NFT smart contracts explained

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In this guide

What is an NFT smart contract?
Advantages of using smart contracts
Standards of smart contracts for creating NFTs
How are NFT smart contracts created?
What does a smart contract cover?
How do smart contracts verify authenticity?
Do smart contracts prevent counterfeits?
Examples of NFT smart contracts
How to create an NFT smart contract?
Final thoughts

What is an NFT smart contract?

An NFT (Non-Fungible Token) smart contract is a computer program that is stored on a blockchain network, such as Ethereum. The smart contract contains the rules and logic that govern the creation, ownership, transfer, and storage of a specific NFT.

When someone creates an NFT, they typically use a smart contract to define the unique characteristics of the NFT, such as its name, description, and metadata. The smart contract also specifies the rules for transferring ownership of the NFT, such as how much cryptocurrency is required to purchase it and where the funds should be sent.

Once the smart contract is deployed on the blockchain network, it becomes a self-executing program that can interact with the blockchain and automatically enforce the rules that were programmed into it. This ensures that the NFT is always managed in a transparent, secure, and decentralized manner, and that ownership and transactions are recorded immutably on the blockchain.

Advantages of using smart contracts

Security

NFT smart contracts are built on blockchain technology, which makes them secure and tamper-proof. The contracts are executed automatically by the network, so there is no need for intermediaries, which reduces the risk of fraud and hacking.

Transparency

NFT smart contracts are transparent, as all the information is stored on a public blockchain that can be accessed by anyone. This makes it easy to verify the authenticity of an NFT and ensures that ownership is clear and undisputed.

Decentralization

NFT smart contracts are decentralized, which means that there is no central authority controlling the network. This makes it more difficult for bad actors to manipulate the system, as there is no single point of failure.

Programmability

NFT smart contracts are programmable, which means that developers can create custom contracts that suit their specific needs. This allows for a wide range of use cases, such as creating collectibles, art, music, and more.

Efficiency

NFT smart contracts are efficient, as they automate many of the processes involved in creating, buying, and selling NFTs. This reduces the need for intermediaries and paperwork, which saves time and reduces costs.

Standards of smart contracts for creating NFTs

There are several standards of smart contracts that are used for creating NFTs. These standards ensure that NFTs are interoperable, meaning they can be used and exchanged across different platforms and applications.

The most commonly used standards for NFT smart contracts are:

ERC-721 – the original standard for NFTs on the Ethereum blockchain. It defines the minimum interface that a smart contract must implement in order to create a non-fungible token.
ERC-1155 – a newer standard that was introduced as an improvement over ERC-721. It allows for the creation of both fungible and non-fungible tokens within the same smart contract. This makes it more efficient for creating collections of NFTs, as it reduces the number of contracts that need to be deployed.
ERC-998 allows for the creation of NFTs that can own other NFTs. This makes it possible to create complex collections of NFTs that can be traded as a single unit.
TRC-721 – a standard for NFTs on the Tron blockchain. It is similar to ERC-721, but has some minor differences in the interface that a smart contract must implement.
NEP-11 – a standard for NFTs on the NEO blockchain. It is similar to ERC-721, but has some differences in the way that ownership and transfer of tokens are managed.

How are NFT smart contracts created?

Сreating an NFT smart contract requires programming skills and knowledge of blockchain technology. Such contracts are created using programming languages like Solidity, which is a high-level programming language designed specifically for creating smart contracts on the Ethereum blockchain.

Here are the basic steps to create an NFT smart contract. The first step is to write the code for the NFT smart contract using a programming language such as Solidity. This code defines the rules and logic for the NFT, such as its name, symbol, metadata, and transferability.

Once the code is written, it needs to be compiled into bytecode that can be executed on the Ethereum Virtual Machine (EVM). The compiled bytecode is then deployed to the Ethereum network as a smart contract. This requires the payment of a deployment fee, known as gas, which is paid in Ethereum cryptocurrency.

