2021 is a year for Non-fungible tokens (NFT), with several successful NFT projects, including Jack Dorsey’s first tweet ($2.9 million), a digital artwork collection by Grimes ($6 million), and “Beeple'' ($69 million). Realizing the enormous potential of NFTs, many influencers such as Michael Jordan, Mark Cuban, and 2 Chainz, decided to invest millions of dollars in NFT-based projects. NFTs involve not only works in the art and music area but also the gaming sector. Especially, integrating NFTs into games brings a new wave for the game market, with the beginning of Axie Infinity, which is the first NFT game hitting $1 billion in sales. As a result, there are a huge amount of companies jumping into the NFT market, especially in the game area. Then, NFT Game Development and NFT Crypto Development are gaining great attention.
Basically, an NFT- a unique digital asset that is unalterable and unchangeably stored by blockchain technology. Meanwhile, a fungible token is interchangeable with other assets that have the same contents. ETH, Bitcoin, etc are fungible tokens since they can be exchanged with each other. Non-fungible tokens exist in different forms such as video, image, music files, audio files, trading cards, concert tickets, or even tweets. Not only digital works but also real estate or tangible assets can be tokenized and sold in various NFT markets. Cars and houses are expected to be popular NFTs soon. And to create an NFT that is transferable, one-of-a-kind, and able to store the NFT owner’s information, we need to mint the tokens. And that’s why NFT Smart Contract Development is indispensable. So, before creating or trading NFTs, check out this article to have a deep insight into the concept of NFT Smart Contract and how it can be the lifeblood of NFTs.
1. What is an NFT Smart Contract? How does blockchain technology relate to NFT Smart Contract Development?
The term “Smart Contract” describes computer codes that execute an agreement automatically, which is stored on a blockchain-based platform, without the involvement of intermediates. It is in charge of automating a workflow, executing the next actions in the agreements when preconditions are met. For example, if a party completes a transaction, parameters have been met and the automatic code will execute the next steps that are triggered by these parameters. Especially, each code is copied in different nodes of a blockchain, thus, there is no fear of data loss. And NFTs Smart Contract is also working like that. Integrating a Smart Contract with metadata (information about unique works) provides proof of ownership and distinguishes an NFT from others, ensuring the uniqueness of an NFT. An NFT Smart Contract helps decrease the limitations on the use of NFT, by providing proof of work & ownership, and royalty payments. These factors can be considered core factors that create the concept of Non-fungible tokens. Without it, NFTs can not exist. Hence, a Smart Contract that helps NFTs gain these core factors, can be called the lifeblood of non-fungible tokens. Next, let see how NFT Smart Contract Development brings irreplaceable advantages for the non-fungible market.
2. NFT Smart Contract provides proof of work and ownership
NFT is written with a Smart Contract, which controls actions such as certificating the ownership or the rights of transferring NFTs. In the blockchain-based channels, NFTs are protected with the immutability and transparency of cryptographic storage, where NFTs are indivisible. Since NFT Smart Contract includes unique metadata such as owners’ identity, secure file links, processes of works, etc in a secure and transparent blockchain-based storage, proof of work (where and how authors produce the works, story behind the work, materials used for work) and authenticity to potential buying parties are recorded and recognized. Each non-fungible token has different metadata and codes, which make them unique and unexchangeable. NFTs Smart Contract Development ensures that Non-fungible tokens can not be accessed or transferred by frauds. Since in NFT smart contract systems, if all preconditions in agreements are not met, no one can affect NFTs. Additionally, an NFT Smart Contract does not contain middlemen, so the risks decline because the more the parties, the higher the risk of fraud. So, it plays an indispensable role in protecting data and storing proof of work and ownership.
Currently, the vast majority of NFTs work on the Ethereum platform. In Ethereum, there are 2 token standards: the ERC-20 standard for fungible tokens and the ERC-721 standard for non-fungible tokens. ERC-721 (Ethereum Request for Comments 721) provides different functionalities within a smart contract such as transferring, selling tokens, or authorizing a third-party account to move tokens. An NFT’s owner can self-program a smart contract by following ERC-721 standard or using existing free smart contracts templates in virtual libraries and add additional codes about names of tokens, authors’ information, transferring rights, links to works, etc to enhance the security of an NFT.
3. Building royalty payment systems based on NFT Smart Contract
As mentioned in a previous article, currently, there are a lot of countries that have not adopted royalty resale regulations for creators in the creative area. In the Ethereum platform, a huge amount of NFTs are minted with the adoption of the ERC-721 standard, then an NFTs’ owner can receive payment once (initial sale for purchasers). And if the purchasers then mint it in other NFT Marketplaces, with a higher price, the original author can not receive a royalty payment. However, with the latest NFT Smart Contract Development, these issues can be solved. The owner of NFTs can get royalty payment right after their work is resold, thanks to the NFT Smart Contract adoption. Currently, there are more and more platforms that have launched to improve the royalty payment system, for example, Zora. A Zora platform has a new feature, which is “creator share” so NFTs’ authors can decide the percentage of royalty they will get if the work is resale. The royalties they get will not depend on their first NFT price but the price of work minted by other sellers. For instance, if authors choose “creator share” as 10% while their first NFT digital art is worth 2ETH, then other accounts sell it for 10 ETH, the original authors will receive 1 ETH as royalty.
However, it has a rising problem: royalty payment implementations in different NFT channels (such as OpenSea, Rarible, etc) are not compatible. Hence, NFTs ownership can only receive royalties payment when buyers do trade actions in the platform that their NFTs appear. With this platform problem, Zach Burks and James Morgan have created an ERC-721 Royalty Standard, to ensure that ownership of NFTs will get royalty payment regardless of the NFT market where the work will be resold. This new standard contributes to down the copyright issue existing in the market and increases the authors’ rights while maintaining the uniqueness and value of each NFT.
4. What companies are developing Blockchain? How much does it cost to develop Blockchain?
It is clear that NFTs have become a hot trend in different areas and to build and develop a non-fungible token, the NFT Smart Contract helps to provide and store the proof of work, along with ownership verification and adopting royalty payment. NFTs are predicted to be big in the future, especially in the game and digital art sectors. So, if you want to build your own NFT-based projects, such as our previous projects, that require high security, stunning design, and run smoothly, SotaTek is pleased to provide you several blockchain services (such as NFT Website Development, DeFi App Development, etc). With experienced and skillful teams, we will cooperate with your business in consulting, making plans, developing, giving suitable solutions and services to make high-quality blockchain-based projects.