community call each other in an endearing and positive way.

Foundation

An exclusive, by invitation only, NFT marketplace that specializes in NFT art.

Fungible

Means X can be traded for another X and still hold the same value. E.g: My dollars = your dollars. My 1 ether = your 1 ether. My casino chip = your casino chip. On Ethereum, fungible tokens are defined by the ERC-20 standard.

FUD

Acronym for Fear Uncertainty Doubt. It can be a) when someone spreads negative and sometimes false news to discredit a certain crypto or NFT project. Or b) the overall negative feeling regarding the future of the NFT/Crypto project or market, especially when going through a bear market.

Fudder

Someone who has FUD or engages in FUD about a NFT project.

Fudding your own bags

When an NFT collector or crypto investor speaks negatively about an NFT or crypto project he/she has invested in or has a stake in. Usually negative comments about the team or vision.


G

G

Means Gangster. A term of endearment used amongst the NFT Community.

Gas/Gas fees/Gas prices

The fee charged to complete a transaction in a blockchain. These gas prices vary tremendously between the blockchains, the consensus mechanism used to validate transactions or the number of transactions being made at a specific time.

Gas war

When a lot of NFT collectors (or bots) are trying to mint an NFT at once and therefore resulting in gas price surge.

Generative art

Artwork that is algorithmically created by code with unique traits and rarity.

Genesis drop

It refers to the first NFT drop a creator makes on an NFT auction platform.

GG

Interjection for Good Game.

GM

Interjection for Good Morning.

GMI

Acronym for Going to Make It. Opposite of NGMI (NOT Going to Make It).

GOAT

Acronym for Greatest Of All Time.

GTD

Acronym for Going To Dust. When a token or NFT project turns out to be a bad investment.

GTFO

Get The F*ck Out, as in “gtfo with that fud dude” if someone is talking bull.

GWEI

One billionth of an Ether (ETH) also known as a Shannon / Nanoether / Nano — unit of account used to price Ethereum gas transactions.


H

HEN (Hic Et Nunc)

A popular NFT art marketplace for art built on the Tezos blockchain. Big NFT marketplace for inexpensive NFTs but not a very user-friendly UI/website.

HODL

Misspelling of HOLD coined in an old Reddit post. Synonym with “Hold On for Dear Life” meaning hold your coin or NFT until the end, whether that they’ll moon or dust.

Hot wallet

Wallets connected to the Internet, less secure than cold wallet because they’re more susceptible to hacks.

Hype

Term used to show excitement or anticipation about an upcoming crypto project or NFT.


I

ICO

Acronym for Initial Coin Offering. It’s the crypto equivalent to a stocks’ IPO (Initial Public Offering) but with far less scrutiny or regulation (leading to a lot of scams). ICO’s are a popular way for crypto projects to raise funds.

IDO

Acronym for Initial Dex Offering. To put it simply it means to launch NFTs or tokens via a decentralized liquidity exchange. It’s a common fundraising method used by upcoming crypto or NFT projects. Many consider IDOs a far better fundraising alternative to ICOs.

IDK

Acronym for I Don’t Know.

IDEK

Acronym for I Don’t Even Know.

Imma

Short for I’m going to be.

IRL

Acronym for In Real Life. Refers to the physical world outside of the online/virtual world of crypto, NFTs, gaming or social media.

IPFS

Acronym for Interplanetary File System. A peer-to-peer file storage system using hashes to recall and preserve the integrity of the file, commonly used to store NFTs outside of the blockchain.

It’s Money Laundering

Someone can use this expression to suggest that NFT prices aren’t real and that actually people are using NFTs to launder money, without providing much proof or explanation on how it works.

IYKYK

Stands for If You Know, You Know This. Similar to the expression "few", used when someone buys into a popular crypto or NFT project, slightly because of FOMO but also because it believes in its long term value.


J

JPEG/JPG

File format typically used to encode NFT art. Some people also use Jpeg to mock people buying NFTs as in “All that money for a jpeg”.


K

KMS

Short for Kill MySelf.


L

Larva Labs/ LL

NFT Creators behind the popular NFT projects like Cryptopunks,Meebits or Autoglyphs.

Laser eyes

Bitcoin meme signalling support for BTC and/or it will break the $100k per coin valuation.

LFG

Acronym for Let’s F*cking Go! A common rallying call used in the crypto or NFT community to lead people into buying an NFT or a crypto.

Liquidity

Term that means that a token or NFT has a high volume activity in the crypto/NFT market. It’s easily sold and resold. But usually the NFT market it’s illiquid when compared to the general crypto market, due to the non-fungibility nature of an NFT (there are less buyers for every NFTs out there).

LMFAO

Stands for Laughing My F*cking Ass Off.

Looks Rare

Ironic expression commonly used in the NFT Community. Rarity is a driver of an NFT’s value.

London Hard Fork

Known as EIP-1559, was an Ethereum code upgrade proposal designed to improve the blockchain security and scalability. It’s major change is to shift from PoW to PoS consensus mechanism.

Long run

Means someone is committed to the NFT market or an NFT project in the long term.


M

Maximalist

Typically refers to Bitcoin Maximalists. People who only believe that Bitcoin is the most secure and resilient blockchain. For Maximalists, all other cryptocurrencies are shitcoins therefore a waste of time, development and money.

McDonald's

Common and ironic expression amongst the crypto community. It means that Mcdonald’s is always a valid backup plan or career in the case all cryptocurrencies crash and disappear.

Meatspace

Synonymous with IRL - In Real Life.

Memecoin

Cryptocurrency like Dogecoin that is based on an internet joke or meme.

Metamask

Popular crypto hot wallet platform to store crypto and NFTs.

