What is a smart contract?
Cory Edwards
May 19th, 2022

What is a smart contract?

Smart contracts are an integral part of NFT infrastructure - without them NFTs cannot operate. They are made up of code that allow the storage and display of information, visible to anyone, as well as the execution of pre-defined transactions. Following from the nature of blockchain, smart contracts are immutable, meaning they can’t be changed. If a smart contract is published containing code errors, it will remain that way forever.

Smart contracts are used to determine certain actions, such as verifying ownership, showing token metadata, and enabling and recording transfers. They can also be extended to handle other useful and relevant use cases, such as royalty payments for an artist in future sales of an NFT. A useful example is royalty payments - because the smart contract can trace back all the way to the original artist, it is a great way of enabling perpetual royalty payments for artists long after they initially sell their artwork.

The code in a smart contract determines the characteristics of the NFT and the way in which its data is displayed. Smart contracts tend to follow standards. In Ethereum, the primary standards for NFT smart contracts are ERC-1155 and ERC-721. In its simplest form, ERC-1155 is generally used for contracts with many non-divisible tokens with the same underlying metadata (think of a concert ticket or a library pass - they are unique and you cannot own 'half' a ticket, they are non-divisible; example). ERC-721 is generally used for non-divisible tokens, all of which have different metadata (example) whilst living in the same contract (think of individual players within a football team).

As a fun example, you can go to Etherscan and interact directly with, for example, the Bored Ape Yacht Club’s smart contract. If you click on the ‘Contract’ tab, you will be able to see the code which created the Collection and which pre-defines the functions in the smart contract. If you click on ‘Read’ or ‘Write’ from inside the Contract tab, you’ll be able to directly see and interact with the functions related to that smart contract.


Ownership and intellectual property rights are often, incorrectly, used interchangeably in the context of NFTs and smart contracts. Smart contracts can be of great help when determining ownership, but not necessarily intellectual property rights.

If you’re the owner of a piece of artwork, there is no better use than blockchain to prove ownership and provenance. The records on the ledger of transactions provide provenance and traceability, proving that you are the true and original owner of the art piece. If they’re unable to prove they’re the owner of the artwork through publicly accessible blockchain, a potential replica is worthless. This is one of the very powerful features of smart contracts.

Intellectual Property

Owning an NFT does not always mean you own the copyright rights - unless specifically stated by the owner of the smart contract/collection, the artist will retain the copyright.

As the owner of an artwork, you can rest easy that no one will be able to replicate your asset. If they’re unable to prove they’re the owner of the artwork through publicly accessible blockchain, their replica is worthless.

Smart contracts are helping to wave goodbye to time-consuming paperwork and hack-prone systems and saying hello to a new level of security of trust and security.

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