What you need to know about NFTs and smart contracts
This blog post aims to explain smart contracts in NFTs. We shall further go through the token standards like ERC-721 and others. By the end of the article, we shall also glance at the audit & verification of a smart contract.
A non-fungible token or NFT is the new form of intellectual property that is incredibly trendy right now. It is a digital asset on a blockchain network and symbolizes real-world artifacts such as art, music, images, documents, and videos. It is a digital replica of physical collectibles. The most fantastic thing about NFTs is that no two NFTs are the same. The popularity of an NFT is due to its’ scarcity and uniqueness.
Further, an NFT is a form of the digital token and essentially a one-of-a-kind proof of digital asset ownership. This means that at a time, an NFT has only one owner; however, it can be transferred from one owner to another. NFTs are crypto-tokens built on the blockchain networks like Ethereum, Cardano, Solana, etc. Therefore, an NFT’s functioning is based on smart contracts.
What are Smart Contracts in NFTs?
To create an NFT, you need to mint it on the blockchain network. In this process, the user registers on the minting platform and performs the minting operation. The minting platform executes a code that complies with the digital standard, such as ERC-721. Further, upon executing the code, a new block is added to the blockchain network that contains information regarding NFT ownership and transferability. Hence, a smart contract is a code that assigns ownership and manages the transferability of the NFTs.
To explain the smart contract in more detail, consider it a self-executing program or protocol in which the contents of an agreement are inscribed directly into lines of computer code to facilitate the performance of the agreement. It is a blockchain-based piece of code. Moreover, it eliminates the mediators or central authority in the ownership verification and transfer process from one owner to another.
An analogy to a smart contract is the vending machine. A vending machine dispenses drinks, candies, chocolates, etc., upon receipt of money. As you put the coin into the slot, the machine identifies the coin through a mechanism. Upon verification of the coin, another mechanism gets triggered that dispenses the goods. In this system, there is no need for a shopkeeper to take the money and give you goods.
Other than the NFTs, smart contracts have many other uses, such as acting as a deed in real estate, e-commerce, supply chain, etc. Further, smart contracts can activate other smart contracts.
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