A dynamic NFT, or dNFT, refers to a type of non-fungible token that comes equipped with encoded smart contract logic. This allows the token to modify its metadata automatically in response to certain external conditions.
In this guide, we will explore the world of dNFTs, including their history, how they work, benefits and drawbacks, use cases, and future outlook.
Whether you’re a blockchain developer, investor, or simply curious about NFTs, this guide will provide you with all the necessary information to navigate the exciting world of dNFTs.
Let’s jump into it!
Table of Contents
What are Dynamic NFTs (dNFTs)?
Dynamic NFTs are a subset of non-fungible tokens that possess the ability to modify their characteristics based on certain conditions.
Each NFT carries metadata, which provides a description of its features. This metadata can consist of a name, a description, and specific details about the NFT’s attributes.
For example, in a gaming NFT, metadata may describe the characteristics of an avatar, such as its strength or stamina. In the case of an NFT artwork, metadata may consist of details such as the colors or accessories used in creating the artwork.
Unlike traditional non-fungible tokens (NFTs), dNFTs can be updated and altered over time, increasing customization and flexibility.
The tokenization of real-world assets, the development of video games that are based on progression, and the creation of blockchain-based fantasy sports leagues all require data to be updated regularly.
Dynamic NFTs provide a solution that combines the best of both worlds. They retain their unique identifiers while also having the ability to update certain aspects of their metadata.
Related Read: What Are Phygital NFTs? Phygital Assets Explained 
How Dynamic NFTs Work?
Dynamic NFTs have the ability to evolve based on both off-chain and on-chain functions, thanks to the use of smart contracts.
These contracts enable dynamic NFTs to be updated and altered in response to certain conditions or events, providing a more interactive and engaging experience for collectors and creators alike.
Here is how dynamic NFTs work:
- ERC1155 Token: Dynamic NFTs primarily use Ethereum’s ERC1155 token.
- Smart Contract Instructions: In a Dynamic NFT, smart contracts provide instructions on how the dNFT’s metadata should be changed given a triggering event based on external data through an oracle or an on-chain event.
- Creation of Base NFT: A base NFT is created first, after which smart contracts that govern updates, unlocking hidden traits or features, and image enhancements are put into place.
- Conditional Changes: The changes made to the metadata of the dynamic NFT are conditional and only happen when a smart contract is triggered.
- Triggering Events: Each smart contract can be triggered by events that can be on-chain or off-chain, as well as time, price, or location-based events.
- Potential Changes: Depending on the triggering event, the metadata of the dynamic NFT can be changed to unlock hidden traits or features, change the appearance of the NFT, or update the metadata.
Role of Oracles in Dynamic NFTs
Dynamic NFTs operate by enabling updates to metadata and the introduction of dynamic features based on certain conditions.
For instance, a dynamic NFT can be created when a user discovers a secret location in an augmented reality app.
Additionally, dynamic NFTs can have numerous underlying features that become more visible as users engage with them more frequently. By adding programmability to NFTs, the potential for dynamic non-fungible tokens is virtually limitless.
However, dynamic NFTs rely on both on-chain and off-chain data.
Oracles play a vital role in providing the off-chain data required for making changes to dynamic NFTs.
Oracles also provide the necessary computing services needed for upgrading and modifying dynamic NFTs.
Moreover, oracles bridge the gap between smart contracts and external web services, which helps to make dynamic NFTs more decentralized and automated.
Most importantly, oracles ensure that dynamic NFTs are more connected to the real world.
Static NFTs Vs Dynamic NFTs (dNFTs)
Smart contracts generate static NFTs with immutable token data that cannot be modified, even under external circumstances. As a result, static NFTs remain unaltered and can become outdated in the event of new information.
Dynamic NFTs, on the other hand, can overcome this limitation. Although the token IDs of dynamic NFTs remain unchanged, they possess the distinctive feature of being able to modify under specific conditions.