Metaverse

Term was coined by writer Neal Stephenson in the 1992 dystopian novel “Snow Crash”. It’s an immersive and digital place where people interact via their avatars. Big tech players like Meta (formerly known as Facebook) and other independent players have been designing their own version of a metaverse. NFTs can have utility for users like buying, trading, winning, accessing, experiencing or interacting with things inside a metaverse.

Mfer

Short for “mother fker”.

Miners

Single person or company that mines one or more cryptocurrencies like Bitcoin or Ethereum. Both blockchains need computing power for their Proof of Work consensus mechanism. Miners provide the computing power and receive coins/tokens in return as payment.

Mining

Mining is the process by which new tokens enter in circulation as for example in the Bitcoin blockchain. Also, mining ensures the validity of new transactions happening in a given blockchain that uses the PoW consensus mechanism. Therefore, the ones who mine are rewarded by ensuring the validity of a blockchain.

Mint/Minting

Mint an NFT is the act of publishing your unique instance to a specific blockchain like Ethereum or Tezos blockchain. In simpler terms, a creator is adding a one-of-kind token (NFT) into circulation in a specific blockchain.

Once the NFT is minted - aka created - NFT collectors can i) direct mint, therefore purchase the NFT by paying the specified amount directly into the project’s wallet. Or ii) buy it via an intermediary like an NFT marketplace (e.g: OpenSea, Foundation, Rarible, etc.). Later, the NFT owner can choose to resell the NFT, most NFT creators set up a royalty for every time their NFT is resold.

Minting interval

How often an NFT creator can mint or create tokens.

MOAR

A misspelling that means “more”.

Moon/Mooning

When a coin (e.g. ETH), or token, like an NFT goes exponential in price and the price graph sees a vertical climb. Crypto or NFT users then use the expression that “X token is going to the moon!”.

Moon boys

Slang for crypto or NFT holders who are looking to pump the price dramatically - taking a token to the moon - for short term gains and with no real long term vision or commitment.


N

Never trust, always verify

Treat everyone or every project like something potentially malicious.

New coiner

Crypto slang for someone new to the cryptocurrency space. Usually newcomers can be more susceptible to FUD or scammers.

NFA

Acronym for Not Financial Advice.

NFT

Acronym for Non-Fungible Token. The type of token that can be created, bought, sold, resold and viewed in different dapps. The ERC-721 smart contract standard (Ethereum blockchain) is the most popular amongst NFTs.

NFT Marketplace / NFT Auction platform

Platforms where people can sell and buy NFTs, either via an auction or pay the seller’s price. The largest NFT marketplace is OpenSea. But there are other popular NFT marketplace examples like Foundation, SuperRare, Nifty Gateway, Rarible, Hic et Nunc (HeN), etc.

NFT Whale

A NFT collector or investor who buys a large amount of NFTs.

NGMI

Acronym for Not Going to Make It. For example, something said to someone who has paper hands.

NMP

Acronym for Not My Problem.

Nocoiner

It can be someone who simply doesn’t hold cryptocurrencies, mistrust the crypto market or believes that crypto is either a scam or a ponzi scheme.

Noob/N00b/Newbie

Slang for someone new or not experienced in cryptocurrency or NFTs. These people are more susceptible to scams, drawn into pump and dumps or getting rekt on bad coins.

Normie/Normy

Similar expression for a nocoiner.

NSFW

Acronym for Not Suitable For Work. Referring to online content inappropriate for viewing in public or at work. It began as mostly a tag for sexual content, nudity, or violence, but it has envolved to range a number of other topics that might be delicate or trigger viewers.

Nuclear NFTs

An NFT or collectible with more than 1,000 owners. For the NFT to be sold or resold, every co-owners must give their permission beforehand. Otherwise, the NFT transaction can’t be made.


O

OG

Acronym for Original Gangster and it popularized by 90s Hip Hop culture. It means the first, the original or the person who has been around since the very start and earned respect in the community. In NFT terms, Cryptopunks are the OG of NFTs.

On-chain vs Off-chain

An on-chain NFT is when the artwork (like a jpeg, video or music file) is stored directly into the blockchain making it more secure and less susceptible to being stolen. But, note that most blockchains can only store small amounts of data.

Off-chain NFTs means that the high quality image, music or video file is not stored in the blockchain. But, the NFT data is stored on an external party like a) a centralized server, highly vulnerable to the server being shut down/exploited. Or b) an InterPlanetary File System (IPFS), also an external party but more secure way of finding data because it utilizes a distributed, decentralized system.

OpenSea

By far the largest NFT marketplace in the world, currently.


P

Paper Hands

A crypto or NFT holder who is permeable to negative market sentiment or FUD. And does not hold their crypto or NFT for long. Expression used to describe someone who sells as soon as NFTs enter a bear market.

PFP

Stands for Picture For Profile. Twitter users who hold popular NFTs like Crypto Punk or BAYC use their punk or monkey avatar as their profile picture.

POAP NFT

Stands for Proof of Attendance Protocol. These types of NFTs are awarded to attendees of events, regardless if they’re physical or virtual, as proof you attended.

PoS

Stands for Proof of Stake. A consensus mechanism used by blockchains like Bitcoin or Ethereum to achieve agreement, trust and security in every transaction and keep the integrity of the blockchain intact. PoS mechanisms are considered more environmentally friendly than PoW as they’re lower energy and in emissions.

PoW

Stands for Proof of Work. A consensus mechanism used by blockchains like Bitcoin to achieve agreement, trust and security and keep the transactional integrity of the blockchain intact. PoW mechanism requires a lot of computational power, therefore uses more energy resources and higher CO2 emissions than the PoS mechanism.

Private Key

It can be similar to a password. It’s a secret number that allows users to access their cold or hot wallet funds, prove ownership of a certain address and sign transactions on the blockchain.

