If you follow the NFT industry closely, then most likely you have come across the term “smart contracts” at least a couple of times. More often than not, people dismiss smart contracts as technical jargon that has nothing to do with them. But in fact, NFT smart contracts are extremely important (if not the most important) in your NFT journey. For creators and collectors alike, understanding smart contracts is a critical step in NFT minting.
What is a smart contrac NFTt ?
A smart contract is a digital contract written as a piece of code, stored on a blockchain, and automatically executed when certain pre-set conditions are met. Typically, they are used to automatically fulfill the terms of an agreement between various parties. In layman’s terms, smart contracts follow a simple mechanism that says “if/when this happens, then do this.” In other words, when these conditions are met, the network of computers performs a predetermined action.
What makes smart contracts “smart” is that all this is done automatically, without the participation of a third party. Also, because they are on the blockchain, they are secure, transparent, efficient, and process transactions almost instantly. Moreover, unlike traditional contracts, smart contracts do not need a central authority to function and provide you with tamper-resistant and enforceable agreements.
In the context of NFT, unique information about the NFT, including ownership and transaction data, is stored in a smart contract. Creators can add details such as their identity, secure file links, and more to smart contracts. In addition, they can specify certain NFT trading rules. For example, it could be the percentage of royalties they receive for each subsequent sale. Essentially, smart contracts are what makes each NFT unique and valuable.
For NFTs, the possibilities of smart contracts go beyond simple transactions. Creators or developers can specify almost anything they want in contracts. For example, some NFT projects may grant certain rights to a select group of people. This includes exclusive access to drops for early sponsors, rewards for entering competitions, a lower coin price for later drops, the ability to breed your collectibles, and more.
How to read NFT smart contracts?
First of all, why do you need to read NFT smart contracts? As already mentioned, smart contracts contain all the information about a particular NFT. Thus, just by reading a smart contract, you can understand the popularity of the project, ownership rights, details of all transactions, and much more. Moreover, you can even mine NFT directly from the smart contract.
So, here are the steps to find a smart contract (since most NFTs are built on Ethereum, for the purposes of this guide, we will be looking at NFTs on Ethereum):
Find the NFT you are interested in on OpenSea.
Scroll down the page and click on the dropdown arrow on the Details tab.
Here you will see the “Contract Address”. Clicking on it will take you to the smart contract on Etherscan. Etherscan is a useful site for finding data about transactions, blocks, wallet addresses, smart contracts and more on the Ethereum blockchain.
Also, if you already know the address of the contract, you can directly search for the smart contract on Etherscan by pasting the address into the search bar.
Using Etherscan for more information
Now that you have the NFT smart contract, let’s see what you can understand from it.
First of all, you will see some general information related to NFT.
Balance: The number of coins held in the contract.
Tag My Name: This is mainly for adding your personal notes to any projects you are interested in. To do this, you need to log into Etherscan.
Creator: The wallet address of the person who created the contract, and a link to the original transaction. If you click on this link, you can see details such as transaction hash, block, timestamp, transaction fee, gas fee, and more.
The tracker, or token tracker, will tell you everything you need to know about the token (in this example, BAYC). Here you can see the minimum price, the maximum total supply, the total number of transactions, the official website and social profiles. Interestingly, there is also a “Holders” tab here, where you can see details such as the number of users who own tokens and who owns the maximum number of tokens.
On the Transactions tab, you can find all NFT smart contract transactions listed in chronological order. You can click on individual transactions for more information. So, “Method” is a function that is executed based on the input data. These are usually methods such as “mint”, “set approval for everyone”, and “translate from”.
Along with that, you can also see details such as the status of the transaction, the block the transaction was included in, the transaction fee, the addresses of the wallets that made the transaction, as well as the wallet that received it, and so on.
Simply put, internal transactions refer to transactions between contracts. Remember how smart contracts can automatically trigger predefined actions when certain criteria are met? Internal transactions are, in fact, the transfer of value that occurs as a result of the execution of a smart contract. In other words, it often takes a certain number of ETH (or other token) transactions to execute a smart contract – so-called internal transactions.
The “Contract” tab provides you with all the information about a specific NFT smart contract. In the “Code” section, you can see the source code of the contract. Read the contract” is general information about the contract and all its functions. At the same time, “Record Contract” allows you to interact with the contract. Essentially, you can perform functions such as burning tokens, approving transactions, transferring tokens, and more. But for this, your wallet must have the necessary permissions. You can connect your wallet using the ‘Connect to Web3’ option.
Finally, under the Analytics tab, you will find various graphs detailing transactions, transaction fees, token transfers, and more. You can also set specific time frames. This is a useful tool for understanding the general trends of the NFT project you are interested in.
After all, you probably won’t need to use all of the features of NFT smart contracts described above. However, it is important to really understand what your NFT and in turn its smart contract means before making any investment.