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CIP-68 NFT Standard — Lecture Notes

1. Background​

Early Cardano NFTs followed CIP-25, where metadata was stored in the minting transaction.

Limitations of CIP-25​

  • Metadata becomes immutable after mint
  • Smart contracts cannot read metadata
  • Difficult to build dynamic or evolving NFTs
  • Requires off-chain infrastructure for interpretation

To solve these limitations, Cardano introduced CIP-68, a modern NFT architecture enabling programmable assets.

2. Core Idea of CIP-68

CIP-68 separates NFT ownership from metadata storage.

Instead of minting a single token, a project mints two tokens:

User NFT​

  • Held in a user's wallet
  • Represents the actual NFT

Reference NFT​

  • Stored in a smart contract UTxO
  • Contains metadata in the datum

This structure allows metadata to be read by smart contracts and updated if allowed by the script.

3. Token Labels

CIP-68 uses labels defined in CIP-67 to distinguish token types.

LabelPurpose
100Reference NFT (metadata holder)
222User NFT
333Fungible Token
444Rich Fungible Token

Example:

(222)DragonSword
(100)DragonSword

Both tokens share:

  • the same policy ID
  • the same asset name
  • but use different labels.

4. Metadata Storage

Metadata is stored inside a datum attached to the UTxO holding the reference NFT.

Example structure:

datum = [
  metadata,
  version,
  extra
]

Example metadata:

{
  "name": "Dragon Sword",
  "image": "ipfs://Qm123...",
  "description": "Legendary weapon",
  "attributes": {
    "damage": 120,
    "rarity": "legendary"
  }
}

Advantages:

  • Metadata lives on-chain
  • Smart contracts can read and validate metadata
  • Metadata can be updated under controlled conditions

5. Metadata Lookup Process

When a wallet encounters an NFT:

policyID.(222)DragonSword

The system derives the reference token:

policyID.(100)DragonSword

Then:

    1. Locate the UTxO containing the reference NFT
    1. Read the datum attached to that UTxO
    1. Decode the metadata

This process ensures deterministic metadata discovery.

6. Smart NFT Capabilities

CIP-68 enables programmable NFTs.

Examples:

Dynamic NFTs

NFT attributes evolve over time.

level
skills
appearance

Membership NFTs

tier
expiration date
privileges

Reputation NFTs

DAO participation
achievements
contributions

DeFi Position NFTs

NFTs representing:

liquidity positions
loans
staking records

7. Development Stack

Typical Cardano NFT development stack:

Smart Contracts

  • Plutus V2
  • Aiken
  • Helios

SDKs

  • Lucid
  • MeshJS
  • Cardano Serialization Library

Infrastructure

  • Blockfrost
  • Ogmios
  • Kupo

Storage

  • IPFS
  • Arweave

8. Minting Flow

Modern NFT minting using CIP-68 follows these steps.

  1. Create Minting Policy

Defines mint conditions.

Examples:

  • one-time mint
  • time-locked mint
  • DAO-controlled mint
  1. Mint Two Tokens

For each NFT:

(222)UserNFT
(100)ReferenceNFT
  1. Lock Reference NFT

Send the reference NFT to a script address. Attach metadata inside the datum.

  1. Distribute User NFT

The user token (222) is sent to the buyer’s wallet. Wallets and marketplaces retrieve metadata from the reference NFT.

9. Best Practices

When designing NFT projects:

Decide Metadata Type:

  • immutable
  • semi-dynamic
  • fully dynamic

Separate Components

Recommended architecture:

  • mint policy
  • metadata contract
  • application logic contract

Secure Metadata Updates

Ensure only authorized scripts can update metadata.

Store Media Off-Chain

Images and large files should be stored on:

  • IPFS
  • Arweave

The blockchain should store references and hashes.

10. When to Use CIP-68

Use CIP-68 when NFTs require:

  • dynamic metadata
  • smart contract interaction
  • on-chain logic
  • evolving assets

Examples:

  • games
  • DAO memberships
  • DeFi positions
  • identity systems

For simple static art collections, CIP-25 may still be sufficient.

11. Summary

CIP-68 introduces programmable NFTs to Cardano by:

  • separating ownership from metadata
  • storing metadata on-chain
  • enabling smart contract interaction

This architecture forms the foundation for:

  • dynamic NFTs
  • decentralized identity
  • on-chain gaming assets
  • financial NFTs

CIP-68 is now considered the modern standard for advanced NFT development on Cardano.

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