It’s not advisable to share a private key with anyone as it makes a person vulnerable to thefts. In case someone loses or forgets its private key, it can use a recovery phrase to restore access to a crypto or NFT wallet.

Pre-mine

A term used in crypto to refer to the act of creating a set amount of tokens before their public launch. It can also be known as a Genesis Sale and is usually associated with Initial Coin Offerings (ICOs) in order to compensate founders, developers or early investors.

Probably nothing

It’s an ironic expression used by NFT enthusiasts to refer to an important or soon to be big news, project or person in the NFT space. Meaning when someone says probably nothing it actually means that it is probably something.

Protocol Coin

Stands for the native coin of a blockchain. As in Ether for the Ethereum blockchain or BTC on the Bitcoin blockchain.

Pump & Dump

The term pump means when a person or a group of people buy or convince others to buy large quantities of a crypto or an NFT with the single goal to drive the price to a peak. When the price peaks, these people sell their position high and for a hefty profit, therefore dumping the price and leaving other slower investors or newbies rekt or at a loss.


R

Rarity

Rarity in NFT terms refers to how rare an NFT is. The rarity can be defined by the number of traits, scarcity or properties of an NFT.

Reaching

Slang for an exaggeration over something to make it sound worse than what it actually is or to take a point/scenario too far.

Recovery phrase

A 12-word phrase that acts like backup for your crypto private keys. A person can recover all of the crypto wallet accounts’ private keys from the recovery phrase. Is not advisable to share the recovery phrase with anyone.

Rekt

Slang for wrecked. When a crypto or NFT project goes wrong or down in value sharply. Or more broadly, when something goes wrong like a person is price out by the gas surge or an NFT floor price goes down.

Right Click Save As

An Ironic expression used by people who don’t understand the value or potential unlocked by NFTs. Person who makes fun that she/he can easily get a digital artwork by Right Click Save As and mock the NFT space and its hype.

Roadmap

The strategy outlined by an NFT project. A way to explain to the NFT community or a potential NFT investor, the different stages, value and the long term vision of the NFT project.

Royalties

NFT creators can set up their NFT so each time their NFT is resold, the creator gets paid a percentage of the sale price.

RN

Acronym for Right Now.

Rug Pull/Rugged

Slang for a scam when the founders, team or developers suddenly leave a crypto project and run away with all the investors’ funds leaving them with nothing.


S

Satoshi Nakamoto

The anonymous creator of the Bitcoin whitepaper and whose identity has never been verified.

Scammer

Someone actively trying to steal other people’s crypto or NFTs.

Secondary

Secondary refers to secondary NFT marketplaces, where NFT collectors or investors can resell NFTs after they’ve been minted. The price of an NFT or NFT collection is determined by those who list them.

Seed phrase

Another name for recovery phrase is the 12-word phrase that allows you to recover all of the crypto wallet accounts’ private keys and regain control of the wallet. Is not advisable to share the seed phrase with anyone.

Seems legit

When an NFT project or a person in the NFT community looks promising and the real deal, meaning seems legitimate. Depending on the context can also be used ironically.

Seems rare

An ironic expression or dismissive comment used by the NFT community. For example, It can be used sarcastically when someone asks for feedback on an NFT they own or created.

Ser

Slang for sir and a polite way of addressing others in an NFT community.

Shill

Expression when someone wants to promote or get exposure to an NFT they own or created.

Shill Thread

It’s a common Twitter strategy to gain traction by encouraging NFT creators to share a link to their NFT project in the hopes of getting bought or noticed by the NFT Community and potential buyers.

Simp/Simping

A NFT holder or creator who comes off as trying to hard impress an NFT whale or investor.

Sh*tposter

A person who mostly posts meme content on Twitter for fun.

SLP

Acronym for Smooth Love Potion. It’s a token players can earn as a reward in the NFT game Axie Infinity.

Smart Contract

A self-executing contract where the terms of the agreement between buyer and seller are directly written into the code and without third party or human intervention. Ethereum is a blockchain that can execute smart contracts, on the contrary to Bitcoin which does not have that capability.

SMFH

Acronym for Shaking My F*cking Head. Common reply to a person showing unbelievable idiocy.

Sock Puppet

Scam account used to lure noob investors into fake investment services.

Snag

It means to buy an NFT quickly and for a very low price. Can also be known as sniping.

Sotheby’s

Very famous auction house that has recently auctioned Beeple’s NFTs or Bored Ape Yacht Club and Crypto Punks’ NFT collections.

Stake

Crypto term for locking up a certain amount of crypto tokens for a set period of time to earn interest. In the NFT space, there are popping up a lot of projects or services that allow NFT holders to earn interest for holding a certain NFT.

Szn

Stands for season referring to crypto or NFT market cycles.


T

TINA

Acronym for There Is No Alternative. Example: someone asks “why are you investing in BTC?”, to which the reply is “TINA”.

TINA RIF

Acronym for There Is No Alternative Resistance Is Futile.

This is the way

A commendation for positive behavior by someone in the NFT Community.

Tokenomics

Referring to the economics of cryptocurrencies, DeFi or NFT projects.


V

Valhalla

Ironic use of the Viking “heaven”. Meaning someone’s NFT collection is either going to be a profitable and blue chip project, therefore they can ascend to Valhalla or is going to tank and that person will have to work at a Mcdonald’s.

Vibe

Term used to express a positive emotional state.

Volatile/Volatility

Term used to describe rapid market fluctuations and crypto or NFT prices go up and down quickly in a short period.


W

WAGMI

Acronym for We Are Going to Make It. Rally cry to build momentum for a crypto or NFT project and lead even more people into buying, shilling or supporting a specific project.

