Are you new to the world of NFTs and cryptocurrencies? Well, if yes, one term you would have often heard must be “smart contracts.” Wondering what they are? Read our guide and find out all you need to know for the future of technology, innovations and advancements.
In this blog, we will explore the following;
What are smart contracts?
A smart contract is a computer program that is stored on a blockchain and automatically executes when certain conditions are met. It is a way to facilitate, verify, and enforce the negotiation or performance of a contract. These allow for the automation of the contract execution process and enable the transfer of assets without the need for intermediaries.
They can be used to create and manage digital assets like NFT collections, to execute financial transactions such as trading and lending, and to facilitate decentralized autonomous organizations (DAOs). These are tamper-proof, transparent, and can be programmed to execute complex logic. They can be seen as a digital version of a legal contract but with the added benefits of security and automation provided by blockchain technology.
How do they work?
Smart contracts work by using the underlying technology of a blockchain, a decentralized and distributed digital ledger that records transactions across a network of computers. An example of blockchain would include Ethereum Blockchain along with Solana.
When a smart contract is created, it is stored on the blockchain and can be accessed by all parties involved. The contract contains a set of rules and conditions that must be met before the contract can be executed. Once the conditions are met, the contract automatically executes without intermediaries, such as lawyers or banks.
For example, suppose two parties agree to exchange a digital asset for a certain amount of cryptocurrency. In that case, the smart contract can be programmed to automatically transfer the asset to the buyer and release the cryptocurrency to the seller once the payment is received.
Most commonly smart contracts are created on Polygon Blockchain, created by Nick Szabo. Using these you can also buy NFTs, video games, sell NFTs and other digital items.
Some common use cases
Here are some common uses of smart contracts:
- Supply chain management: Smart contracts can track the movement of goods and ensure that all parties meet their obligations.
- Financial services: Smart contracts can automate financial transactions such as trading, lending, and insurance.
- Real estate: Smart contracts can automate property transactions and manage property ownership records.
- Healthcare: Smart contracts can securely store and share patient medical records and automate the payment process for medical services.
- Gaming: Smart contracts can create and manage in-game assets, such as weapons and armour, and facilitate player-to-player transactions.
- Identity verification: Smart contracts can create and manage digital identities, such as passports and driver’s licenses.
- Voting: Smart contracts can facilitate secure and transparent voting systems.
- Decentralized Autonomous Organizations(DAOs): Smart contracts can create and manage decentralized organizations where members can vote on decisions and proposals using the blockchain.
- NFTs: Smart contracts can create, mint, and manage NFTs (non-fungible tokens), representing digital assets such as art, music, videos, and more.
These are just a few examples of how smart contracts can be used, but the possibilities are virtually limitless. As the technology continues to evolve, new use cases will likely emerge.
Which smart contract is to be used to create an NFT?
Several smart contract platforms can be used to create NFTs, represent ownership, each with strengths and features. Some popular choices include:
- Ethereum: The most widely-used platform for creating and trading NFTs, with a large and active community of developers and a wide range of tools and services available.
- Binance Smart Chain (BSC): A newer platform that has gained popularity recently due to its lower transaction costs and faster confirmation times compared to Ethereum.
- Polygon (previously Matic Network): A layer 2 scaling solution that utilizes side chains to offload some of the workloads from the Ethereum mainnet; this reduces gas fees and improves transaction speed.
- TRON: A blockchain platform focused on high throughput and scalability, with a growing ecosystem of dApps and NFT marketplaces.
It’s important to consider the specific needs of your NFT project and choose a platform that best meets those needs. You can also consult with blockchain developers or experts for their opinion.
Do you need a smart contract to create an NFT?
No, a smart contract is not necessary to create an NFT (non-fungible token). An NFT can be created and managed through a platform or marketplace that supports the creation and trading of NFTs without the use of a smart contract. However, many NFT marketplaces and platforms use smart contracts to handle the transfer of ownership and other transactions related to NFTs.
The world of NFTs, blockchain and crypto-verse, is rapidly changing. If you do not want to be left behind in the race to know it all, this guide would have been the ideal read for you. If you are interested in learning about Ethereum and NFTs, read our guide.