Difference Between NFT and Smart Contract

Edited by Diffzy | Updated on: October 05, 2022

       

Difference Between NFT and Smart Contract Difference Between NFT and Smart Contract

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Introduction

A non-fungible token (NFT) is a digital asset based on the blockchain that represents real-world art, music, and films. NFTs can be discovered in Nyan Cat gifs, Jack Dorsey's first original tweet, and a video of LeBron James' basketball dunk. Each NFT is a unique asset because it employs identifying numbers and metadata that are logged and authenticated on cryptocurrency blockchains. NFTs are non-fungible, unlike cryptocurrencies, which are also recorded on blockchains. They cannot be traded or swapped at face value. Typically, NFTs are bought and sold online in return for bitcoin. NFTs, unlike other digital assets, are usually one-of-a-kind or limited in quantity. As a result, the scarcity of digital assets determines the value of NFTs. Beeple’s college Everyday-The First 5000 Days sold for USD69.3 million and is now being auctioned by Christie's for USD91.8 million.

NFTs are created via a minting procedure that includes the establishment of a smart contract that is also stored on the blockchain. The smart contract contains information on the NFT, such as who invented it, who is owed royalties if it is sold, and who owns it. Because keeping that much data is expensive and energy-intensive, the bulk of NFTs is not stored on the blockchain. As a result, smart contracts usually specify the amount of effort they represent. The vending machine analogy is particularly useful in explaining the purpose and role of a smart contract. When buying something from a vending machine, the underlying sale agreement is between the buyer and the vending machine owner, and the machine runs based on the buyer's actions and the owner's pre-set instructions to fulfill the parties' agreement.

A smart contract, like a vending machine, is arguably a mechanism for implementing a sale agreement between the NFT owner and the buyer. Because smart contracts are self-executing, they may check that the contract's terms have been followed and execute them without the intervention of a third party or central authority. The smart contract is updated after it is implemented, and the code becomes immutable once it is logged on the blockchain. Because the code of a smart contract on a blockchain is public, anyone who utilizes smart contracts and has the necessary coding skills can inspect the code and verify the smart contract's legitimacy. Due to the lack of regulation around smart contracts, it is necessary to apply old common law notions (based on 17th and 18th-century Roman-Dutch law) to extremely modern technology, which was inconceivable at the time the law was formed, to understand their validity. Surprisingly, the key factors for determining the legality of a contract can still be employed today. The following three things must be included in a selling contract:

  1. Willing seller and buyer
  2. A products to offer; and
  3. Consideration

The sale must be practicable to carry out and legal. A smart contract has all of the fundamental elements of a sale contract, including a willing seller and buyer, an object (NFT), a price, the ability to perform, and legality (although not regulated yet). However, the increased usage of smart contracts would undoubtedly upset industries like as real estate (where a paper contract is required to alienate immovable property), e-commerce, and data storage, all of which are already regulated. Smart contracts will require parties to be aware of ever-changing restrictions as the business gets more regulated. To guarantee that the code is compliant with legal and regulatory provisions in the country where the smart contract is finalized, legal advisers and smart contract developers will collaborate. It's a completely separate challenge to figure out where a smart contract is signed and which jurisdiction regulates it.

Difference Between NFT and Smart Contract in Tabular Form

Table: NFT vs. Smart Contract
Basis of Comparison
 Non-fungible token (NFT)
Smart contract
Discovered by Geoffrey Huntley, an Australian programmer, designed it. Nick Szabo, an American computer scientist, found it.
Applications Medical Records Verification, Supply Chain Management, and the Gaming Industry. Medical Records Verification, Supply Chain Management, and the Gaming Industry.
Advantages The capacity of NFTs to make markets more efficient is their most typical benefit. Trading operations, cross-border payments, insurance, and digital identity.
Other Name A cryptographic asset is another name for it. Chain code is another name for it.
Companies Using Pizza Hut, Tangles, and Taco Bell are three of the most popular fast-food restaurants. S-pro, Eleks, and Cyber Infrastructure Inc.

What is Non-fungible token (NFT)?

Kevin McCoy and Anil Dash built Quantum, the first known "NFT," in May 2014. Jennifer McCoy, McCoy's wife, created a video for it. During a live presentation at the Seven on Seven conferences at the New Museum in New York City, McCoy registered the video on the Name coin network and sold it to Dash for $4. To describe the technology, McCoy and Dash invented the term "monetized graphics." On-chain metadata was used in this effort to establish a clear link between a non-fungible, tradable blockchain marker and a work of art (enabled by Name coin). Other blockchains, like Counterparty, use multi-unit, fungible, and metadata-free "colored currencies." Following the debut of a slew of NFT applications that year, the term "NFT" only grew in popularity with the ERC-721 standard, which was first proposed on the Ethereum GitHub in 2017. Curio Cards, Crypto Punks (a project developed by the American studio Larva Labs on the Ethereum blockchain to trade unique cartoon characters), and peculiar Pepe trading cards were all released at the same time as the standard.

