As blockchain, and NFTs in particular, gain more attention and adoption, new types and use cases for non-fungible tokens are coming to light. One of the most promising ideas is dynamic NFTs, as they enable a new level of interactivity and functionality for digital assets. Even though traditional or static NFTs have taken the world by storm, dynamic NFTs are now even more popular and generating hot discussions in the NFT community.
In this article, we will explore the concept of dynamic NFTs and understand how they work and change the way we view and use NFTs. We will also take a look at their use cases and how they may represent the future of non-fungible tokens.
Dynamic NFTs, also known as dNFTs, are digital tokens that can change their characteristics based on external conditions, with the changes recorded in the NFT’s metadata. Traditional NFTs represent static digital assets with fixed characteristics, while the architecture of dynamic NFTs is designed to respond to behavior, real-time market prices, time, weather, and other external parameters.
Dynamic NFTs incorporate interactive and programmable features that enable the creation of digital assets that can evolve over time. As a result, dNFTs enable artists to provide a more engaging experience for buyers, collectors, and fans.
Using an old mansion NFT as an example, the metadata of a dynamic NFT will change based on historical data, maintenance records, market value, and other factors. Dynamic NFTs also reflect changes in ownership as well as modifications made to the building.
Currently, static NFTs are the most popular type of NFTs. They are commonly used as digital collectibles in NFT art projects and play-to-earn games. In addition, NFTs offer a unique value proposition for tokenizing real-world objects, such as real estate papers, patents, and other unique identifiers.
Still, this model is limited by the immutability of static NFTs, as the metadata associated with them becomes immutable once the tokens are minted on a blockchain. Building progression-based video games, creating blockchain-based fantasy sports leagues, tokenizing real-world assets, and many other use cases require frequent data updates.
Dynamic NFTs take the best features of both static and dynamic non-fungible tokens. As such, NFTs retain their unique identifiers and allow for updating aspects of their metadata.
First, dynamic NFTs have a high degree of interactivity that comes from their flexibility and ability to change. This makes them more attractive and engaging to collectors. In addition, dynamic NFTs can be used in digital art, games, social networking, and other services. This opens up new opportunities for creators and developers who want to offer immersive experiences to their audiences.
Second, dynamic NFTs offer programmability, which means that developers can create rules that define the behavior of NFTs and have a significant degree of control. What’s more, it offers a high level of automation, enabling new use cases and applications across multiple industries. For example, a dynamic NFT can represent an in-game character or item continuously evolving and acquiring new capabilities based on the player’s progress.
Finally, dynamic NFTs open up new revenue streams for artists and creators who earn royalties based on the sustained use or interaction with their NFTs.
Just like static NFTs, dynamic NFTs run on blockchain technology. However, dynamic NFTs rely on smart contracts that define how tokens can change over time. Smart contracts automate functions such as changing the animation, appearance, or behavior of the NFT based on certain conditions. They also define how dynamic NFTs can be bought, sold, and traded and how royalties are distributed to their creators.
Unlike traditional NFTs, dynamic NFTs use the ERC-1155 token standard. This standard enables data to be stored in a format that can be edited on demand, making tokens semi-fungible.
In addition, dynamic NFTs use oracles that allow them to become interactive and responsive representations of digital assets and create new use cases. When an oracle sends external data to the smart contract, it triggers a change in a dynamic token and updates the metadata of the NFT. As a result, the appearance and other characteristics of the token are also updated.
Users need a digital wallet that supports smart contracts to interact with dynamic NFTs. They can collect, sell, or trade NFTs on NFT marketplaces or use them in decentralized applications that support dynamic NFT capabilities.
Although static NFTs have revolutionized digital art and provided creators with a way to prove ownership and prevent illegal copying of their original works, static tokens still have limitations that can hamper their benefits in certain situations. Let’s take a closer look at some of the limitations of static NFTs.
Fixed properties
As the name implies, static NFTs are fixed and represent a single version of a digital asset. This limits their ability to respond to shifting conditions or parameters. Therefore, the metadata associated with the NFT, such as its description or image, cannot be changed once it is placed on the blockchain.
