Understanding smart contracts for NFT marketplace

Introduction

Non-fungible tokens are making headlines in recent days. This hype started with the advent of blockchain networks that has been adopted by most industries. For quite a long time, we have discussed developing an NFT marketplace; now, it's time to focus on the legal things that surround the launch of NFT marketplaces. This article will give you a knowledge of NFT and smart contracts for developing a comprehensive NFT marketplace like Opensea.

What is a Non-Fungible Token(NFT)?

• NFTs (non-fungible tokens) are unique cryptographic tokens that exist on a blockchain and cannot be replicated.
• NFTs can represent digital or real-world items like artwork and real estate.
• "Tokenizing" these real-world tangible assets makes buying, selling, and trading them more efficient while reducing the probability of fraud.
• NFTs can represent individuals' identities, property rights, and more. Collectors and investors initially sought NFTs after the public became more aware of them, but their popularity has since waned.

What is an NFT Marketplace?

NFT marketplace is a digital platform where users can buy, sell, and trade non-fungible tokens (NFTs). It acts as intermediaries between creators and collectors, providing a space for these digital assets to be traded and exchanged.

Different Standards of NFT Smart Contract

Okay, now that you've got a general understanding of NFT and marketplace, its time to navigate to the different standards of NFT smart contracts. These are called Ethereum standards that are popular globally due to their provided benefits such as secure transactions, verify authentication, and more.

1. ERC 721 Standard

ERC-721 is known as an open standard found on Ethereum Blockchain and makes the NFTs work like one-of-its-kind while being perpetual on the Blockchain. It is the reason behind making NFTs difficult to replicate unique digital holding on the Ethereum Blockchain. It specifies the Smart Contract is working. Each ERC 721 can handle multiple tokens efficiently. The time token is transferred, you will require 2 important things including a Token ID, and a Smart Contract address. It defines the legitimacy of digital ownership and protects the NFT token from fraudulent activities.

2. ERC 1155 Standard

The solidity of the Smart Contract for NFTs will be bolstered further with the help of the ERC 1155 standard. It is considered a multi-token able to do multi-transactions. At a time, it has the capability to manage different tokens. With this token, a token ID will include its type, metadata, and supply. It will be useful for Smart Contracts to be semi-fungible, non-fungible as well as fungible. Hence, multiple tokens can be transferred in a single transaction.

Other than Ethereum, there are many Smart Contract Blockchains with NFT tools EOS, TRON, TEZOS, and Solarium. This NFTs standardization will be helpful to ensure the tokens’ interoperability. Here, these tokens will operate entirely different according to the Blockchain platforms they are implemented in.

Key Functions for NFT Smart Contract

An NFT smart contract, usually adhering to standards like ERC-721 or ERC-1155, contains functions related to the creation and management of NFTs.

1. Minting Functions:

• mint(address to, uint256 tokenId): Creates a new NFT and assigns it to the specified address.
• safeMint(address to, uint256 tokenId): Similar to mint, but checks that the recipient can receive NFTs.

2. Metadata Functions:

• setBaseURI(string memory baseURI): Sets the base URI for metadata, allowing dynamic linking to metadata using token IDs.
• tokenURI(uint256 tokenId): Returns the URI for a specific token, which points to its metadata (e.g., JSON file describing the NFT).

3. Ownership Functions:

• ownerOf(uint256 tokenId): Returns the owner of a specific NFT.
• balanceOf(address owner): Returns the number of NFTs owned by a specific address.

4. Transfer Functions:

• transferFrom(address from, address to, uint256 tokenId): Transfers ownership of a specific NFT from one address to another.
• safeTransferFrom(address from, address to, uint256 tokenId): Transfers an NFT and checks that the receiving address can handle it.

5. Approval Functions:

• approve(address to, uint256 tokenId): Grants permission to another address to transfer the specified NFT.
• setApprovalForAll(address operator, bool approved): Approves or revokes approval for an operator to transfer all of a user’s NFTs.

6. Several helper functions:

• supportsInterface(bytes4 interfaceId): Checks if a contract implements a specific interface.
• getCreator(uint256 tokenId): Returns the creator of a specific NFT.
• getApproved(uint256 tokenId): Returns the address approved to transfer a specific NFT.
• isApprovedForAll(address owner, address operator): Checks if an operator is approved to manage all of an owner’s NFTs.
• function getRoyalty(uint256 tokenId): Returns the royalty fee for a specific NFT.

...

Key Functions for NFT Marketplace Smart Contract

An NFT marketplace smart contract facilitates buying, selling, and trading of NFTs.

1. Listing Functions:

• listNFT(uint256 tokenId, uint256 price): Allows the owner of an NFT to list it for sale at a specified price.
• cancelListing(uint256 tokenId): Allows the owner to cancel a listing before it is sold.

2. Buying Functions:

• buyNFT(uint256 tokenId): Allows a user to purchase a listed NFT, transferring ownership and handling the payment.
• getNFTPrice(uint256 tokenId): Returns the listing price for a specific NFT.

3. Bid Functions for auction-style selling of NFTs:

• placeBid(uint256 tokenId, uint256 bidAmount): Allows users to place bids on NFTs.
• acceptBid(uint256 tokenId, address bidder): Allows the owner to accept a bid, completing the sale.

4. Royalties and Payment Handling:

• setRoyaltyPercentage(uint256 tokenId, uint256 percentage): Allows setting a royalty percentage for future sales of the NFT.
• withdrawFunds(): Allows the contract owner to withdraw funds collected from sales.

5. Ownership Verification:

• isOwner(uint256 tokenId): Returns whether the caller is the owner of the specified NFT.

Conclusion

The development of NFT marketplaces represents a significant advancement in digital asset trading, combining blockchain technology with unique digital ownership. Through the implementation of standardized smart contracts like ERC-721 and ERC-1155, these platforms provide secure, transparent, and efficient ways to create, buy, sell, and trade NFTs.

Key takeaways:

• NFT smart contracts provide essential functions for minting, managing ownership, handling metadata, and facilitating transfers
• Marketplace smart contracts enable crucial features like listing, buying, bidding, and royalty management
• The combination of both contract types creates a robust ecosystem for NFT trading
• Standardization through ERC protocols ensures interoperability and security

As the NFT space continues to evolve, understanding these fundamental components is crucial for developers looking to build secure and functional NFT marketplaces. The proper implementation of these smart contract functions creates a foundation for successful NFT platforms that can serve creators, collectors, and traders effectively.

I will provide you with the code for the NFT marketplace smart contract step by step in the next article.