The crypto world is growing at an unsustainable rate. The cryptocurrency space is evolving into an expanding environment, but the lack of efficient systems is slowing progress in its economic growth. While there were many cryptocurrency platforms built, few of them have successfully integrated the Smart Contract Protocol.
Why does the cryptocurrency market rely on third-party security when it comes to investing, trading and transacting with cryptocurrencies — especially knowing that the blockchain itself can be quite secure? In this article, we explain what a smart contract in NFT is and why companies need it.
What is a Smart Contract in NFT?
Before answering this question, we reckon it is reasonable to give NFTs and smart contract definitions.
An NFT is a digital representation of a physical asset, such as a work of art, real estate, or even a car. The non-fungibility makes these tokens exclusive and can also be used to create scarcity. They are unique and cannot be copied or modified by anyone else.
A smart contract is a program that runs on another platform, such as Ethereum or NEO, and performs specific instructions when certain conditions are met. They are self-executing with detailed directions written into their code as well as the terms and conditions of the agreement.
Smart contracts are computer protocols that facilitate, verify and enforce the agreement between parties. In the context of NFTs, the smart contract guarantees that the digital asset you buy is exactly the same as the one described in the token sale. It also ensures that you own the asset you buy.
Benefits of Smart Contracts
While implementing blockchain, smart contracts are the most important part. They are a set of codes that are pre-written and can be deployed on the distributed ledger technology network. There are many benefits of smart contracts on the blockchain, and we are going to review some of them.
• Increased Security
Smart contracts’ security is improved because their automated nature helps prevent fraud and theft. No middleman is needed, as the contract is enforced by its own terms and conditions. This eliminates the possibility of corruption and manipulation by third parties who may not be trustworthy enough.
Smart contracts are stored on a blockchain that is distributed and decentralized. This means that no single entity controls the data or can manipulate it. This ensures complete security for all parties involved in a transaction.
• Improved User Experience
The biggest benefit of smart contracts on blockchain is that they improve the user experience by reducing the time and cost of contract enforcement. This is because of the increased automation and transparency of the contract process itself. Since smart contracts are self-executing, there is no need to involve a middleman to ensure proper fulfillment between two parties. This also ensures that there are no delays in legal disputes and court fees associated with enforcing the terms of a traditional contract through litigation, which can take months or years to resolve.
• Simplified Trading
Instead of relying on a third party to make sure you get what you paid for, smart contracts allow buyers and sellers to transact directly with each other. Secure smart contracts simplify trading by automating it through an algorithm. For example, if you want to buy something from Amazon, you have to place an order, providing your credit card information, shipping address, and other details that may not be necessary for the actual transaction. Instead of doing all this yourself, you can simply tell the smart contract what you want and how much you would like to pay for it — and then wait for it to complete the trade automatically.
• Easier Management of the Ownership of Digital Assets
With smart contract development, businesses can automatically verify compliance with the terms of the contract. This blockchain technology allows you to manage your own digital assets as well as those of others. This helps you save time and money when you want to sign a contract or other deal with third parties.
Let’s say you intend to sell your car through an online marketplace using smart contracts. The buyer and seller would enter into an agreement that automatically transfers ownership once the buyer makes payment. The transaction would be transparently recorded on the blockchain for everyone to see.
• Handling Various Payments & Commissions
With the help of smart contracts, you can handle different types of payments and commissions. One basic smart contract example is the management of mutual funds: you can apply the technology to pay your investment manager a commission for their services. A payment channel allows two parties to send an unlimited number of tokens from one wallet to another without announcing their transaction on the chain whenever they want to transfer funds. This ensures fast transactions, as there is no need to wait for confirmations from miners before you can make another payment.
• Cost-Effective Business Management & Taxes
The use of smart contracts can also help businesses manage their taxes more efficiently. Using an automated system, companies can easily track how much tax they owe or receive from different jurisdictions around the world. This allows them to pay only what they owe without having to worry about double taxation that can occur when dealing with multiple taxing authorities at once. Hence, businesses can focus on what they do best while having less paperwork to complete. Custom NFT smart contracts also ensure that everything runs according to the agreed terms, leading to fewer disputes between the parties.
How Can Businesses Apply NFT Smart Contracts to Improve Trading Security?
Using blockchain technology is growing exponentially across all industries, including retail. In fact, it’s predicted that by 2026 the global blockchain market will reach $67.4 billion. As more companies adopt the software, the demand for NFTs and smart contracts will increase. Let’s find out how companies can leverage NFT smart contracts for their business.