Lack of interactivity
Static NFTs are not designed to respond to user interactions or external conditions. This restricts their potential use cases and applications, especially in gaming and other interactive environments requiring dynamic behavior.
Limited versatility
Although static NFTs have proven their usefulness in digital art, their fixed properties make them less useful for tokenizing other assets, such as real estate documents or patents. These assets call for a more universal and programmable approach than static NFTs can provide.
Both static and dynamic NFTs have unique characteristics and can be used in a wide variety of applications, depending on the specific needs and requirements of the use case. However, dynamic NFTs can solve the problems associated with the limitations of traditional static non-fungible tokens, making them more useful. Let’s dive into the characteristics of dNFTs.
There are small but important differences between static and dynamic NFTs. First, static NFTs cannot be changed, modified, or updated over time.
Dynamic NFTs have the opposite characteristics. They are sometimes referred to as living NFTs. The metadata of dynamic NFTs is modifiable, so these tokens are interactive and responsive and have broader use cases compared to static NFTs.
Oracles transfer data to a non-fungible token without creating a new token. Instead, the old token is updated, making dynamic NFTs a perfect solution for use cases where data needs to be updated regularly.
As for static NFTs, they cannot be changed or modified once they are created. This makes them more lightweight, secure, and compatible with many existing systems and protocols. Static NFTs are a better solution for audit purposes because the number of transactions doesn’t affect the creation and storage process of these tokens. All of the metadata associated with a static NFT is stored in a single file.
Oracles play an important role in dynamic non-fungible tokens. Oracles are collections of nodes that provide and validate external data for smart contracts that also include dynamic NFTs. For example, oracles can send off-chain data to smart contracts that are dynamic NFTs. This changes the metadata of dynamic NFTs, and token owners see changes in the appearance of the token. Thus, oracles help dynamic NFTs obtain external data needed to update and modify tokens.
Thanks to the assignment of values by the Chainlink oracles, dynamic NFTs can fulfill various use cases, such as the creation of NFTs, the transfer of their ownership, and the assignment of values to the assets to resolve competitive outcomes.
In addition to bridging the gap between smart contracts and external web services, oracles make dynamic NFTs more automated and decentralized. Most importantly, oracles can ensure that dynamic NFTs are more connected to the real world.
An often unnoticed component of dynamic NFT design is how to reliably obtain the information and functionality needed to build an automated, fair, and secure dynamic NFT process.
Dynamic NFT metadata can evolve in response to external conditions. These conditions can be both on-chain and off-chain. However, blockchains cannot access external or off-chain data and calculations.
Chainlink overcomes these limitations by providing various off-chain data and computation services that can be used as inputs to initiate dynamic NFT updates. As the dynamic NFT ecosystem expands and NFTs become more integrated with the real world, Chainlink serves as a bridge between the two disconnected worlds, enabling the creation of automated, decentralized, and engaging dynamic NFT processes.
Chainlink Data Feeds and Any API
Chainlink Data Feeds is an off-chain data delivery service for the secure delivery of sports scores, weather readings, and any other type of data used to update a dynamic NFT. For data offerings that are unique to a project, Chainlink also enables seamless connections between any API and an NFT smart contract through the Chainlink Any API.
This service is critical for use cases such as LaMelo Ball dynamic NFTs that require on-chain sports data to cause metadata changes. Still, this is one of an unlimited number of potential use cases. Chainlink is the most widely used decentralized oracle network designed to provide off-chain data to any dynamic NFT using real-world data.
Chainlink Automation
Chainlink Automation is a secure smart contract automation service that can be used to initiate dynamic NFT changes when predetermined conditions are met. For example, LaMelo Ball NFTs changed visually when he reached a certain statistical milestone, such as scoring 1000 points.