Here’s a concise table outlining the key differences between traditional NFTs and dynamic NFTs (dNFTs):
|Aspect||Traditional NFTs||Dynamic NFTs (dNFTs)|
|Interactivity||Isolated from the off-chain environment||Interact with the off-chain environment|
|Fungibility||Fungible and cannot be altered||Semi fungible and metadata can be modified based on external conditions|
|Functionality||Limited functionality||Programmable functionality|
|Use Cases||Collectibles, art, and media||Gaming, Identity, and more|
|Value Creation||Scarcity and provenance||Utility and value-added features|
Benefits of Dynamic NFTs
When comparing static NFTs to dynamic NFTs, it becomes clear that the latter represents the next phase of growth for NFTs.
Dynamic NFTs have the potential to unlock a wide range of use cases in the future of blockchain and the decentralized web.
This new type of NFT combines the unique properties of non-fungible tokens with the ability to incorporate dynamic data inputs, resulting in increased flexibility and functionality.
However, flexibility is not the only advantage that dynamic NFTs offer. There are several other notable benefits associated with these tokens, such as:
- Enhanced Interactivity: Dynamic NFTs allow for greater interactivity and engagement compared to their static counterparts. They can respond to different events or conditions, making them more dynamic and engaging for users.
- Personalization: Dynamic NFTs can be customized and tailored to meet the unique needs and preferences of individual users. This can lead to a more personalized and enjoyable experience for collectors and creators alike.
- Increased Value: The ability to add dynamic data inputs to NFTs can increase their overall value and utility, as they can be used for a wider range of purposes.
- Improved Loyalty: The interactive nature of dynamic NFT projects can foster ongoing engagement and encourage users to discover new ways to enjoy the collections. This can be a powerful tool for brands, as dynamic NFTs have the potential to transform casual users into loyal fans.
- Foster Innovation: Numerous examples of successful dynamic NFT collections demonstrate the ability to tailor these projects to drive engagement and create a unique user experience. As a result, there are endless options for designing dynamic NFTs that reflect innovative ideas and creative strategies.
Dynamic NFTs represent an exciting new frontier in the world of blockchain and NFTs, with numerous potential benefits and use cases yet to be explored.
Applications of Dynamic NFTs
Dynamic NFTs encompass a wide range of real-world applications, and each use case yields different benefits. Some of the most popular applications of dNFTs include:
By utilizing dynamic NFTs, players can level up their in-game characters and enhance their gaming experiences. As players progress through the game, the avatars represented by their dynamic NFTs could evolve and improve in appearance and abilities.
Progression is a crucial concept in game design, as it is essential for engaging players. Dynamic NFTs make it possible to reflect progress in-game through the avatars represented by the tokens.
Additionally, dynamic NFTs have the potential to facilitate choose-your-own-ending games and other interactive experiences that require external data to function.
In the event that blockchain-based identity is established, dynamic NFTs may find themselves being utilized as digital identity cards or passports across the globe.
The adaptable nature of dynamic NFTs would permit automatic updates to be made to the information, eliminating the need for physical replacement of identity documents.
These updates could cover a variety of details such as marital status, contact information, and place of residence.
NFT collectibles have the ability to transform their appearance and acquire unique attributes based on real-world occurrences.
As an illustration, LaMelo, a professional basketball player in the NBA, has recently launched a collection of dynamic NFTs that progress and reward their owners according to his in-game achievements.
After LaMelo won the 2020-2021 rookie of the year award, the NFT modified its color to gold and the planet Saturn, which he was holding, metamorphosed into the sun.
Digital art represented by a dynamic NFT can exhibit unique characteristics such as shifting colors or displaying time-bound features based on factors such as temperature, location, season, time of year, or lunar position.
In order for these changes to occur, smart contracts would need to be established to extract data from APIs or oracles that pertain to the specific events in question.
