The Importance of NFT Smart Contract Audit
Currently, the NFT in the digital world is a trending hot topic of discussion! Moreover, the underlying smart contract technology makes it more secure, plus a good NFT smart contract audit guarantees security from various cyber threats.
NFT is a prized possession in the virtual world that gives artists, musicians, and businesses more potential than ever before. Further, this power elevates by deploying the NFT smart contract audit.
With NFTs gaining popularity every passing day, a dedicated NFT smart contract audit enhances security and provides your organization with the ultimate peace from hackers.
What is a Non-Fungible Token? How do they work with Smart Contracts?
In Non-Fungible token (NFT), the term “fungible” stands for something not interchangeable. For example, a $1 note is fungible, you can trade it with another $1 note, and you will have the same amount. Similarly, Bitcoin is fungible. But NFT is non-fungible; that one cannot substitute it. NFT mainly accommodates on the Ethereum blockchain, though few blockchains have their own NFT.
It can be anything digital like a gif, digital artwork, video, song, or a good old tweet by Twitter Ex-CEO Jack Dorsey. A few of the examples of NFTs are Nyan cat gif, Grimes’ WarNymph, and Nike’s digital sneakers.
Minting is the mechanism used for producing an NFT. In addition, smart contracts work as a medium in the functioning of the NFTs. The software code stores information in an immutable way. NFTs work on smart contracts that take care of — original ownership and handle transferability. In addition, there is permanent identification information that tracks all the royalty payments, links to other digital assets, and ensures that NFTs aren’t duplicated.
Not only do artists use NFTs; nearly all businesses can leverage the opportunity and use the NFT to connect with their audience.
9 Use Cases of NFT in Businesses Other Than Art
The mainstream media signifies the use of NFT only in art and music. But the applications of NFTs go beyond that. NFTs have paved the way for businesses to create a digital proof of ownership for the customer.
With smart contracts embedded in the NFT ensures that NFTs, once sold, cannot be edited or altered. When your customer purchases an NFT and later transfers the NFT to a third party, the business will receive a portion of the transaction. The process also adds new life to the traditional sales funnel. Here you can generate revenue even when your business isn’t the original seller.
Suppose a car manufacturer adds an NFT with each line of vehicles they fabricate and sell. Whenever the customer resells the car, the original manufacturer will receive a certain percentage of an amount received by the seller. Blockchain technology will also be accessible to the next buyer, who will be able to know what changes have been done to the car from its previous buyer.
Any business can use NFT as a reward when your customers sign up for a course.
- Real Estate: With the onset of NFT smart contracts. Significant changes are going to occur in the real estate world. An NFT can provide proof of ownership to speed up transactions. The timestamp property of NFT is essential to keep track of changes in the property’s value.
- Increase the authenticity of products: One of the major scams that happen is reselling of luxury goods. This is because the buyer can never check its authenticity. As the blockchain is immutable, brands can use NFTs to provide fair trade.
- Patents and Intellectual Property: The process of applying for a patent is lengthy thus the NFT technology can increase the transparency and shorten the application process. The token can be used to follow the patent owners and can distinguish the ownership of IP by using timestamps.
- Medical Records: NFT tokens can store medical records without risking tampering from third-party sources. An example can be an NFT birth certificate. The birth certificate will act as a lifelong identification. Similarly, it can be used by health insurance companies. The sensitive medical information of any individual will be stored in one place and will only allow authorized officials or healthcare providers to access the information.
- Supply Chain Management: It becomes difficult to track the raw material sources in the food industry. An NFT will solve the problem. NFT can trace the whole path from shipping to delivery.
- Ticketing: With the world going paperless, NFT tickets with unique IDs can be made available to the general public. The unique ID will be enough for traveling purposes. Like that, tickets to singing concerts can be in the form of NFT, along with an embellished picture of your favorite popular rockstar.
- Academics: What can be the best way to handle all the degree certificates you received during school and college? It’s an NFT chain that can secure all the information regarding attendance and degrees in one place, which cannot be altered easily by anyone. The NFT smart contract verification system will record all the educational achievements.
- Gaming: The gaming industry has a valuation in billions. Imagine the excitement with the adoption of NFT in gaming. Various digital goods in games will be converted into a token and put for sale.
- Domain Name: NFT will propagate easy trading. Private Keys will let the owners control the domain name. The domain names will be recorded permanently and will not be able to be deleted.
Standard Smart Contracts For Developing NFTs
A number of marketplaces like OpenSea, Decentraland, Top Shot, and NBA are created to give permission for the trading of NFT projects. When selecting any smart contract platform you should take care of three factors other than the NFT smart contract audit:
- NFT Smart contract functionality
- Transaction cost
- Consensus mechanism
Let’s have a look at the most popular blockchain platforms other than Ethereum. No doubt, Ethereum is the compelling force behind the concept of NFT smart contracts, but there are other equally capable blockchains as well.
|Blockchain||Consensus Mechanism||Popular NFT|
|Cardano||Proof of Stake||Spacebudz|
|Solana||Proof of Stake||Degenerate Ape Academy|
|Tezos||Liquid Proof of Stake||Kalamint|
|Flow||Proof of Stake||NBA Top Shot|
|EOS||Delegated Proof of Stake||Atomic Market|
|Binance Smart Chain||Proof of Staked Authority||Bakery Swap|
Ethereum is the most operated platform for NFTs. In contrast to the ERC-20 which is for fungible tokens like cryptocurrencies. ERC721 and ERC1155 are mainly used for NFT tokens.
Want to learn more about Ethereum smart contracts? Here is a guide by 0defect on “How to Audit an Ethereum Smart Contract.”
