NFT Smart Contracts: How to Read Them and Why You Must Read Them

If you've followed the NFT industry closely, you've probably come across the term "smart contracts" at least a couple of times. Smart contracts are mostly dismissed as a technical jargon that is irrelevant to them. But actually, NFT smart contracts are extremely important (if not the most important) on your NFT journey. For creators and collectors, understanding smart contracts is a crucial step in shaping NFT.
Smart contracts are equally important as the NFTs. Credits: vectorpouch/Freepik
Smart contracts are equally important as the NFTs. Credits: vectorpouch/Freepik

What is a smart contract?

A smart contract is a digital contract that is written as code, stored on the blockchain, and automatically executed when certain pre-determined conditions are met. They are generally used to automatically fulfill the terms of the agreement between various parties involved. In layman terms, smart contracts follow a simple mechanism that says, "If/if this happens, do so". In other words, when these conditions are met, the computer network takes the standard action.

What makes smart contracts "intelligent" is that all of this happens automatically without the need for a third party. In addition, they are secure, transparent, efficient on the blockchain and process transactions almost instantly. Also, unlike traditional contracts, smart contracts don't require a central unit to function and provide you with tamper-proof enforceable agreements.

In the context of NFTs, an NFT's unique information, including ownership and transaction details, is stored in its smart contract. Creators can add details like their identity, secure file links, and more to smart contracts. Alternatively, they can set certain rules for NFT trading. For example, this could be the percentage of royalties they receive for each subsequent sale. In essence, smart contracts are what make every NFT unique and valuable.

With NFTs, the capabilities of smart contracts go beyond simple transactions. Creators or developers can specify almost anything they want in the contracts. For example, some NFT projects can grant certain rights to a select group of people. This includes exclusive access to giveaways for early supporters, rewards for entering contests, a lower coin price for giveaways later, the ability to increase your collectibles, and much more.


How to Read Smart NFT Contracts

First things first, why should you read NFT smart contracts? As mentioned above, smart contracts contain all of the information about a specific NFT. So, simply by reading a smart contract can help you understand a project's popularity, property rights, the details of all transactions, and more. Plus, you can even mint an NFT directly from a smart contract.
How to find smart contract address on OpenSea. Credits: OpenSea
How to find smart contract address on OpenSea. Credits: OpenSea

Now, these are the steps to find a smart contract (since most NFTs are based on Ethereum, we'll be looking at Ethereum NFTs for the purposes of this guide):

  • Find the NFT you're interested in on OpenSea.
  • Scroll down and click the drop-down arrow on the Details tab.
  • Here you can see the 'contract address'. If you click here, you will access the smart contract on Etherscan. Etherscan is a useful website for finding data on transactions, blocks, wallet addresses, smart contracts and more on the Ethereum blockchain.
  • Alternatively, if you already know the address of the contract, you can find the smart contract directly on Etherscan by pasting the address in the search bar.

Using Etherscan to know more

Now that you have the NFT smart contract, let's see what you can understand about it.

General Information

First, you will see general information about the NFT.

  • Balance: The number of coins the contract will hold.
  • My Name Tag - This is basically for adding your own private notes to any project of interest. To do this, you need to log into Etherscan.
  • Creator: Wallet address of the person who created the contract and a link to the original transaction. When you click here you will see details like transaction hash, block, timestamp, transaction fee, gas fee and many more.
Smart Contract details of Bored Ape #1341 on Etherscan. Credits: Etherscan
Smart Contract details of Bored Ape #1341 on Etherscan. Credits: Etherscan

Tracker


Tracker, or token tracker, tells you everything you need to know about the token (BAYC in this example). Here you can see the minimum price, the maximum total offer, the total transactions, the official website and social profiles. Interestingly, there is also a "Holder" tab that lets you see details of how many users have the tokens and who has the maximum number of tokens.


Transactions

All NFT smart contract transactions are listed chronologically on the Transactions tab. You can click on individual transactions for more information. Now, 'method' is the function that will be performed based on the input data. Usually, the methods are Mint, Set Approval for All, and Transfer Form.

In addition to this, you can also view details such as the status of the transaction, the block that the transaction was included in, the transaction fee, the wallet addresses who made the transaction and who received it, etc.

Transactions tab on Etherscan. Credits: Etherscan
Transactions tab on Etherscan. Credits: Etherscan

Internal Txns

In simple terms, internal transactions refer to transactions between contracts. Do you remember how smart contracts can automatically trigger predefined actions when certain criteria are met? Internal transactions are basically the transfers of value that occur as a result of the execution of the smart contract. In other words, often a certain number of ETH (or other tokens) transactions, also known as internal transactions, are required to execute a smart contract.


Contract

On the Contract tab, you will find all the information about the respective NFT smart contract. Under 'Code' you can see the source code of the contract. 'Read contract' provides general information about the contract and all of its functions. In the meantime, you can use “Write a contract” to interact with the contract. Essentially, you can perform functions like token burning, approving transactions, transferring tokens, and more. To do this, however, your wallet must have the necessary permissions. You can connect your wallet using the "Connect to Web3" option.
If you have permission, you can interact with the contract under ‘write contract’. Credits: Etherscan
If you have permission, you can interact with the contract under ‘write contract’. Credits: Etherscan

Analytics

Finally, under the Analysis tab, you can find various charts detailing transactions, transaction fees, token transfers, and more. You can also set specific timelines. It is a useful tool for understanding the general trends of the NFT project you are interested in.

At the end of the day, you probably won't need to use all of the NFT smart contract features described above. Still, it is important that you really understand what your NFT, and therefore your smart contract, entails before making any investment.

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