Wallet

There can be a hot or cold wallet, but both are a place where someone can store their cryptocurrency and tokens. Hot wallets are always connected to the Internet like MetaMask, Trust wallet or Phantom. On the contrary cold wallets are hardware wallets to store crypto or NFTs offline like Nano Ledger.

Weak Hands

Synonymous with Paper Hands. Someone who immediately sells their crypto or NFT because of a bear market, FUD or any other negative sentiment.

Web 1.0

Refers to the beginning of the Web. A period from around 1990 to 2005, also known as the read-only web.

Web 2.0

Refers to an iteration of Web 1.0. From 2005 to the present moment, where social media platforms like Facebook, Instagram, TikTok, Google, Twitter, etc reshaped the web, therefore becoming the read-write web.

Web 3.0

A term coined by Ethereum co-founder Gavin Wood and it’s an idea of what the future of the web could look like. Most peoples’ data, info or content would no longer be centralized in Web 2.0 giants - the Big Tech - but decentralized, mostly thanks to blockchain technology. Web 3.0 could be known as read-write-trust web.

Wen

As in When.

Wen Moon

Popular expression from crypto Twitter not so much in the NFT space. Refers to the still distant future when a token will moon.

Whitepaper

Document released by a crypto or NFT project where it lays the technical information behind the concept, vision, roadmap and plans to grow a certain project.

Whale

Someone who owns a large position on a specific or many cryptos or NFTs.


Y

Yodo

Acronym for You Only Die Once. The opposite of Yolo.

Yolo

Acronym for You Only Live Once. A person can use this when they just realized they bought a shitcoin or crap NFT and they’re getting rekt.


Original post

More on NFTs & Art

Vishal Chawla

Vishal Chawla

3 years ago

5 Bored Apes borrowed to claim $1.1 million in APE tokens

Takeaway
Unknown user took advantage of the ApeCoin airdrop to earn $1.1 million.
He used a flash loan to borrow five BAYC NFTs, claim the airdrop, and repay the NFTs.

Yuga Labs, the creators of BAYC, airdropped ApeCoin (APE) to anyone who owns one of their NFTs yesterday.

For the Bored Ape Yacht Club and Mutant Ape Yacht Club collections, the team allocated 150 million tokens, or 15% of the total ApeCoin supply, worth over $800 million. Each BAYC holder received 10,094 tokens worth $80,000 to $200,000.

But someone managed to claim the airdrop using NFTs they didn't own. They used the airdrop's specific features to carry it out. And it worked, earning them $1.1 million in ApeCoin.

The trick was that the ApeCoin airdrop wasn't based on who owned which Bored Ape at a given time. Instead, anyone with a Bored Ape at the time of the airdrop could claim it. So if you gave someone your Bored Ape and you hadn't claimed your tokens, they could claim them.

The person only needed to get hold of some Bored Apes that hadn't had their tokens claimed to claim the airdrop. They could be returned immediately.

So, what happened?

The person found a vault with five Bored Ape NFTs that hadn't been used to claim the airdrop.

A vault tokenizes an NFT or a group of NFTs. You put a bunch of NFTs in a vault and make a token. This token can then be staked for rewards or sold (representing part of the value of the collection of NFTs). Anyone with enough tokens can exchange them for NFTs.

This vault uses the NFTX protocol. In total, it contained five Bored Apes: #7594, #8214, #9915, #8167, and #4755. Nobody had claimed the airdrop because the NFTs were locked up in the vault and not controlled by anyone.

The person wanted to unlock the NFTs to claim the airdrop but didn't want to buy them outright s o they used a flash loan, a common tool for large DeFi hacks. Flash loans are a low-cost way to borrow large amounts of crypto that are repaid in the same transaction and block (meaning that the funds are never at risk of not being repaid).

With a flash loan of under $300,000 they bought a Bored Ape on NFT marketplace OpenSea. A large amount of the vault's token was then purchased, allowing them to redeem the five NFTs. The NFTs were used to claim the airdrop, before being returned, the tokens sold back, and the loan repaid.

During this process, they claimed 60,564 ApeCoin airdrops. They then sold them on Uniswap for 399 ETH ($1.1 million). Then they returned the Bored Ape NFT used as collateral to the same NFTX vault.

Attack or arbitrage?

However, security firm BlockSecTeam disagreed with many social media commentators. A flaw in the airdrop-claiming mechanism was exploited, it said.

According to BlockSecTeam's analysis, the user took advantage of a "vulnerability" in the airdrop.

"We suspect a hack due to a flaw in the airdrop mechanism. The attacker exploited this vulnerability to profit from the airdrop claim" said BlockSecTeam.

For example, the airdrop could have taken into account how long a person owned the NFT before claiming the reward.

Because Yuga Labs didn't take a snapshot, anyone could buy the NFT in real time and claim it. This is probably why BAYC sales exploded so soon after the airdrop announcement.

Tora Northman

Tora Northman

3 years ago

Pixelmon NFTs are so bad, they are almost good!

Bored Apes prices continue to rise, HAPEBEAST launches, Invisible Friends hype continues to grow. Sadly, not all projects are as successful.
Of course, there are many factors to consider when buying an NFT. Is the project a scam? Will the reveal derail the project? Possibly, but when Pixelmon first teased its launch, it generated a lot of buzz.

With a primary sale mint price of 3 ETH ($8,100 USD), it started as an expensive project, with plenty of fans willing to invest in what was sold as a game. After it was revealed, it fell rapidly.
Why? It was overpromised and under delivered.

According to the project's creator[^1], the funds generated will be used to develop the artwork. "The Pixelmon reveal was wrong. This is what our Pixelmon look like in-game. "Despite the fud, I will not go anywhere," he wrote on Twitter. The goal remains. The funds will still be used to build our game. I will finish this project."

