With more and more attention being paid to all things crypto and Web3, there is still mystery around NFTs and Smart Contracts. Here we look at how they interact.
Smart Contracts are self executing contracts without any requirement of physical parties.
Ethereum is the first ever cryptocurrency to utilize smart contracts in the platform.
After Ethereum, many other crypto assets implemented the concept of smart contracts.
What Are Smart Contracts?
In general terms, a contract is an agreement between two parties where the parties reach a consensus when certain conditions are met. We see these contracts happening everywhere during our daily lives. Rent agreement, employment agreement, a tender for building something and more, are all part of the contract. But these contracts are executed manually, so what makes a smart contract?
NIck Szabo explained smart contracts during the 90s as a set of promises specified in the digital form. Many elaborates the term as an automatic software executing itself after meeting specific conditions. For instance, if A is true, then B is done. In more simple terms, while playing games like Call of Duty Mobile, you can play the battle royale mode only after reaching a certain level. Here, reaching the particular level is a condition, and battle royale getting unlocked is the reward as promised by the agreement.
NFTs Using Smart Contracts
Minting of NFTs is done via smart contracts too. It assigns ownership to the individual upon the purchase and is reassigned to another when the asset is sold or transferred. Basically, smart contracts act as a sales agreement tool. It is similar to making transactions via the ATM card. The machine will accept or reject the withdrawal based on the amount the user has entered and the availability of a certain amount fed by the user to the machine.
NFT smart contracts may contain utilities, like receiving a tangible product, associating the delivery of any real world item at owner’s will etc. During October 2021, Glenfiddich, the legendary spirits brand, released an NFT collection. The holder of the token represents ownership of the rare NFT bottle which the company would deliver to the individual at his request. Here, the utility remains delivering a rare piece of bottle to the NFT holder, agreeing to the certain condition of the document.
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