In the previous article, we showed how Kadena Marmalade is revolutionizing how NFTs are transacted on-chain with multi-step pacts controlling sale, and token policies offering “pluggable” marketplace implementations for creators to choose from, or write their own! In this article we will go deep into the actual standards and Pact implementations so builders can start minting marketplaces right away on testnet!

Kadena’s initial NFT standard is inspired by ERC-1155, the “multi-token standard” on Ethereum. Like the ERC version, it mainly specifies transfer operations and limited metadata (the uri string value). Version 2 turbocharges this with the full Kadena vision of truly decentralized on-chain NFTs:

Pacts in Kadena define a multi-step operation. They are used to handle cross-chain transfers and, behind the scenes, even handle the automatic gas purchase->redeem process on the Kadena blockchain!

In the sale pact, two steps are specified: **offer **and **buy. **The offer operation also has a “rollback step” that allows the seller to **withdraw **the sale. The sale pact uses a special feature of pacts, “pact guards”, to govern the trustless escrow of the NFT sale. Once an asset is transferred to an account governed by a pact guard, only that particular execution of the pact, as identified by its “pact ID”, has the right to manage that asset in subsequent steps.

Note that a sale can only occur after token creation and minting. A sale is how an existing NFT token that is owned by a “seller” finds a “buyer” who, upon success, will receive the token.

The first step of the sale pact **offers the NFT for sale. **This step handles the transfer of the NFT into the escrow account, and the fresh Pact ID assigned to the particular sale execution is considered the “sale ID” in the SALE event that gets emitted.

It’s important that the NFT be escrowed for sale, as it commits the seller to “play by the rules.” This allows buyers to pay (or bid) with confidence that the seller can’t rug-pull the NFT between offer and purchase or other shady business. By initiating the sale, **the seller actually loses custody of the token **unless the buyer does not materialize, at which point the seller can roll back the sale with the **withdraw **process described below.

The token policy is responsible for any specific behavior needed, as specified in the **init-sale **operation. The sale pact itself does nothing other than escrowing the pact and capturing a timeout value. Policies would here quote a price in some coin, or enforce a floor price: whatever is needed for the particular marketplace.

If a buyer wants to acquire the token offered in the first step, they send a **continuation message **of the Pact ID (or “sale ID”) initiated in the first step into the blockchain. Buyer recipient data for the token is specified in the message payload in the **buyer **and **buyer-guard **fields.

At this point, the token policy is responsible for enacting whatever offsetting transaction is needed to allow the release of the escrowed NFT to the buyer, in the **enforce-sale **operation. While the sale pact handles transferring the NFT out of escrow (and enforcing the timeout), everything else is “pluggable”, be that an offsetting coin transfer, royalty redemption, or whatever you can imagine!

The timeout captured in the **offer **step allows a sender to withdraw from the sale if nobody shows up to buy the token. The timeout is measured in blocks, such that if a seller sets the timeout to 30 blocks, they cannot pull out of the sale until 30 blocks have been mined on-chain.

Once the timeout has passed, the seller (or anybody, as the only authority governing the rollback is the Pact code itself) sends a special “rollback” continuation message for the sale ID. The **withdraw **operation simply transfers the token out of the escrow account back to the seller.

Note that all of the logic surrounding the step-wise operation of the sale pact is automatically handled by the Pact language itself (and the blockchain hosting it). This ensures that step 2 can only happen after step 1, and only if step 1 has not been rolled back, and only if step 2 has not already happened; likewise a rollback can’t occur if step 1 hasn’t happened, or if step 2 has already happened. As you can see, left to programmers this would inevitably result in numerous bugs. Instead with Pact it’s impossible to have a bug in the sequencing logic.

The sale pact is the critical piece of logic that powers mintable marketplaces, since it introduces a fully autonomous and enforceable way to offer tokens for sale within the standard. However, the token policy handles critical aspects of the sale, such as how does money change hands? How might a royalty be implemented? And also, doesn’t transfer still undermine everything?

Token policies don’t just govern sales, but transfer, minting, and burning as well. This is necessary to make a truly enforceable token policy:

To give a simple but powerful example of policies in action, let’s consider a creator offering a token that implements a policy that enforces scarcity, requires sales for transfer, and pays a royalty.

In token creation, a fixed max supply is captured, which along with the standard notion of precision, allows creating a true 1-for-1 NFT (supply 1.0, precision 0), a limited series of say 5 (supply 5.0, precision 0), or any fixed issuance.

Minting enforces the max supply (precision is automatically enforced in the ledger), to prevent minting once the max supply is reached. For a 1-of-1 this would allow a single mint only. Burning is prohibited altogether.

The sale initiation policy requires the seller to quote a price in some coin. This puts the NFT into the trustless escrow. Transfer is prohibited altogether to prevent offline sales without royalty enforcement.

The sale completion policy computes the royalty from the quoted price, transfers the royalty to the creator, and the balance to the seller, before releasing the escrowed token to the buyer.

Note that all sales going forward have to respect this process. The buyer can only resell using the exact same quoting process and royalty, with no possibility of back-handed transfers behind the scenes.

Finally, NFTs can have rich on-chain metadata, verifiable IDs, and a true sale process for enforcing a policy-driven marketplace. Check out the KIP-0013 proposal where we’re hammering out the new standard, and come check out our smart contracts on testnet and on Github to see how you can “mint a marketplace” and drive innovation in NFTs on Kadena!