Enforce Ownership & Verify Authenticity
NFTs can enforce property rights and verify the authenticity of any item. This can be done through blockchain-based smart contracts, which are self-executing and running on a distributed ledger. One of the main NFT smart contract use cases is the representation of physical goods such as artwork or collectibles. This means that as long as you own an NFT that represents a physical good, you own the actual item. This makes it easy for artists to sell original works without having to worry about fakes on the market — because only they can produce authentic copies with their own private keys.
Prevent Plagiarism & Counterfeiting
NFT smart contracts are used to protect against counterfeiting and plagiarism by using blockchain technology to track ownership of an asset. This means that anyone who tries to sell or trade counterfeit goods will be immediately detected because their token is invalid or belongs to someone else. Artists can create digital artworks and sell them as NFTs on a marketplace like OpenSea or Rarebits, where anyone can buy them with crypto tokens like Ethereum and Bitcoin. When these artists sell their works online, buyers can easily verify that they’re purchasing authentic art from a reputable artist, because all the data about each piece is stored on the blockchain and can be viewed at any time.
Facilitate Business Transactions
Create NFT smart contracts to automatically execute transactions over a blockchain network once they met certain conditions. They are written as code and therefore cannot be modified once they have been deployed on the blockchain. This means that once a smart contract has been created, it cannot be changed. This ensures that there is no room for manipulation or fraud in any transaction carried out using these protocols.
By using blockchain-based escrow accounts, businesses can ensure that transactions are completed before exchanging funds and goods. This reduces the risk of fraud because if one party fails or chooses not to complete the transaction, they lose their money receiving no compensation from the other party.
Have Permanent Identification Data
Companies can use blockchain smart contract technology to record details about their products, such as serial numbers or barcodes, to simplify identification. Businesses can use the software to create a permanent record of their products and services — this is often referred to as “certifying” or “notarizing”. NFT smart contracts can store permanent identification data on the blockchain. This is valuable for companies that want to create digital assets that are legally binding and enforceable.
Let’s say you’re a book publisher, and you wish to sell digital copies of your books. You could use an NFT smart contract to store your customers’ personal information and credit card numbers. When buyers purchase the book, their data is permanently stored on the blockchain, so there is no risk of losing customer information or having it stolen by hackers.
Ensure the Terms of the Agreements are Met
Businesses can apply NFT smart contracts to prevent the violation of agreements established between parties. If you have a business and want to sell your product or service, you can use a smart contract as a guarantee that your customer will pay for the goods after receiving them. The terms of the agreement are encrypted into the code and automatically executed once the conditions are met.
Provide Important Data About the Artwork
When you create a smart contract for NFT, you can also add metadata to it that describes what the token represents. The metadata can include information such as the artist’s name, the date of creation and even the title of the work itself. This information can be used to verify that an artwork is genuine, or to prove that it has been stolen and should be returned to its rightful owner.
This can be done by inserting details about the artist, and their qualifications can be added to the blockchain for everyone to see. The same goes for any other information about a piece of art that you want to share with potential buyers. This includes things like whether the artwork has been authenticated or how much it costs to create such.
How to Choose the Right NFT Smart Contract Development Company?
This is crucial to choose a blockchain development company that has strong expertise in the field. If a company has no experience in developing NFT smart contracts, it can rely on open-source code or get help from another developer who has already developed similar projects.
The best way to select a smart contract development service provider is to do thorough research on the company. You can check their prior work and the types of clients they have worked with. Once you find a company that meets your requirements and budget, you can work together on the project.
You may wonder what steps you need to take to find the most suitable vendor. Here is how to make sure you select the right company.
First of all, make sure the company has a portfolio of similar projects. If they do not have prior experience with NFT smart contracts, they may not know what they are doing. Next, look at the team behind the company. It delivers your project on time and within budget, so make sure they are well-qualified and experienced enough to do so.
Another point you should consider when choosing an NFT smart contract development company is its location. In most cases, it is better if they are located nearby, as they’ll be able to communicate with you at the same time zone. However, nowadays, a remote team can also organize their work in such a way that they are in constant contact with the client. Don’t forget to check references and reviews on the Internet before making a final decision about who should develop your project.
Wrapping Up
NFT smart contracts are developed to increase the speed and security of any crypto exchange. With the blockchain, traders can avail of better arbitration services. Also, trading becomes faster as transactions are recorded in a decentralized system: there are no concerns about third-party interference.
Find a reliable partner to help you create robust and secure smart contracts. We provide custom blockchain development services that enable businesses to improve their operations and meet all current needs. Contact us!