What Is An NFT Smart Contract? Complete Guide

We all have listened that NFTs (non-fungible tokens) are unique but what makes them unique? NFT Smart contracts. When we talk about NFTs, we always listen the word “smart contract”. So what is an NFT smart contract? Don’t worry it’s not that hard to understand. As you can understand by its name it is just a contract that exists digitally so we call it a smart contract. If you don’t know what is a simple contract. A contract is an agreement between two parties buyer and seller containing some terms and conditions. 

What is an NFT smart contract?

NFT smart contract is a digital contract based on a coding program and it contains some programmatically defined actions that only execute when the specific conditions are fulfilled. NFT smart contracts are stored on the blockchain. The smart contract only has if, else, and when code blocks to authenticate transactions between buyers and sellers. If the one condition satisfies only then the next code runs otherwise it will not perform further conditions.

It means smart contract code and conditions run into the sequence. Smart contracts have the token ID of NFT, transaction history, Artist copyrights, some owner’s details, and some pre-defined agreements. These details are publicly accessible and everybody can see these details on the blockchain. This means you can verify ownership of any NFT through its smart contract. Digital assets can be copied but smart contracts have the proof of ownership that makes NFTs unique and copyrights can be claimed by the owner.

NFTs smart contracts do not only have the basic payment processing functionality but also can be programmed with some extra functionality features like linking to other NFTs and royalty cuts etc. 

If a user defines a smart contract as a self-executable program it can automatically execute if certain conditions are fulfilled. For example, there is a self-destruction NFT that will be destructed if the global temperature rises by 2 degrees centigrade from a specific temperature. This NFT has a predefined smart contract to self-destroy itself if the temperature rises that is stored on the blockchain. So how this smart contract predefined program will be triggered or get to know that the global temperature has been increased to a certain point. Through oracle.  

Related: What is NFT and How does it Change Living?

What is Oracle?

Oracle is the blockchain service that provides authorized sources of data to the smart contract blockchain through APIs. Like I was giving the example of self-destructing NFT. This NFT is using the oracle service of NASA to get accurate temperature data. So the NFT smart contract self-destructing program can be executed through an API signal and if the data satisfies temperature conditions NFT will be destructed automatically.

How NFT smart contracts are created?

When an NFT is minted on the blockchain. Special terms & conditions are defined in form of code in the smart contract. Quality, functionality, ownership, and payment authentication of NFTs are defined in the smart contract and there are many platforms that are used for smart contracts. One of the most popular of them is Ethereum. I will discuss the basics of Ethereum blockchain standards. There are two standards of Ethereum blockchain ERC-721 and ERC-1155.


This is the public standard mostly used to build NFT smart contracts and the functionality of an NFT is defined by this standard on the Ethereum blockchain. A single ERC-721 standard can handle multiple tokens. ERC-721 requires two details to transfer a token. 

  1. Token ID
  2. Smart Contract Address

ERC- 1155:

As part of the ERC 1155 standard, tokens can be identified by their identifiers, such as the token id, and each token can be represented by a configurable token type and its own metadata attributes. In addition to Ethereum, TRON, EOS, TEZOS, and Solarium are smart contract blockchains with NFT tools. NFTs will be standardized in order to ensure their interoperability. NFTs may operate differently due to the capabilities of a blockchain. Smart contracts are adjusted to fit the blockchain environments in which they are executed, but these variations are usually small.

Related: What is Blockchain Technology and How does it Work?

How do NFTs configure with the smart contract?

NFTs can be configured with smart contracts in two ways. 

  • NFTs can be embedded into the smart contracts means a smart contract can own an NFT and it will be transferred to a user or another smart contract when the specific conditions will be fulfilled.
  • A smart contract can be embedded into an NFT means if a film is an NFT. You can access this digital asset once certain conditions are fulfilled like you have to make a payment of a certain amount to watch the movie.

Why smart contracts are so important?

Smart contracts contain very special information, terms, and agreements about an NFT. The most important information it contains is licensing pacts. What information is this? The proof of ownership and copyright. Yes, both are different from each other.

In some cases, copyrights do not transfer to the new owner which means copyrights belong to the artist of digital art, and ownership belongs to NFT. Due to this feature, artists receive royalty cuts whenever their NFTs are benign sold or purchased. But nowadays owner of NFTs receives a license. So they can use NFTs for commercial and business purposes. This license is also covered in smart contracts in the form of coding.

Verify NFTs’ authenticity with a smart contract:

Yes, It is definitely possible to verify the authenticity of any NFT through a smart contract. You can check ownership and track the previous transactions that token on the public blockchain. You can check NFTs metadata and the wallet address of the owner through the blockchain. This data is stored on blockchain so anybody can verify this and avoid fraudulent activities. So you can verify any NFT manually through this process. Some platforms provide this information in disclaimers but SuperRare collects this information through an application form and shows these details to the buyer. 

How do smart contracts handle the replicated NFTs?

Counterfeiting is prevented through smart contracts because when an NFT is sold or purchased, a new token ID is generated on the blockchain that contains the address of the smart contract, and with that smart contract you can verify the transaction and owner. So the owner has proof of ownership that is publicly available. If someone creates a duplicate of your NFT, you can show your ownership of that NFT, and a duplicate NFT or digital assets will be worthless. 

Only owners can sell and purchase their NFTs, No one can perform transactions on their NFTs because an owner’s secret key is required to perform a transaction.

Related: What Is NFT Metadata & How Does it Work? Full Guide

What are the benefits of smart contracts?

Smart contracts are not only used in NFTs but they are used for multiple purposes like betting. Let’s suppose, We have a bet that if Pakistan wins a championship you have to give me 1 BTC, and if India wins I will give you 1btc. So we can create a smart contract for this bet that will have two conditions, if India wins send 1 BTC to you, and if Pakistan wins send 1 BTC to me.

So this smart contract will perform an action when any of these countries will win or else nothing will happen. If you noticed that there is no third party in this transaction and there are no trust issues in the transaction. And the transaction will be public on the blockchain so anybody can verify this.

So this is just an example, with smart contracts we can sell and purchase big assets like real estate with no trust issues and minimum commission fees. So smart contracts are going to evolve in the future with their amazing use cases. Just imagine using smart contracts in your daily routine. Life will be easier. I have tried my best to elaborate on what is NFT smart contracts and how they are used. I hope you found this article helpful. If you have any queries or suggestions do not hesitate to ask in the comment section or you can contact us. Give it a share if you like this post. Thanks for reading.

Related: What are Extremely Fungible Tokens? Accurate Intro

Leave a Reply

Related Posts