Smart contracts are one of the main drivers of the viability of NFTs, cryptocurrencies, blockchain and Web3. A smart contract is a line of code that executes all or part of the conditions in an agreement and is stored in a blockchain-based platform. It can be the sole manifestation of an agreement, or act as a complement to a text-based contract and execute some of its provisions. Think of it as an automated version of what we know as a contract, where all the conditions have to be met or it automatically reverses itself.
What is truly interesting is that today, smart contracts are still rudimentary; primitive even. They only allow for specific input that stipulates the conditions that have to be met in order to commence the execution of the code. That is, if “x” occurs, then “y” has to be executed. If a person clicks to buy an NFT, and a wallet is previously connected, then the contract executes a transfer of funds in exchange for an NFT. The ownership of the NFT is now in the hands of the person that has paid for the NFT. Pretty simple, right?
Well what if a smart contract could be deployed for a licensing or renting agreement? That way, instead of using an NFT as an investment vehicle, it can be used to create revenue streams. How about the use of digital real estate to host events? Those kind of contracts are not commonplace still, as Web3 is still in its infancy. But the possibilities are there, and they are the kind of things that can bring a lot of value to an NFT art gallery such as SOPRG.
On the enforcement side of things, access to content could be denied. If a party cannot hold its end of the deal, then the code denies the user access to whatever was being granted in the first place. Or a collateral might be permanently transferred if an NFT is not returned after a rent period is over.
This brings more possibilities for artists, who are the ones that are driving NFT forward. They could choose not sell their artwork, and opt instead to license (or rent) it to a museum for a fixed amount of time. That contract could contain variables that makes the artist earn money when people view the NFT. More subjective legal interpretations are also expected to make their way into the smart contracts. For example, you could have a commitment in terms of promotion and exposure that, if not honored, the contract could be considered null.
For now, SOPRG is hosting events at its Somnium metaverse parcel and everyone is invited. But as smart contracts start to evolve and become more sophisticated, that could empower new forms of business to emerge. More concretely, new ways of getting revenue in Web3.
Even though some its applications are still being experimented with, smart contracts are a very practical tool to allow your NFT provide you with money, or revenue. NFTfi, for example, allows you to get loans in ETH against an NFT that you could have. Your digital asset becomes the collateral. Plus, it has the decentralized aspect that everyone in Web3 knows and loves. In this case, because it is a P2P loan. A marketplace where loaners and borrowers come together. So your NFT art can become a source of liquidity that you can use to make an investment.
And of course, the next use of smart contracts is one that has been described above: renting. A marketplace has been birthed to fill this particular need: reNFT. Once again, a lender provides an NFT for a fixed amount of time, and the borrower offers a collateral. And it all happens in a P2P format, in a marketplace of renters and lenders. There are several uses for such an agreement. The short-term flex should not be underestimated, and that could perfectly be one of its uses. One interesting use of the renting format is that and art gallery is hosting an installation or exhibition. So the NFT art that you buy at an art gallery such as SOPRG could provide you revenue as you hold it. The next use of renting and lending NFTs is for the digital art dealers of the future, who might need such arrangements as they try to show NFTs to potential buyers. Finally, there’s also the use of gaming loans, much in the vein of Axie Infinity’s scholarship program.
You see, NFTs are so much more than just a fad. They can be considered an asset in and of itself and, as such, they can be monetized. The moment these assets are used more and more to generate revenue and not as an investment vehicle, then you can consider that Web3 has matured. Not to say that it will be its final stage though, as NFTs are not the only thing that characterizes Web3. Smart contracts will be a big part of it all.