NFTs, or non-fungible tokens, are one-of-a-kind pieces of data created by technology that allows virtual content such as movies, music, and images to be recorded and authenticated on cryptocurrency blockchains such as Ethereum. Each transaction, from transfers to revenue, is recorded on-chain following the upload of content material to the blockchain, resulting in the creation of a searchable log of provenance and rate history. NFTs have the major consequence of making it easy to own and distribute virtual content. Unlike the era before them, the most significant effect of NFTs is that they make it simple to own and market virtual digital content (such as video games). It was straightforward to share and sell images online before the advent of NFTs. While NFTs have benefited many artists, there is insufficient data to decide if they benefit everyone or just a chosen few. Critics have compared NFTs to a Ponzi scheme. The most effective complete observation of NFTs posted to date accrued fees from 2017 to April 2021. Digital data such as photographs, films, and music are routinely linked using NFTs. Unlike fungible cryptocurrencies, NFTs can only be identified once. The digital file that an NFT refers to determines its market worth. As a result, these NFTs are one-of-a-kind and in limited supply. This means that if you take two NFTs, the two digital objects will be significantly different, and the blockchain will be able to prove it. In a nutshell, it's a one-of-a-kind "token" backed by a cryptocurrency network. As a result, its owner is certain to be the lone owner.

Characteristics of NFT

Each NFT, as previously indicated, is unique. Four main elements describe this uniqueness:

The one and only creator- The inventor will come and "sign" the NFT once it has been completed. Indeed, by interacting with a "smart contract" (a blockchain contract), the author will trigger an event on the blockchain, allowing for unalterable time stamping and creation of the NFT. To give you a better idea of what this signature on the blockchain looks like, imagine it as a painter's signature on a canvas. This signature allows you to tell the difference between the original and the duplicates.

The indestructible identifier- The identifier is the NFT's version of the identity card number. This unchangeable and unalterable sequence of numbers or letters will be used to identify an NFT on a blockchain. To provide a physical analogy, this equates to a one-of-a-kind serial number.

The information it contains- The NFT's identifier and content are two separate pieces. The identifier is set at the time of creation and cannot be changed, therefore the NFT's "identity" will be guaranteed. The content is also defined during the construction process, although it can be changed completely or partially. On the content side, the formats vary an image, a movie, a paper, or something else entirely. The content of the NFT will most likely not be changeable. However, a change in the content may be necessary for some circumstances. The owner can qualify it and add information to the blockchain "on the NFT."

The present-day occupant- The current owner is the final feature of the NFT that will be used to classify it. If the NFT is transferred between two blockchain wallets, the list owner will be revealed. Using time-stamped blockchain transactions, it is feasible to identify all of the owners in chronological order. This ownership transfer entails unique rights and duties.

Its content- The NFT's identifier and content are two separate pieces. The identifier is set at the time of creation and cannot be changed, therefore the NFT's "identity" will be guaranteed. The content is also defined during the construction process, although it can be changed completely or partially. On the content side, the formats vary an image, a movie, a paper, or something else entirely. The content of the NFT will most likely not be changeable. However, a change in the content may be necessary for some circumstances. The owner can qualify it and add information to the blockchain "on the NFT."

What is Smart Contract?

On a blockchain network, smart contracts are computer programs that are housed and executed. Each smart contract is made up of code that specifies specified criteria that, when satisfied, cause certain events to occur. Smart contracts allow several parties to reach a shared result in an accurate, timely, and tamper-proof manner by running on a decentralized blockchain rather than a centralized server. Smart contracts are not controlled by a central administrator and are not exposed to single points of attack by bad groups; they offer a powerful foundation for automation. Smart contract applications, when used in multi-party digital agreements, can minimize counterparty risk, boost efficiency, lower costs, and add new levels of transparency to processes.

Smart contracts can be used to provide privacy protection in addition to providing privacy safety. For example, smart contracts can facilitate the selective release of privacy-included data to meet a specific request. The development, allocation, control, and update of the applications that serve as the foundation for intelligent contracts can be done in a variety of ways. They can be included in a variety of pricing methods and virtual exchanges that include bitcoins and other cryptocurrencies, and they can be preserved as part of a blockchain or other distributed ledger technology. Smart contracts, contrary to popular assumptions, are not legally binding contracts. The core characteristic is the ability to programmatically execute corporate common sense, which covers a wide range of activities, strategies, and transactions that have been programmed into them to respond to a certain set of events.

