When it comes to new technologies like non-fungible tokens, or NFTs, it’s vital to understand blockchain ‘smart contracts’ so you have a better idea of how these assets work and what people do with them.
First off, though, there’s a lot of jargon involved. It can be hard to cut through all that and talk about just what NFT smart contracts are. But we’re up to the task!
What Is An NFT?
A non-fungible token is a token that is unique and can’t be interchanged with any other. It also can’t be divided into parts.
As we’ve mentioned in other blogs, NFTs are used for verifying ownership of various assets, for example, digital artworks, or even physical artworks with a digital component, if that makes sense. (Check out Beeple’s “Human One” for a real in-the-flesh example – no pun intended.)
NFTs deal with ownership, provenance, properties, and the exclusivity of intellectual property assets.
One way to describe them is as authentication tools – when you check the blockchain for the NFT, you know who the owner is, or in some cases, who has a license to use something.
In other cases, it’s more of a marker of who has bought some digital item representing a favorite artist, athlete, or celebrity.
The Use of Smart Contracts
Okay, so what’s a smart contract?
A smart contract is like any contract – it specifies the details of an agreement, such as ownership and payment terms, between two parties. What makes them ‘smart’ is that they’re self-executing, with the terms of the agreement written into lines of code that (once predetermined conditions are met) gets written to a particular blockchain.
In other words, people use smart contracts to validate NFTs among other things.
Here’s another way to understand smart contracts simply – first, we just had blockchain assets. Bitcoin (BTC) was the first coin, and people understood that parties were mining BTC through creating the blockchain data. The result was, simply put, digital money.
Okay, so then smart contracts came along, and people started validating other things besides monetary value with the blockchain.
If you follow this simple analogy, smart contracts make more sense.
The first Internet was “web 1.0” – it was just a read/write Internet. You couldn’t interact through the Internet with complicated web forms.
Then there was web 2.0, which gradually evolved the read/write Internet, and web 3.0, the functional Internet.
Smart contracts are a lot like this on the blockchain. Regular blockchain is the validation of digital money or assets. Smart contracts add what you might call “blockchain 2.0” – if you’re trying to be clear and explicit about it – where the blockchain does more than just handle monetary value.
Best Platforms for NFT Smart Contract Handling
This part is a little more interesting to people who want to understand how smart contracts work practically.
The first major blockchain that many people associated with smart contracts was Ethereum.
Ethereum has an established ecosystem and the ability to handle smart contracts well. So, people have created a lot of smart contracts on Ethereum.
However, there is a challenger network that can also manage smart contracts. Bitcoin SV is particularly well-positioned for this. Leveraging Bitcoin Scripting, BSV doesn’t incur as high network fees as Ethereum or other blockchains and has larger block sizes to handle more data faster.
Ethereum and BSV Pros and Cons
Now, let’s look at some of the pros and cons of each of these platforms.
Ethereum has an established ecosystem, as we’ve said, but it also has potentially high gas fees for implementing smart contracts. There are also some problems with scaling that have led to people “rolling up” transactions in a side blockchain or doing other things to try to get around existing limitations.
Bitcoin SV is fast, scales well, and has a lot of support. But it isn’t on as many exchanges as Ethereum is.
More on NFT Smart Contract Handling
So now that you know all this, what do you do with this information?
When you understand that NFTs are created through smart contracts, and you understand the use of a smart contract on the blockchain, you’re several steps ahead of everyone else who’s still learning about how crypto works.
Then you can get involved in buying, selling, and trading various blockchain assets including NFTs or cryptocurrencies, or whatever your strategy entails.
FabriikX is a new kind of NFT marketplace that offers expertly curated, exclusive NFTs from top creators within arts, sports, and music, as well as content from the best creative minds in the digital collectibles’ community. FabriikX is also built on the power of the BSV blockchain, so you can buy NFTs without giving up your gains to gas fees. Explore its Inaugural Community Collection now.
Any news, opinions, research, analyses, prices, or other information contained in this article are provided as general market commentary and do not constitute investment advice. We do not make any warranties about the completeness, reliability, and accuracy of this market commentary. Any action you take upon the information contained in this article is strictly at your own risk, and we will not be liable for any losses or damages in connection with the use of this article.
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