Once the smart contract is deployed, the NFT can be created by calling the create function in the smart contract code. This function will create a new token and assign ownership to the account that called the function.

The smart contract can be used to manage the ownership and transfer of the NFT, such as by implementing functions that allow for the sale or transfer of the token.

What does a smart contract cover?

A Non-Fungible Token smart contract covers the rules and logic that govern the creation, ownership, transfer, and storage of a specific NFT. Check some of the key elements that an NFT smart contract typically covers:

Token metadata that describes the NFT, such as its name, symbol, and description.
Token ownership transfer rules, such as how much cryptocurrency is required to purchase it and where the funds should be sent.
Token creation rules, such as the maximum number of tokens that can be created and how they can be minted.
Token storage on the blockchain network, such as in a digital wallet or a decentralized storage system.
Token additional functionality, such as whether it can be used as collateral for a loan or as a reward for completing a task.

How do smart contracts verify authenticity?

First, NFTs have a unique identifier that is assigned to them by the smart contract when they are created. This identifier is stored on the blockchain and cannot be changed, ensuring that each NFT is unique and cannot be replicated.

NFT smart contracts can also use digital signatures to verify the authenticity of the creator and owner of the NFT. Digital signatures are created using cryptographic algorithms and provide a secure and tamper-proof way of verifying the identity of the sender and receiver of a transaction.

Besides, NFTs can contain metadata that describes the asset, such as its name, description, and image. This metadata can be used to verify the authenticity of the NFT by comparing it to the original asset.

Finally, the blockchain network provides a transparent and tamper-proof record of the ownership history of an NFT. This means that the ownership of the NFT can be verified by checking the transaction history on the blockchain.

Do smart contracts prevent counterfeits?

NFT smart contracts can help prevent counterfeiting of digital assets by providing a secure and transparent way to verify the authenticity of an NFT. However, it is not a foolproof solution.

Counterfeiters can still attempt to create fake NFTs by copying the metadata of an existing NFT, such as its name, description, and image, and creating a new token with the same metadata. To prevent this, some NFT platforms use advanced techniques such as image recognition, watermarking, and other digital signatures to ensure the authenticity of the NFT.

Overall, it is important to exercise caution when buying and selling NFTs and to do due diligence in verifying the authenticity of the NFT before making a purchase.

Examples of NFT smart contracts

CryptoKitties

CryptoKitties is a popular NFT platform that uses smart contracts to create unique digital cats that can be collected, traded, and bred. The smart contract defines the rules for creating new CryptoKitties, including their unique attributes and genetic makeup.

Decentraland

Decentraland is an NFT platform that uses smart contracts to create virtual real estate that can be bought and sold. The smart contract defines the rules for creating new parcels of land, including their location, size, and ownership.

NBA Top Shot

NBA Top Shot is an NFT platform that uses smart contracts to create unique digital collectibles that are based on iconic NBA moments. The smart contract defines the rules for creating new moments, including their rarity and authenticity.

SuperRare

SuperRare is an NFT platform that uses smart contracts to create unique digital art that can be collected and sold. The smart contract defines the rules for creating new artworks, including their ownership, authenticity, and provenance.

Final thoughts

NFT smart contracts are a powerful tool for creating, transferring, and verifying the ownership of digital assets. They provide a secure and transparent way to ensure the uniqueness and authenticity of each NFT, as well as a tamper-proof record of its ownership history. NFT smart contracts are being used in many different applications, from gaming and virtual real estate to collectibles and digital art, and are increasingly being adopted by a variety of industries.

While NFT smart contracts offer many advantages, it is important to note that they are not a foolproof solution for preventing counterfeits or guaranteeing the value of an NFT. As with any investment, it is important to carefully evaluate the authenticity, rarity, and potential value of an NFT before making a purchase.

Overall, NFT smart contracts are a powerful tool that are transforming the way we think about ownership and value in the digital world. As the technology continues to evolve, it will be exciting to see how NFT smart contracts are used in new and innovative ways.

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