Contrary to popular belief, smart contracts are not legally binding contracts. Its primary quality is the capacity to programmatically execute corporate common sense, which includes a wide range of activities, strategies, and transactions that have been programmed into them to respond to a certain set of events.

Characteristics of Smart Contract

The majority of smart contract qualities are obtained from the blockchain technology that underpins them:

Secure- Cryptography is used to secure contracts and prevent tampering with records. While the technology is generally safe, there have been some instances where SC has been hacked and cash placed has been removed.

Third Parties- Smart contracts do not require the involvement of a third party in the verification process, as we previously stated.

Execution- Smart contracts are normally executed virtually instantaneously for all parties, across participating computers, once the relevant criteria are met, despite being dependent on the underlying networks' capacity and congestion.

Autonomous and decentralized- SCs are autonomous and decentralized, which means you don't have to wait for someone to press a button. Furthermore, they can't be updated or managed by a centralized entity once they've been deployed (like banks, brokers, or even by the network).

Near-real-time execution- Once the relevant parameters are met, smart contracts normally execute virtually simultaneously for all parties, across participating computers, despite the underlying networks' performance and congestion.

Difference Between NFT and Smart Contract In Points

NFTs are enabled by smart contracts that deal with transferability and ownership confirmation, which is the main difference between them and Smart Contracts. A smart contract, on the other hand, is an Ethereum blockchain-based program. In a specific deal, its code and data are kept on the Ethereum blockchain. NFTs are powered by smart contracts, which deal with transferability and ownership confirmation. A smart contract, on the other hand, is an Ethereum blockchain-based program. In a specific deal, its code and data are kept on the Ethereum blockchain. Smart contracts are meant to eliminate the need for middlemen while also preventing both intentional and unintentional exclusions. According to the NFT license, the NFT is a tool for erasing artwork. The artwork could be a photograph, a piece of music, or sound. On the other hand, smart contracts can verify the token's ownership and authenticity.

  • The cost of minting an NFT variant ranges from $1 to $500, and they can occasionally go even higher. On the other hand, a simple smart contract that does not require the use of a complex company costs roughly $7,000.
  • NFT is a token, a type of cryptocurrency that exists on the Blockchain. However, unlike these, it is not convertible with any other similar product. Smart contracts, on the other hand, are software programs that operate on the Block chain’s nodes and allow for movement while positive events occur.
  • NFTs allow creators to profit immediately from their effort, whereas smart contracts are more cost-effective due to the lack of office work and fees.
  • NFT license designates the NFT as a tool for removing the artwork. The artwork could be a photograph or a piece of music or sound. On the other hand, smart contracts can verify the token's ownership and authenticity.
  • NFT license designates the NFT as a tool for removing the artwork. The artwork could be a photograph or a piece of music or sound. On the other hand, smart contracts can verify the token's ownership and authenticity.

Conclusion

Users will be able to access a wide range of use cases by combining NFTs and smart contracts. It is possible to design complex contractual frameworks and agreements. The contracts will be transparent, tamper-proof, and auditable in real-time thanks to the underlying blockchain processes. Any future arbitration process will be simplified and expedited as a result of this. Because of blockchain technology, smart contracts and NFTs are possible. When developing NFTs, users can choose from a variety of NFT standards. As new blockchain platforms emerge, I expect that several other NFT standards will emerge. Users will be able to transact across several platforms from a single spot thanks to the interoperable nature of blockchains. This means that a user could use NFTs and smart contracts on platforms other than their favorite platform. Blockchains will also provide real-time audit ability while securing platform assets and transactions.

NFTs may instantaneously convert digital art, music, and media into verifiable assets that are simple to acquire and sell utilizing blockchain technology. NFTs have a variety of business applications and have far-reaching consequences for media and DRM. NFTs will work in tandem with Web 3.0 to make the internet more transparent and safe. To designate and obtain the right of admission to the property in the NFT, smart contracts can be incorporated in the NFT. A smart contract, for example, can grant a consumer access to a track that is embedded in an NFT. They may agree on the terms of the smart contract, pay the agreed-upon amount, and then have access to that track. Finally, we may deduce that NFTs could be integrated into smart contracts. A smart contract can contain an NFT, which is subsequently transferred to a customer or another contract based on the smart contract's guidelines and operations.

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"Difference Between NFT and Smart Contract." Diffzy.com, 2022. Fri. 09 Dec. 2022. <https://www.diffzy.com/article/difference-between-nft-and-smart-contract-496>.



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