Smart Contracts for NFTs: Everything Developers & Creators Need to Know in 2025

NFTs in 2025: A Core Infrastructure

NFTs are no longer just about digital collectibles; they are fundamental to how various sectors operate. The $95 billion global transaction volume in 2024, with 68% powered by Ethereum-based smart contracts, underscores this massive growth and the dominance of Ethereum’s standards.

Why Smart Contracts Are the Real Powerhouse Behind NFTs

Smart contracts are the backbone of NFTs, enabling their functionality and defining their behavior. They are self-executing agreements whose terms are directly written into code and deployed on a blockchain.

Key Stats (2025):

• 43% of NFT creators now embed dynamic royalties via ERC-2981: This signifies a strong move towards ensuring creators receive ongoing compensation from secondary sales. “Dynamic” implies that royalty percentages could potentially change based on certain conditions defined within the smart contract (e.g., higher royalties for the first few resales, then decreasing). ERC-2981 standardizes how marketplaces interpret and enforce these royalties, making it easier for creators to receive their due across different platforms.
  
  
• 32% of metaverse platforms use ERC-4907 to manage rentals: This stat highlights the practical application of NFTs in virtual economies. Renting out virtual land, in-game items, or even avatars becomes seamless and trustless with ERC-4907, as the smart contract automatically manages the time-limited access and ownership reverts to the original owner after the rental period.
  
  
• Over 400k+ composable NFT contracts were deployed last year alone: This explosion in composable NFT contracts (likely leveraging standards like ERC-998) demonstrates a growing sophistication in NFT design. Composability allows NFTs to be built from or contain other NFTs, opening up complex use cases like customizable avatars, bundled digital assets, or even nested legal agreements.

Smart contracts enable:

• Real-time royalty automation: No more relying on third parties or manual processes to distribute royalties. The smart contract automatically executes the royalty payment to the creator (or other specified recipients) whenever a secondary sale occurs on a platform that honors the standard.
  
  
• Time-limited NFT access: This is crucial for rental models (as seen with ERC-4907) or for creating dynamic NFTs that grant access to events, content, or features for a specific duration. Once the time expires, the smart contract automatically revokes the access.
  
  
• Token bundling and nesting: This refers to the ability for one NFT to “own” or contain other NFTs or even fungible tokens (ERC-20). Imagine a single NFT representing a gaming character, which then owns NFTs for its equipment, weapons, and even a small amount of in-game currency. This creates richer, more complex digital assets.
  
  
• Identity and credential verification: NFTs can serve as verifiable digital credentials. A smart contract can issue an NFT representing a degree, certification, or even a digital passport. This NFT can then be verified on-chain, proving identity or qualifications without needing a centralized authority.

“Think of smart contracts as the DNA of your NFTs—they define not just who owns them, but how they evolve.” This analogy perfectly captures the essence of smart contracts: they imbue NFTs with inherent rules, behaviors, and the potential for dynamic change.

NFT Smart Contract Standards You Must Know in 2025

These are the foundational standards that enable the various functionalities of NFTs on the Ethereum blockchain.

ERC-721 (Launched 2018)

• The gold standard for one-of-a-kind digital assets: ERC-721 was the first widely adopted standard for non-fungible tokens. Each ERC-721 token is unique and cannot be interchanged with another, making it perfect for representing distinct items.
  
  
• Used in: CryptoPunks, BAYC, World of Women: These are iconic NFT collections that leverage ERC-721 to represent individual, unique pieces of digital art.
  
  
• Limitation: Each token requires individual transactions: If you wanted to mint 100 unique ERC-721 NFTs, you would typically need 100 separate transactions, which can be gas-intensive.
  
  
• Interesting Fact: ERC-721 accounted for over 51% of NFT minting gas fees in 2023: This highlights its continued prevalence but also points to the need for more gas-efficient alternatives for certain use cases.

ERC-1155 (Launched by Enjin, 2019)

• Supports both fungible and non-fungible tokens in one contract—ideal for games and metaverses: This is the key innovation of ERC-1155. A single smart contract can manage multiple types of tokens, including unique NFTs and interchangeable fungible tokens (e.g., 100 units of “gold coins” and a single “legendary sword”).
  
  
• Used in: The Sandbox, Axie Infinity, Lost Relics: These gaming platforms benefit greatly from ERC-1155’s ability to manage a wide array of in-game assets efficiently.
  
  
• Gas Efficiency: Batch operations cut gas fees by up to 75% compared to ERC-721: ERC-1155 allows for batch minting and transfers, meaning you can mint or transfer multiple tokens (even different types) in a single transaction, significantly reducing gas costs compared to individual ERC-721 transactions.

ERC-4907 (Dual-role + Expiry)

• Adds rentable capabilities to NFTs: This standard introduces the concept of separating ownership from usage rights.
  
  
• Use Case: Renting out your NFT land in Decentraland: An owner of a virtual land NFT can grant temporary usage rights to another user without transferring the underlying ownership, and the smart contract automatically revokes these rights after a set period.
  
  
• Adoption: Integrated by over 20+ metaverse platforms: This indicates a strong industry recognition of the need for rental functionality in virtual worlds.
  
  
• Feature: user and expires roles to define access: The user role designates who can use the NFT, and the expires role sets the timestamp for when their access will automatically terminate.

ERC-998 (Composable NFTs)

• Create NFT trees—an NFT that owns other NFTs or ERC-20 tokens: This is a powerful standard for creating hierarchical structures. A “parent” NFT can own “child” NFTs, creating complex, nested digital assets.
  
  
• Use Case: Gaming avatars with gear, DeFi bundles: Imagine a single NFT representing your gaming character. This NFT could then own other NFTs representing the character’s armor, weapons, and even an ERC-20 token representing a health potion. For DeFi, an ERC-998 NFT could represent a basket of different financial tokens.
  
  
• Growing Trend: DAOs are building shareable, nested NFT portfolios: Decentralized Autonomous Organizations (DAOs) can use ERC-998 to manage collective ownership of diverse digital assets in a structured and transparent way.

ERC-2981 (Royalties Metadata)

• Standardises royalty information across marketplaces: Before ERC-2981, royalty enforcement was largely up to individual marketplaces, leading to inconsistent or non-existent payouts. This standard provides a common way for creators to signal their desired royalty percentage within the NFT’s metadata.
  
  
• Stat: Nearly 73% of new marketplaces now support ERC-2981: This high adoption rate is a positive sign for creators seeking consistent royalty payments.
  
  
• Problem: Still not enforceable without platform-level cooperation: While ERC-2981 standardizes the information, the actual enforcement of royalties still largely depends on marketplaces respecting and implementing the standard in their smart contracts or off-chain systems.
  
  
• Pro Tip: Combine with programmable enforcement mechanisms to protect royalty flows: This suggests a future where smart contracts could potentially interact directly with marketplace contracts or use other on-chain mechanisms to ensure royalty payments are directly executed, rather than relying solely on marketplace compliance.

Interactive Comparison Table

This table provides a quick reference for choosing the right NFT standard based on the use case.