ERC721: The interface is specially designed for trading or creating NFTs. In 2017, the founder of Cryptokitties, Dieter Shirley, made a proposal to make a new token type to support non-fungible tokens. Though 721 is expensive and slow, it provides an option to customize and delivers better security.
If you are into collecting unique digital artwork, gaming characters, or cartoon characters you should definitely check out ERC721.
ERC1155: This one is the multi-token standard of Ethereum. The ERC 1155 allows the deployment of smart contracts for both non-fungible, fungible and semi-fungible as well. The central idea for the outcome of the token standard was to create an all-in-one platform.
A game-changer token that gives an uptick to both scalability and efficiency. The standard is available for creating NFTs, ICOs, shopping vouchers, and many more.
The Ownership of NFT
One of the major doubts is that if you own a digital asset, you own the copyright to it, which isn’t true. Purchasing an NFT gives you ownership only; it does not imply that the individual who pays for a digital asset owns the copyright. The copyright will remain with the creator until and unless it is defined in the contract.
An NFT license sums up what rights are being mainly licensed to the buyer. The NFT license establishes its rights.
The license is the proof that would permit the buyer to exhibit the art, or use it for commercial purposes — allowing them to create merchandise that incorporates art. But these terms will have to be particularly coded into the smart contract.
How do smart contracts verify their authenticity?
Smart contracts’ main purpose is to verify their authenticity. it can trace the history of the creative work and make it available on the public blockchain.
The platforms that exhibit and auction the NFTs will validate the identities of the creators. Many times, this is done manually. For example, SuperRare uses an application form that collects the detailed facts of the artwork, while other platforms use disclaimers that the buyers do the investigation before purchasing any NFT.
How Do NFT Smart Contracts Work?
When you purchase an NFT a unique token is created? The token has the details of the smart contract. The information on the blockchain is viewable to the public and it showcases the proof of ownership along with the record of the purchase.
If the image is duplicated (which happens in the digital world just by a right-click when the work is shown to the public) the blockchain will verify the ownership and the reproduced images would be useless. The transfer of any NFT is approved only if the private key of the owner is tried.
Deploy NFT Smart Contract Step by Step
Let’s understand the process step by step:
- Make a free account on Alchemy, it allows you to communicate with Ethereum without thinking about running nodes.
- On Alchemy, the platform goes to the products section and selects the NFT API. The API key is essential to make requests to the Ropsten test network. A test network is used for testing purposes before deploying the blockchain on the mainnet. Give some name to the app, and add a short description.
- For app bookkeeping select “Staging” and choose “Ropsten” for the network.
First and foremost, create an Ethereum account!
- Add some fake ETH from FaucETH. Submit your Ropsten account address. Then click for “Request funds”. Choose “Ethereum Testnet Ropsten” and one more time click on the “Request funds” button. To check the balance select eth getBalance. This will return the ETH to the Metamask wallet.
- To initialize the project you need to install Hardhat which is a development environment for deploying and testing Ethereum software. Understand more about Hardhat here.
- After creating the Hardhat project add project folders to it.
5 Steps to write the NFT Smart contract
- You can use any editor, the most preferable one is VSCode. Navigate to the contracts folders in VSCode. Add a new file to it.
- OpenZeppelin library to copy-paste the content. Run npm install to finally install the library into a folder.
- Connect both Alchemy and Metamask and install Ether.JS which is a library that makes interactions easier.
- Update the hardhat configuration again. Compile the contract with hardhat tasks.
- Navigate to scripts/folders to develop a new file and add contents into it. Finally after deploying you can check the Ropsten etherscan to search the NFT smart contract address.
If you are hoping to do it all yourself. Then we would suggest you understand the coding in Solidity. Check out more about the Ethereum detailed tutorial on deploying the contract.
Importance of NFT Smart Contract Audit
A question that always floats on the internet is, “Does blockchain technology make the NFT smart contracts secure?” Unfortunately, the answer to the question is “No”.
Without trying to confuse you more, we want to say that the underlying technology is great, but smart contracts have a history of being hacked by malicious parties. Especially the NFTs, which are more popular among the common public, thus are more prone to attacks.
A recent example is when attackers stole NFTs from OpenSea in February 2022. The estimated value of stolen NFTs was $1.7 million.
The popularity in the digital world is affected by hackers. The mechanism works on smart contracts; the underlying technology blockchain is secured, but still, it is easy to manipulate if not audited.
Benefits of NFT Smart Contract Audit
As creating an application on the blockchain isn’t easy from taking care of the language to the development environment. Further, an NFT smart contract audit also becomes crucial, as we move further in the blog here are a few of the advantages of an NFT smart contract audit:
- It prevents the vulnerabilities present in code
- Improves the performance of the contracts
- Security from hackers
0defect’s process for NFT smart contract audit
- At 0defect, start with project familiarization, and later we freeze the contract code.
- Dedicated professionals do a code review at 0defect. We run an automated analysis to find surface-level errors and a manual analysis to learn more about the vulnerability.
- After this, your developer team will receive the first audit report.
- When the developer team fixes the code, the tests are done again, and the final audit report will be sent again to your team.
Closing Thoughts on NFT Smart Contract Audit
With the “fear of missing out,” many investors are jumping into the NFT segment. However, it will take time for the technology to get streamlined.
As a user, your priority should be the NFT smart contract audit. Smart contracts improve purchasing power and envelop NFTs with added security and benefits.
No doubt, technology will not be limited, and very soon, it will become a regular part of our life. Online communities are becoming stronger with every passing day. Hopefully, the accountability improves more and more with an overall positive impact.
We at 0defect regularly carry out an NFT smart contract audit for our clients. Our process of rigorous auditing will save you from any financial damage. Secure your NFT smart contract with 0defect. Reach out to us, and our team will help you to decide on the best audit.
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