Chainlink Automation gives us an easy way to build truly autonomous and distributed NFT processes and help ensure that user-owned dynamic NFTs work exactly as they are designed to. Chainlink Automation is combined with Chainlink Data Feeds and Any API to enable the development of eco-friendly behavioral tracking through dynamic NFTs, automated and attractive shopping rewards dNFT programs, etc.
Chainlink Verifiable Random Function (VRF)
Chainlink VRF is a verifiable RNG that can be used to stimulate dynamic changes in dynamic NFTs. This functionality is highly useful in GameFi projects. Randomness is an integral part of most video games, as it is used to decide what in-game items come out of a loot box, determine the success rate of attacks, or even what color a character’s shirt will be after using a fabric dye.
Because play-to-earn games have real-world value, they must use a transparent and tamper-proof RNG mechanism.
Gaming and the metaverse
First, dynamic NFTs are widely used in games and the metaverse. This type of token represents characters or in-game items that change based on the player’s actions and interactions.
Imagine you are working on a role-playing game where players engage in battles and quests to defeat various creatures. You can use dynamic NFTs to create digital weapons because these tokens can evolve during the game, for example, when the player completes a particular quest or wins a battle with a specific creature.
All in-game achievements are displayed in the corresponding NFT metadata. This approach increases player engagement and provides a tangible representation of their in-game progress. In addition, dynamic NFTs also represent in-game characters with their various attributes recorded in the token’s metadata.
Dynamic NFTs can also be used in play-to-earn games to create dynamic items such as in-game currencies, power-ups, and virtual goods.
Digital art
Digital art is another popular use case for dynamic NFTs. For example, you can create a collection of NFT art that changes color or has specific temporary features that depend on location, season, or even temperature. This makes your artwork even more unique.
In addition, dynamic NFT artwork can imitate real-world art installations that require audience participation to be appreciated. A dynamic non-fungible token could evolve based on the token owner’s interaction with the asset. As a result, you will increase engagement with digital art exhibitions.
Real estate
Dynamic NFTs can contribute to the promotion of the tokenization of real estate and physical commodities. Real estate tokenization is a complicated process because real estate prices are constantly changing based on interest rates, supply and demand, property maintenance, and other factors.
Players in the real estate industry must keep all records accurate and up to date. Therefore, it is extremely important to be able to update all necessary data in real time. Dynamic NFTs make this possible, as this type of token can keep immutable records of maintenance work, ownership information, and sales transactions that can be easily updated when they change. This makes it easier to track the value of a property over time.
Digital identity
Digital identity management is another exciting potential use case for dynamic NFTs. Dynamic NFTs can be used to represent a person’s digital identity and store information such as contact details, marital status, and place of residence. Because dynamic NFTs are flexible, this information can be updated automatically without replacing digital identity documents.
Similarly, dynamic NFTs can represent user profiles on social media. It can change based on the user’s actions and interactions on the network.
Sports
The sports industry can also take advantage of dynamic NFTs. For example, they can be used in sports collectibles. With static NFTs, the metadata becomes immutable once the token is minted on a blockchain. Therefore, any changes in statistics, such as a soccer player’s scores, cannot be updated.
On the contrary, dynamic NFTs can store an athlete’s performance in the metadata, which can be changed based on their achievements and performance.
Collectibles
Dynamic NFTs can also be useful in the collectibles space. For example, they can represent evolving works of art or offer interactive experiences to collectors.
Dynamic NFTs also allow collectors to personalize and customize their non-fungible tokens. For example, collectors can change the token’s appearance, accompanying elements, and attributes according to the individual’s preferences.
Dynamic NFTs can also help you create exclusive collectibles that gain rarity and valuable attributes over time. For example, dNFTs can represent rare football cards that change to reflect the player’s accomplishments and career milestones. As a result, the value of the collectible will increase.
Dynamic NFTs also make it possible to add gamification to digital collectibles to increase user engagement. All in all, you can enable collectors to earn rewards based on their participation.
Rewards and royalties
You can also use dynamic NFTs to reward users for completing specific tasks or reaching various milestones on your platform. For example, when a user reaches a milestone, you can give them a dynamic NFT that grants them exclusive content.
