Much has been said and written about the NFT world in recent months.
The whole NFT space is still at the beginning of something big, at least that’s what many people are convinced of. I am happy to join this group as I have already had great success with my investments in NFTs. We can have very long discussions about the value of NFTs, especially the artistic value.
Why on earth are such exorbitant amounts being paid for images of indifferent monkeys, armed science fiction figures, and invisible walking dolls? Many factors together determine the value. I think it is already clear that it is not just about the art.
There are many more factors why certain NFT sets have a high value. For example, this value comes from sets that financially reward their holders for holding the NFTs. Value is also influenced by close-knit communities that drive a set uphill led by a committed team.
Scarcity and rarity are also important aspects when it comes to valuation. So, it’s not just the art that determines how much is paid for NFTs.
Smart contracts
The success of the NFT world is also related to the transparency that blockchain networks offer.
You can find all the information you need in the so-called smart contracts that are connected to the NFT sets. Information that can make the difference between winning or losing! As a collector of NFTs, you may not be very interested in all the technology that goes on behind the scenes.
Do I really need to know all that?
If I just do good research into team, utility, volume, art, and community, that isn’t important, is it?
Why read smart contracts?
You might think that a project’s website should give you enough information.
Maybe you are already a step further and will first do your research on Discord of the set.
All very important but even scam projects or rug pulls use these forms of media to make their fraud come across as real.
Because smart contracts contain information that provides security for you as an NFT collector, it is important that you know something about this.
For you as a collector, but also for NFT creators, smart contracts are extremely important. If you know how a smart contract works, you have important knowledge to become successful as an NFT trader. I’m going to help you a little bit on your way here to acquire this knowledge.
What is a smart contract?
In short, a smart contract is a digital agreement, written as a kind of code. Smart contracts are stored on the blockchain and automatically triggered when predefined conditions are met.
Smart contracts arrange that you can buy or sell an NFT on the Marketplaces. Smart contracts are used to automatically comply with the terms of the agreement concluded by different parties.
Simply explained, the contract says ‘if this or that happens, do this or that’.
In other words, if the conditions are met, the network of computers will perform the predetermined action.
Why is it called a ‘smart’ contract?
These contracts are called ‘smart’ because no 3rd party is needed to carry out the assignment. Everything is activated automatically.
Unlike traditional digital contracts, smart contracts do not require a central entity. They offer a lot of security, are fraud-resistant and the agreements made are binding and enforceable. If you are going to relate this information to NFTs, it means that the unique information of the NFT, the ownership, and all transaction details, are recorded in the smart contract.
The makers of NFTs can record various things in the smart contract, such as their identity and, for example, secure links to files. In addition, certain rules for trading the NFTs can also be stored.
In this case, you have to think, for example, of the royalties that the project receives for each sale. And also how the royalties benefit the project and you as a holder.
Smart contracts make each NFT unique and give it extra value.
How can I as a user look into the smart contracts?
If you want information about an NFT and what is laid down in the Smart Contract, you can do that by using Etherscan.
The ‘reading’ of smart contracts is really not just reserved for internet techies!
Thanks to Etherscan, anyone can obtain information about transactions, ownership, and the rules for buying and selling an NFT. This transparency is one of the Unique Selling Points, USPs, of the blockchains. OpenSea and smart contracts, For the time being, most NFT transactions take place on the Ethereum network.
Because OpenSea is the largest marketplace there, I’m going to explain how you can read smart contracts via this channel. Smart contracts are also used on the Solana blockchain, I also wrote an article about that. When you have found the NFT of your choice on OpenSea you can find the term Details on the left side of the screen.
By opening this with the arrow key down you will see the contract address of the NFT appear. By pressing this contract address, you will arrive at the smart contract on the EtherScan website.
An alternative to this procedure is that you enter the contract address via copy/paste yourself on the EtherScan.
As already mentioned, the contract address can easily be found on OpenSea.
What can you learn from smart contracts?
Then, once we are in the contract, we can see what information we can retrieve from it.
First, we get to see general information about the NFT. For example, you can think of the number of coins that are laid down in the contract. In addition, you will receive information about the maker or creator of the NFT such as the wallet address and a link to the original transaction. You can also see here how the gas fee and the transaction fee are arranged.
This function also offers the possibility to see which transactions the NFT has undergone, ie from whom to whom the NFT has been transferred and when this took place. It is also possible to save your own information about projects you have followed. For example, you can set a timeline for the projects you follow. For this, you will have to create an account on EtherScan and log in with it.
Token tracker EtherScan also has a so-called token tracker for each individual NFT set. Here you can see what the reserve price is, the number of transactions, the total stock or supply, and a link to the official website. Very interesting here is that under the Holders tab you can also see how many hodlers a set has and who has the largest number of NFTs of a set.
Under the Transaction tab, you can see all transactions made under the smart contract in chronological order. By clicking on individual transactions you will find out even more information.
The Contract The contract button gives you all the necessary information about the specific NFT smart contract. For example, you can find the source code and all general contract information and associated functions.
If your wallet has specific permissions, you can even interact with the contract in the form of burning tokens, approving transactions, and moving tokens.
Analyze
Under the Analyze tab, you will find various details about transactions such as the gas fee, transfer of tokens, and much more.
It is a very useful tool that will teach you a lot about the trends of the NFT set that you are interested in.
Ultimately, you will not have to use all the described functions or information from the smart contracts. In general, it is important that you know what the NFT and the contract entail in order to arrive at a well-considered investment.
I mainly use smart contracts to protect myself against rug pulls and scams.
And I think it’s important to read back transactions that have been done in the past and to know how the property rights are arranged.
Conclusion
Reading smart contracts can provide you with a lot of useful information. By following NFT contracts in this way you can detect rug gpulls and NFT scams early.
This way you protect yourself against unnecessary losses and frustrations.
When you really understand smart contracts it becomes easier to determine the popularity of a project, know the property rights and security measures, and much more.
You, therefore, benefit a lot from reading smart contracts to achieve nice NFT profits!
