The Core Concepts

A policy ID is a unique code that identifies a group of related NFTs on the Cardano blockchain. You can think of it as the unique collection identifier*. All tokens on Cardano must be minted under a policy ID, consequently a new policy ID must be created before any new token can be minted. Because all policy IDs are unique and only the holder of the policy keys can mint new tokens under the same policy, it’a also the perfect way to ensure your collection’s authenticity. An NFT might be identical in content and metadata but the policy ID will always be different in the case of an attempted copy. The ability for anyone to quickly and effortlessly verify authenticity and provenance on their own is one of the key advantages NFTs bring to the table. In short, on Cardano you can very quickly tell which one of two seemingly identical NFTs is the authentic one: just look at their policy IDs and see which one matches the official one. Wallets, marketplaces and blockchain explorers all display policy IDs preeminently when showing data about an NFT.

Organising Collections with Policy IDs

Policy IDs are also the most common way that works are grouped into collections. But, policy IDs are just technical identifiers and ultimately it’s up to you as a creator to decide how you want to use them and group your collection. For instance, if you have loosely defined collections or you want all your work to be under the same identifier you can group all your NFT releases and collections under the same policy ID, which, in a way will become your on-chain digital signature as an artist. On the opposite end of the spectrum, you can also choose to mint each new NFT you release under a different policy ID. However, keeping collection organised by policy IDs is the ecosystem standard - blockchain explorers, wallets, marketplaces and other services all use policy IDs to identify collections and group NFTs, so keep this in mind.

Policy Keys

Upon creating a Policy ID, it is essential to secure and manage the corresponding policy keys. These keys enable the burning and minting of new tokens under the Policy ID and must be kept safe to prevent unauthorised access. After first creating your policy ID you will be responsible for safely storing and managing your policy keys. If you are using a third party minting service make sure you ask for your policy keys, if the service doesn’t provide them by default. Of course, this applies to open policies or policies that close a considerable time after mint - in the case of policies that close shortly after mint, having the policy keys won’t make much of a practical difference, as once a policy is closed it can no longer be modified regardless of having or not having the keys. If you're unsure, err on the side of caution and always ask for your policy keys.

Conclusion

Understanding and making use of Policy IDs effectively enables creators to maintain control over their digital creations, ensuring that authenticity and provenance are easily verifiable. By managing policy keys securely and making informed decisions about how to organise collections, creators can make the most of Cardano to support their digital works.

* This is true when speaking about policy IDs in non-technical terms. In technical terms, a minting policy is the set of rules that dictate how tokens under a specific policy can be minted and burned. A policy ID is the hash of that script used to identify that particular script (hence ID). You can find out more by exploring the Native Tokens section of the Cardano Docs - link in the Additional Resources section.