Dynamic NFTs allow you to automate royalty payments assigned to NFT creators and investors. You can program predefined rules for these NFTs to automatically distribute revenue to the parties.
Fundraising
Dynamic NFTs can also be useful for fundraising. They can help you improve the entire crowdfunding process and make it more interactive and engaging for users.
Take Regenerative Resources, for example. This ecosystem services company uses dynamic NFTs to raise money for mangrove conservation. The company released an NFT for a short film that initially contained a single frame. However, new frames are added every time the movie is resold. This will continue until the movie is completed.
Government
In theory, governments can issue passports in the form of dynamic NFTs that update a person’s travel information. There will be no need for additional paperwork or a stamp, as a person’s travel information will be stored on a blockchain. Furthermore, it will reduce the possibility of fraud because blockchain technology creates immutable and verifiable records.
Sports: LaMelo’s NFT collection
LaMelo, an NBA player, has launched a collection of dynamic NFTs that represent his accomplishments and offer various benefits to their owners. When he won the Rookie of the Year award, the NFT changed visually and turned gold.
Gaming: CryptoKitties
CryptoKitties is an NFT-based game that allows users to buy, sell, and breed digital pets. Each cat is represented by a dynamic NFT that can change over time. Therefore, token owners can update the cat’s appearance, genes, or personality.
Digital art: The Merge
The Merge is an experimental NFT art project created by a digital artist known as Pak. In 2022, the artwork was sold for nearly $92 million in the form of fractional NFTs on the Nifty Gateway marketplace. The entire artwork is a mashup of fractions that anyone can buy. Initially, it consisted of just three large dots on a background, with the size of the dots increasing as the number of buyers grew.
Collectibles: Async Art
Async Art is a platform for creating and collecting programmable digital art that can change and evolve based on various external conditions. Each work of art is represented by a dynamic NFT, making it unique and attractive to collectors.
ArtBlocks
ArtBlocks is a Web3 platform for generative art. Projects on the platform use dynamic NFTs to create generative works that combine art and computer programming. Many of these NFTs transform over time and rely on dynamic NFTs to enable these changes.
Moonbirds
Moonbirds has integrated dynamic NFTs into its 10k PFP project. NFT owners can stake their tokens to achieve different rankings that unlock rewards based on the duration of the stake period. In addition, the NFTs themselves display different backgrounds depending on how long they have been staked, whether the owner has a Proof Pass, etc.
Beeple’s ‘Crossroads’
Mike Winkleman, widely known as Beeple, led the early adoption of dynamic NFTs. He created an artwork called “Crossroads” featuring Donald Trump. The piece was designed to show either a triumphant or defeated Donald Trump, depending on the results of the 2020 presidential election. The NFT was so popular that it later sold for $6.6 million on the Nifty Gateway platform.
Since smart contracts allow NFTs to grow, evolve, and update over time based on off-chain and on-chain data, smart contracts can dictate whether a non-fungible token should change along with the metadata of a dynamic NFT.
The process of creating dynamic NFTs basically requires collecting off-chain data from your smart contract and transferring it to Chainlink before updating the token for the minting and final sale.
Here is a basic guide you can follow to create a dynamic NFT yourself.
Steps involved in creating dynamic NFTs
Keep in mind that there are several platforms that allow you to create dynamic NFTs without any coding.
Let’s take a closer look at the tools needed to create dynamic NFTs.
Dynamic NFTs are a revolutionary concept in the digital asset space. They enable a higher level of connectivity and interaction that their traditional alternatives cannot match due to their inability to change and evolve over time.
Although still in its infancy, dynamic NFT technology has the ability to improve the NFT industry by offering more use cases and application scenarios. It also can connect with the real world, which is likely to bridge Web3 with everything that came before it.
Dynamic NFTs may even become so commonplace in our daily lives that we won’t even think of them as NFTs. However, only time will tell if this flexible technology will be adopted or not.
If you have any questions or ideas, please don’t hesitate to contact us.
