NFTs (non-fungible tokens) on the Cardano blockchain use specific concepts related to the way digital assets are created and managed. Here is an explanation of the notions of Policy ID and asset in this context:
1. Policy ID
Policy ID is a unique identifier associated with an asset creation policy on the Cardano blockchain. In simple terms, it defines the rules and conditions under which tokens can be issued, transferred or modified.
Definition: A creation policy is a set of rules that determines how NFTs (or other types of assets) can be mined (created) or burned (destroyed).
Function: Each Policy ID is linked to a "policy script", a script which may include conditions such as a validity period, signature requirements, or specific conditions for the creation or destruction of tokens. This ensures that the rules established for an NFT are respected.
Example: If an NFT creator wants his work to be minted only during a certain period, he can integrate this rule into the policy. The associated Policy ID will then be used to identify this rule on the blockchain.
2. Asset
Asset refers to a specific token or asset on the Cardano blockchain. In the context of NFTs, each asset has unique characteristics that distinguish it from other assets.
Definition: An asset on Cardano is a unit of value or token that is issued according to a policy defined by a Policy ID. It can represent a work of digital art, a collector's item, or any other type of unique digital asset.
Identification: Each asset is identified by a unique name which, in combination with the Policy ID, differentiates it from other assets. For example, an NFT could have a name such as "ArtPiece1" and be associated with a specific Policy ID that defines the rules for its creation and management.
Example: Suppose a digital art gallery creates a limited series of NFTs. Each NFT in this series will be a unique asset with a specific identifier, but all will be governed by the same Policy ID, which defines the conditions under which these NFTs can be created or transferred.
NFT creation and management process
Policy creation: A developer or creator defines a creation policy that includes rules for minting and managing NFTs. This policy is then translated into code on the blockchain, generating a unique Policy ID.
Minting NFTs: Using the Policy ID, the creator can mint tokens or NFTs in line with this policy. Each NFT created is then associated with a unique Asset ID, which is combined with the Policy ID to guarantee its uniqueness.
Management and Transfer: NFTs can be transferred, sold or exchanged according to the rules set out in the policy. The Policy ID ensures that all transactions comply with the defined conditions.
Conclusion
In conclusion, on the Cardano blockchain, the Policy ID plays a crucial role in defining the rules and conditions for the creation, management and transfer of NFTs. It groups all the NFTs belonging to the same collection under a common policy, guaranteeing that all the coins in that collection comply with the same guidelines.
On the other hand, each Asset represents an individual NFT within this collection. It is uniquely identified by a specific identifier which, combined with the Policy ID, ensures its uniqueness and distinctiveness. In this way, the Policy ID groups together the general rules for the entire collection, while each Asset identifies and differentiates each unique NFT within this policy.
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