The project raised $70 million USD, but the NFTs buyers received were not the project's original teasers. Some call it "the worst NFT project ever," while others call it a complete scam.

But there's hope for some buyers. Kevin emerged from the ashes as the project was roasted over the fire.

A Minecraft character meets Salad Fingers - that's Kevin. He's a frog-like creature whose reveal was such a terrible NFT that it became part of history – and a meme.

If you're laughing at people paying $8K for a silly pixelated image, you might need to take it back. Precisely because of this, lucky holders who minted Kevin have been able to sell the now-memed NFT for over 8 ETH (around $24,000 USD), with some currently listed for 100 ETH.

Of course, Twitter has been awash in memes mocking those who invested in the project, because what else can you do when so many people lose money?

It's still unclear if the NFT project is a scam, but the team behind it was hired on Upwork. There's still hope for redemption, but Kevin's rise to fame appears to be the only positive outcome so far.

[^1] This is not the first time the creator (A 20-yo New Zealanders) has sought money via an online platform and had people claiming he under-delivered.  He raised $74,000 on Kickstarter for a card game called Psycho Chicken. There are hundreds of comments on the Kickstarter project saying they haven't received the product and pleading for a refund or an update.

shivsak

shivsak

2 years ago

A visual exploration of the REAL use cases for NFTs in the Future

In this essay, I studied REAL NFT use examples and their potential uses.

Knowledge of the Hype Cycle

Gartner's Hype Cycle.

It proposes 5 phases for disruptive technology.

1. Technology Trigger: the emergence of potentially disruptive technology.

2. Peak of Inflated Expectations: Early publicity creates hype. (Ex: 2021 Bubble)

3. Trough of Disillusionment: Early projects fail to deliver on promises and the public loses interest. I suspect NFTs are somewhere around this trough of disillusionment now.

4. Enlightenment slope: The tech shows successful use cases.

5. Plateau of Productivity: Mainstream adoption has arrived and broader market applications have proven themselves. Here’s a more detailed visual of the Gartner Hype Cycle from Wikipedia.

In the speculative NFT bubble of 2021, @beeple sold Everydays: the First 5000 Days for $69 MILLION in 2021's NFT bubble.

@nbatopshot sold millions in video collectibles.

This is when expectations peaked.

Let's examine NFTs' real-world applications.

Watch this video if you're unfamiliar with NFTs.

Online Art

Most people think NFTs are rich people buying worthless JPEGs and MP4s.

Digital artwork and collectibles are revolutionary for creators and enthusiasts.

NFT Profile Pictures

You might also have seen NFT profile pictures on Twitter.

My profile picture is an NFT I coined with @skogards factoria app, which helps me avoid bogus accounts.

Profile pictures are a good beginning point because they're unique and clearly yours.

NFTs are a way to represent proof-of-ownership. It’s easier to prove ownership of digital assets than physical assets, which is why artwork and pfps are the first use cases.

They can do much more.

NFTs can represent anything with a unique owner and digital ownership certificate. Domains and usernames.

Usernames & Domains

@unstoppableweb, @ensdomains, @rarible sell NFT domains.

NFT domains are transferable, which is a benefit.

Godaddy and other web2 providers have difficult-to-transfer domains. Domains are often leased instead of purchased.

Tickets

NFTs can also represent concert tickets and event passes.

There's a limited number, and entry requires proof.

NFTs can eliminate the problem of forgery and make it easy to verify authenticity and ownership.

NFT tickets can be traded on the secondary market, which allows for:

  1. marketplaces that are uniform and offer the seller and buyer security (currently, tickets are traded on inefficient markets like FB & craigslist)

  2. unbiased pricing

  3. Payment of royalties to the creator

4. Historical ticket ownership data implies performers can airdrop future passes, discounts, etc.

5. NFT passes can be a fandom badge.

The $30B+ online tickets business is increasing fast.

NFT-based ticketing projects:

Gaming Assets

NFTs also help in-game assets.

Imagine someone spending five years collecting a rare in-game blade, then outgrowing or quitting the game. Gamers value that collectible.

The gaming industry is expected to make $200 BILLION in revenue this year, a significant portion of which comes from in-game purchases.

Royalties on secondary market trading of gaming assets encourage gaming businesses to develop NFT-based ecosystems.

Digital assets are the start. On-chain NFTs can represent real-world assets effectively.

Real estate has a unique owner and requires ownership confirmation.

Real Estate

Tokenizing property has many benefits.

1. Can be fractionalized to increase access, liquidity

2. Can be collateralized to increase capital efficiency and access to loans backed by an on-chain asset

3. Allows investors to diversify or make bets on specific neighborhoods, towns or cities +++

I've written about this thought exercise before.

I made an animated video explaining this.

We've just explored NFTs for transferable assets. But what about non-transferrable NFTs?

SBTs are Soul-Bound Tokens. Vitalik Buterin (Ethereum co-founder) blogged about this.

NFTs are basically verifiable digital certificates.

Diplomas & Degrees

That fits Degrees & Diplomas. These shouldn't be marketable, thus they can be non-transferable SBTs.

Anyone can verify the legitimacy of on-chain credentials, degrees, abilities, and achievements.

The same goes for other awards.

For example, LinkedIn could give you a verified checkmark for your degree or skills.

Authenticity Protection

NFTs can also safeguard against counterfeiting.

Counterfeiting is the largest criminal enterprise in the world, estimated to be $2 TRILLION a year and growing.

Anti-counterfeit tech is valuable.

This is one of @ORIGYNTech's projects.

Identity

Identity theft/verification is another real-world problem NFTs can handle.

In the US, 15 million+ citizens face identity theft every year, suffering damages of over $50 billion a year.

This isn't surprising considering all you need for US identity theft is a 9-digit number handed around in emails, documents, on the phone, etc.