Tokenized Real Estate
Although the concept of real estate tokenization has existed for a while, static NFTs are incapable of capturing dynamic factors such as changes in property prices, ownership, and age.
This is where dynamic NFTs come in handy, as they can accurately represent the finer details of real estate and are adaptable enough to incorporate specific information updates.
The use of dynamic nature in tokens can increase the appeal of NFT fundraising. Regenerative Resources Co, an ecosystem services company focused on preserving mangroves, is utilizing dynamic NFTs to raise funds.
To achieve this, a short film NFT was created with only one frame initially. As the film is sold again and again, additional frames are added until the entire film is complete. This process continues until the film is fully assembled.
Future Potential of Dynamic NFTs
Dynamic NFTs have opened up new possibilities for innovation, engagement, and monetization in the NFT space.
Here are some potential ways in which dynamic NFTs could shape the future:
- Interactive NFTs: With the addition of more dynamic features, NFTs can become more interactive, allowing users to engage with them in new ways. This could include features such as touch, motion, and sound, making the NFTs more lifelike and engaging.
- Virtual Reality NFTs: As virtual reality technology becomes more advanced, dynamic NFTs could be used to create immersive experiences within these virtual worlds. This could include NFTs that represent virtual real estate, gaming items, and other digital assets.
- Dynamic NFT marketplaces: As the popularity of dynamic NFTs grows, it is possible that dedicated marketplaces could emerge, where users can buy and sell these unique assets. This would create new opportunities for artists, collectors, and investors alike.
- Dynamic NFTs for social impact: Dynamic NFTs could also be used for social impact initiatives, such as fundraising for charities and non-profits. By adding dynamic features, these NFTs could become even more compelling for those looking to make a difference.
- Dynamic NFTs in advertising: Brands could use dynamic NFTs as a new form of advertising, offering unique and engaging experiences for consumers. This could include interactive ads that reward users for engagement, or NFTs that represent limited-edition products or experiences.
The future potential of dynamic NFTs is truly exciting, and as the technology continues to evolve, there are sure to be even more innovative and creative applications for these unique assets.
FAQs: Dynamic NFTs
What are dynamic NFTs?
Dynamic NFTs, also known as Living NFTs, are a type of non-fungible token that can change based on external data sources through the use of smart contracts and oracles.
How are dynamic NFTs different from static NFTs?
Static NFTs have fixed attributes, while dynamic NFTs can change based on external data sources. This makes dynamic NFTs more versatile and opens up many new possibilities for their use.
What kind of external data sources can dynamic NFTs use?
Dynamic NFTs can use any kind of external data source that can be accessed through an oracle, such as weather data, stock prices, sports scores, or social media feeds.
How can dynamic NFTs be used?
Dynamic NFTs can be used in many different ways, such as creating interactive digital art, gamifying experiences, and creating personalized experiences based on user data.
What are some benefits of dynamic NFTs?
Dynamic NFTs offer many benefits, including greater flexibility, enhanced engagement, new monetization opportunities, and the ability to drive innovation.
Can dynamic NFTs be traded like static NFTs?
Yes, dynamic NFTs can be bought, sold, and traded on various NFT marketplaces just like static NFTs.
Dynamic NFTs, or dNFTs, are a new type of non-fungible token that offers more flexibility and programmability than traditional NFTs.
With the use of smart contracts and oracles, dNFTs can change their metadata and features based on external data sources, opening up new possibilities for engagement, monetization, and innovation.
The future potential of dNFTs is vast, with potential applications in gaming, art, music, collectibles, and more.
As the technology behind dNFTs continues to evolve, we can expect to see even more dynamic and interactive NFT experiences that push the boundaries of what is possible in the world of blockchain and decentralized web.
Whether you are a creator, collector, or investor, understanding the concept of dynamic NFTs and their potential impact is crucial.
As the NFT market continues to grow and evolve, dynamic NFTs are likely to play a significant role in shaping the future of this exciting and rapidly evolving industry.