Identity NFTs can fix this.

  • NFTs are one-of-a-kind and unforgeable.

  • NFTs offer a universal standard.

  • NFTs are simple to verify.

  • SBTs, or non-transferrable NFTs, are tied to a particular wallet.

  • In the event of wallet loss or theft, NFTs may be revoked.

This could be one of the biggest use cases for NFTs.

Imagine a global identity standard that is standardized across countries, cannot be forged or stolen, is digital, easy to verify, and protects your private details.

Since your identity is more than your government ID, you may have many NFTs.

@0xPolygon and @civickey are developing on-chain identity.

Memberships

NFTs can authenticate digital and physical memberships.

Voting

NFT IDs can verify votes.

If you remember 2020, you'll know why this is an issue.

Online voting's ease can boost turnout.

Informational property

NFTs can protect IP.

This can earn creators royalties.

NFTs have 2 important properties:

  • Verifiability IP ownership is unambiguously stated and publicly verified.

  • Platforms that enable authors to receive royalties on their IP can enter the market thanks to standardization.

Content Rights

Monetization without copyrighting = more opportunities for everyone.

This works well with the music.

Spotify and Apple Music pay creators very little.

Crowdfunding

Creators can crowdfund with NFTs.

NFTs can represent future royalties for investors.

This is particularly useful for fields where people who are not in the top 1% can’t make money. (Example: Professional sports players)

Mirror.xyz allows blog-based crowdfunding.

Financial NFTs

This introduces Financial NFTs (fNFTs). Unique financial contracts abound.

Examples:

  • a person's collection of assets (unique portfolio)

  • A loan contract that has been partially repaid with a lender

  • temporal tokens (ex: veCRV)

Legal Agreements

Not just financial contracts.

NFT can represent any legal contract or document.

Messages & Emails

What about other agreements? Verbal agreements through emails and messages are likewise unique, but they're easily lost and fabricated.

Health Records

Medical records or prescriptions are another types of documentation that has to be verified but isn't.

Medical NFT examples:

  • Immunization records

  • Covid test outcomes

  • Prescriptions

  • health issues that may affect one's identity

  • Observations made via health sensors

Existing systems of proof by paper / PDF have photoshop-risk.

I tried to include most use scenarios, but this is just the beginning.

NFTs have many innovative uses.

For example: @ShaanVP minted an NFT called “5 Minutes of Fame” 👇

Here are 2 Twitter threads about NFTs:

  1. This piece of gold by @chriscantino

2. This conversation between @punk6529 and @RaoulGMI on @RealVision“The World According to @punk6529”

If you're wondering why NFTs are better than web2 databases for these use scenarios, see this Twitter thread I wrote:

If you liked this, please share it.

You might also like

joyce shen

joyce shen

3 years ago

Framework to Evaluate Metaverse and Web3

Everywhere we turn, there's a new metaverse or Web3 debut. Microsoft recently announced a $68.7 BILLION cash purchase of Activision.

Like AI in 2013 and blockchain in 2014, NFT growth in 2021 feels like this year's metaverse and Web3 growth. We are all bombarded with information, conflicting signals, and a sensation of FOMO.

How can we evaluate the metaverse and Web3 in a noisy, new world? My framework for evaluating upcoming technologies and themes is shown below. I hope you will also find them helpful.

Understand the “pipes” in a new space. 

Whatever people say, Metaverse and Web3 will have to coexist with the current Internet. Companies who host, move, and store data over the Internet have a lot of intriguing use cases in Metaverse and Web3, whether in infrastructure, data analytics, or compliance. Hence the following point.

## Understand the apps layer and their infrastructure.

Gaming, crypto exchanges, and NFT marketplaces would not exist today if not for technology that enables rapid app creation. Yes, according to Chainalysis and other research, 30–40% of Ethereum is self-hosted, with the rest hosted by large cloud providers. For Microsoft to acquire Activision makes strategic sense. It's not only about the games, but also the infrastructure that supports them.

Follow the money

Understanding how money and wealth flow in a complex and dynamic environment helps build clarity. Unless you are exceedingly wealthy, you have limited ability to significantly engage in the Web3 economy today. Few can just buy 10 ETH and spend it in one day. You must comprehend who benefits from the process, and how that 10 ETH circulates now and possibly tomorrow. Major holders and players control supply and liquidity in any market. Today, most Web3 apps are designed to increase capital inflow so existing significant holders can utilize it to create a nascent Web3 economy. When you see a new Metaverse or Web3 application, remember how money flows.

What is the use case? 

What does the app do? If there is no clear use case with clear makers and consumers solving a real problem, then the euphoria soon fades, and the only stakeholders who remain enthused are those who have too much to lose.

Time is a major competition that is often overlooked.

We're only busier, but each day is still 24 hours. Using new apps may mean that time is lost doing other things. The user must be eager to learn. Metaverse and Web3 vs. our time?  I don't think we know the answer yet (at least for working adults whose cost of time is higher).
I don't think we know the answer yet (at least for working adults whose cost of time is higher).

People and organizations need security and transparency.

For new technologies or apps to be widely used, they must be safe, transparent, and trustworthy. What does secure Metaverse and Web3 mean? This is an intriguing subject for both the business and public sectors. Cloud adoption grew in part due to improved security and data protection regulations.

 The following frameworks can help analyze and understand new technologies and emerging technological topics, unless you are a significant investment fund with the financial ability to gamble on numerous initiatives and essentially form your own “index fund”.

I write on VC, startups, and leadership.

More on https://www.linkedin.com/in/joycejshen/ and https://joyceshen.substack.com/

This writing is my own opinion and does not represent investment advice.

Crypto Zen Monk

Crypto Zen Monk

2 years ago

How to DYOR in the world of cryptocurrency

RESEARCH

We must create separate ideas and handle our own risks to be better investors. DYOR is crucial.

The only thing unsustainable is your cluelessness.

DYOR: Why

  • On social media, there is a lot of false information and divergent viewpoints. All of these facts might be accurate, but they might not be appropriate for your portfolio and investment preferences.

  • You become a more knowledgeable investor thanks to DYOR.

  • DYOR improves your portfolio's risk management.

My DYOR resources are below.

Messari: Major Blockchains' Activities

New York-based Messari provides cryptocurrency open data libraries.

Major blockchains offer 24-hour on-chain volume. https://messari.io/screener/most-active-chains-DB01F96B

Chains Activity providced by Messari

What to do

Invest in stable cryptocurrencies. Sort Messari by Real Volume (24H) or Reported Market Cap.

Coingecko: Research on Ecosystems

Top 10 Ecosystems by Coingecko are good.

https://www.coingecko.com/en/categories

What to do

Invest in quality.

  • Leading ten Ecosystems by Market Cap

  • There are a lot of coins in the ecosystem (second last column of above chart)

CoinGecko's Market Cap Crypto Categories Market capitalization-based cryptocurrency categories. Ethereum Ecosystem www.coingecko.com

Fear & Greed Index for Bitcoin (FGI)

The Bitcoin market sentiment index ranges from 0 (extreme dread) to 100. (extreme greed).

How to Apply

See market sentiment:

  • Extreme fright = opportunity to buy

  • Extreme greed creates sales opportunity (market due for correction).

https://alternative.me/crypto/fear-and-greed-index/Trend of FGI over a period of time. https://alternative.me/crypto/fear-and-greed-index/

Glassnode

Glassnode gives facts, information, and confidence to make better Bitcoin, Ethereum, and cryptocurrency investments and trades.

Explore free and paid metrics.

Stock to Flow Ratio: Application

The popular Stock to Flow Ratio concept believes scarcity drives value. Stock to flow is the ratio of circulating Bitcoin supply to fresh production (i.e. newly mined bitcoins). The S/F Ratio has historically predicted Bitcoin prices. PlanB invented this metric.

https://studio.glassnode.com/metrics?a=BTC&m=indicators.StockToFlowRatio

Utilization: Ethereum Hash Rate

Ethereum miners produce an estimated number of hashes per second.

https://studio.glassnode.com/metrics?a=ETH&m=mining.HashRateMean

ycharts: Hash rate of the Bitcoin network

https://ycharts.com/indicators/bitcoin_network_hash_rate

TradingView

TradingView is your go-to tool for investment analysis, watch lists, technical analysis, and recommendations from other traders/investors.

https://www.tradingview.com/markets/cryptocurrencies/ideas/

Research for a cryptocurrency project

Two key questions every successful project must ask: Q1: What is this project trying to solve? Is it a big problem or minor? Q2: How does this project make money?

Each cryptocurrency:

  • Check out the white paper.

  • check out the project's internet presence on github, twitter, and medium.

  • the transparency of it

  • Verify the team structure and founders. Verify their LinkedIn profile, academic history, and other qualifications. Search for their names with scam.

  • Where to purchase and use cryptocurrencies Is it traded on trustworthy exchanges?

  • From CoinGecko and CoinMarketCap, we may learn about market cap, circulations, and other important data.

The project must solve a problem. Solving a problem is the goal of the founders.

Avoid projects that resemble multi-level marketing or ponzi schemes.

Your use of social media

  • Use social media carefully or ignore it: Twitter, TradingView, and YouTube

Someone said this before and there are some truth to it. Social media bullish => short.

Your Behavior

Investigate. Spend time. You decide. Worth it!

Only you have the best interest in your financial future.

Ajay Shrestha

Ajay Shrestha

2 years ago

Bitcoin's technical innovation: addressing the issue of the Byzantine generals

The 2008 Bitcoin white paper solves the classic computer science consensus problem.

Figure 1: Illustration of the Byzantine Generals problem by Lord Belbury, CC BY-SA 4.0 / Source

Issue Statement

The Byzantine Generals Problem (BGP) is called after an allegory in which several generals must collaborate and attack a city at the same time to win (figure 1-left). Any general who retreats at the last minute loses the fight (figure 1-right). Thus, precise messengers and no rogue generals are essential. This is difficult without a trusted central authority.

In their 1982 publication, Leslie Lamport, Robert Shostak, and Marshall Please termed this topic the Byzantine Generals Problem to simplify distributed computer systems.

Consensus in a distributed computer network is the issue. Reaching a consensus on which systems work (and stay in the network) and which don't makes maintaining a network tough (i.e., needs to be removed from network). Challenges include unreliable communication routes between systems and mis-reporting systems.

Solving BGP can let us construct machine learning solutions without single points of failure or trusted central entities. One server hosts model parameters while numerous workers train the model. This study describes fault-tolerant Distributed Byzantine Machine Learning.

Bitcoin invented a mechanism for a distributed network of nodes to agree on which transactions should go into the distributed ledger (blockchain) without a trusted central body. It solved BGP implementation. Satoshi Nakamoto, the pseudonymous bitcoin creator, solved the challenge by cleverly combining cryptography and consensus mechanisms.

Disclaimer

This is not financial advice. It discusses a unique computer science solution.

Bitcoin

Bitcoin's white paper begins:

“A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.” Source: https://www.ussc.gov/sites/default/files/pdf/training/annual-national-training-seminar/2018/Emerging_Tech_Bitcoin_Crypto.pdf

Bitcoin's main parts:

  1. The open-source and versioned bitcoin software that governs how nodes, miners, and the bitcoin token operate.

  2. The native kind of token, known as a bitcoin token, may be created by mining (up to 21 million can be created), and it can be transferred between wallet addresses in the bitcoin network.

  3. Distributed Ledger, which contains exact copies of the database (or "blockchain") containing each transaction since the first one in January 2009.

  4. distributed network of nodes (computers) running the distributed ledger replica together with the bitcoin software. They broadcast the transactions to other peer nodes after validating and accepting them.

  5. Proof of work (PoW) is a cryptographic requirement that must be met in order for a miner to be granted permission to add a new block of transactions to the blockchain of the cryptocurrency bitcoin. It takes the form of a valid hash digest. In order to produce new blocks on average every 10 minutes, Bitcoin features a built-in difficulty adjustment function that modifies the valid hash requirement (length of nonce). PoW requires a lot of energy since it must continually generate new hashes at random until it satisfies the criteria.

  6. The competing parties known as miners carry out continuous computing processing to address recurrent cryptography issues. Transaction fees and some freshly minted (mined) bitcoin are the rewards they receive. The amount of hashes produced each second—or hash rate—is a measure of mining capacity.

Cryptography, decentralization, and the proof-of-work consensus method are Bitcoin's most unique features.

Bitcoin uses encryption

Bitcoin employs this established cryptography.

  1. Hashing

  2. digital signatures based on asymmetric encryption

Hashing (SHA-256) (SHA-256)

Figure 2: SHA-256 Hash operation on Block Header’s Hash + nonce

Hashing converts unique plaintext data into a digest. Creating the plaintext from the digest is impossible. Bitcoin miners generate new hashes using SHA-256 to win block rewards.

A new hash is created from the current block header and a variable value called nonce. To achieve the required hash, mining involves altering the nonce and re-hashing.

The block header contains the previous block hash and a Merkle root, which contains hashes of all transactions in the block. Thus, a chain of blocks with increasing hashes links back to the first block. Hashing protects new transactions and makes the bitcoin blockchain immutable. After a transaction block is mined, it becomes hard to fabricate even a little entry.

Asymmetric Cryptography Digital Signatures

Figure 3: Transaction signing and verifying process with asymmetric encryption and hashing operations

Asymmetric cryptography (public-key encryption) requires each side to have a secret and public key. Public keys (wallet addresses) can be shared with the transaction party, but private keys should not. A message (e.g., bitcoin payment record) can only be signed by the owner (sender) with the private key, but any node or anybody with access to the public key (visible in the blockchain) can verify it. Alex will submit a digitally signed transaction with a desired amount of bitcoin addressed to Bob's wallet to a node to send bitcoin to Bob. Alex alone has the secret keys to authorize that amount. Alex's blockchain public key allows anyone to verify the transaction.

Solution

Now, apply bitcoin to BGP. BGP generals resemble bitcoin nodes. The generals' consensus is like bitcoin nodes' blockchain block selection. Bitcoin software on all nodes can:

Check transactions (i.e., validate digital signatures)

2. Accept and propagate just the first miner to receive the valid hash and verify it accomplished the task. The only way to guess the proper hash is to brute force it by repeatedly producing one with the fixed/current block header and a fresh nonce value.

Thus, PoW and a dispersed network of nodes that accept blocks from miners that solve the unfalsifiable cryptographic challenge solve consensus.

Suppose:

  1. Unreliable nodes

  2. Unreliable miners

Bitcoin accepts the longest chain if rogue nodes cause divergence in accepted blocks. Thus, rogue nodes must outnumber honest nodes in accepting/forming the longer chain for invalid transactions to reach the blockchain. As of November 2022, 7000 coordinated rogue nodes are needed to takeover the bitcoin network.

Dishonest miners could also try to insert blocks with falsified transactions (double spend, reverse, censor, etc.) into the chain. This requires over 50% (51% attack) of miners (total computational power) to outguess the hash and attack the network. Mining hash rate exceeds 200 million (source). Rewards and transaction fees encourage miners to cooperate rather than attack. Quantum computers may become a threat.

Visit my Quantum Computing post.

Quantum computers—what are they? Quantum computers will have a big influence. towardsdatascience.com

Nodes have more power than miners since they can validate transactions and reject fake blocks. Thus, the network is secure if honest nodes are the majority.

Summary

Table 1 compares three Byzantine Generals Problem implementations.

Table 1: Comparison of Byzantine Generals Problem implementations

Bitcoin white paper and implementation solved the consensus challenge of distributed systems without central governance. It solved the illusive Byzantine Generals Problem.

Resources

Resources

  1. https://en.wikipedia.org/wiki/Byzantine_fault

  2. Source-code for Bitcoin Core Software — https://github.com/bitcoin/bitcoin

  3. Bitcoin white paper — https://bitcoin.org/bitcoin.pdf

  4. https://en.wikipedia.org/wiki/Bitcoin

  5. https://www.microsoft.com/en-us/research/publication/byzantine-generals-problem/

  6. https://www.microsoft.com/en-us/research/uploads/prod/2016/12/The-Byzantine-Generals-Problem.pdf

  7. https://en.wikipedia.org/wiki/Hash_function

  8. https://en.wikipedia.org/wiki/Merkle_tree

  9. https://en.wikipedia.org/wiki/SHA-2

  10. https://en.wikipedia.org/wiki/Public-key_cryptography

  11. https://en.wikipedia.org/wiki/Digital_signature

  12. https://en.wikipedia.org/wiki/Proof_of_work

  13. https://en.wikipedia.org/wiki/Quantum_cryptography

  14. https://dci.mit.edu/bitcoin-security-initiative

  15. https://dci.mit.edu/51-attacks

  16. Genuinely Distributed Byzantine Machine Learning, El-Mahdi El-Mhamdi et al., 2020. ACM, New York, NY, https://doi.org/10.1145/3382734.3405695