What are dynamic NFTs?: Use cases and examples

1.

What is a dynamic NFT?

Dynamic NFTs are “living” NFTs designed to be programmable and responsive to external inputs or conditions, opening up new opportunities for personalization, interactivity and value creation in the digital creator economy.

Nonfungible tokens (NFTs) are no longer new to the blockchain community, crypto enthusiasts and even for non-tech-savvy artists. That said, NFTs are digital items that can be anything from artwork to music to tweets. Each NFT has a special code that proves its authenticity, and it can be bought, sold or traded like other valuable things.

Over time and with the adoption and development of NFT technology, new use cases and types of NFTs emerge. One of them is the dynamic NFTs phenomenon, a significant evolution in the NFT space that has introduced a new level of interactivity and functionality for digital assets. 

Dynamic NFTs, also known as dNFTs, are a new generation of nonfungible tokens that include programmable and interactive features, allowing the creation of digital items that can change and evolve over time and, as a result, enabling artists to offer a more engaging experience for buyers and fans.

Unlike traditional NFTs, which represent static digital assets with fixed properties, dynamic NFTs’ architecture is designed to respond to external parameters or conditions, such as user behavior, real-time market prices, time and weather, or other environmental data. For example, Pearpop’s dynamic NFTs allow creators to mint NFTs of their social media posts on the Solana blockchain. The dynamic nature of these NFTs means that their rank increases when the post gains popularity, using metadata such as comments, shares and likes.

2.

How do dynamic NFTs work?

Overall, NFTs are based on progressive blockchain technology, which allows for constructing a verifiable and immutable record of ownership and authenticity. Dynamic NFTs are no exception. 

When a dynamic NFT is created, the artist defines the rules that govern how the NFT can evolve or change over time. These parameters can be stored in the form of code, such as the Solidity code for the Ethereum network.

The main difference between traditional NFTs and dynamic ones is the token standard. Thus, dynamic NFTs function by storing data in a format that can be edited. While static NFTs are typically created using the ERC-721 token standard, dynamic NFTs use the ERC-1155 standard. This type of token standard is usually referred to as “semi-fungible” because it can be changed if needed.

Also, dynamics in NFTs are made possible through the use of smart contracts, which are self-executing programs that are encoded within the NFT. These smart contracts automate certain functions, such as changing the appearance, animations or behavior of the NFT depending on specific circumstances. Also, they enable various interactions — e.g., empowering users to interact with the NFT in a virtual environment. 

Basically, dynamic NFTs use oracles for modification purposes. Oracles send external data to the smart contract, which causes the NFT’s metadata to change. After that, the characteristics and appearance of this particular NFT, as well as its appearance, are updated.

Smart contracts also define how the dynamic NFTs can be bought, sold or traded and how royalties should be distributed to their creators. To engage with dynamic NFTs, users require a crypto wallet that supports smart contracts. Then they can collect, sell or trade NFTs on NFT marketplaces or use them in decentralized applications (DApps) that support and utilize NFTs’ dynamic features.

3.

What are the benefits of dynamic NFTs?

Dynamic NFTs offer several key benefits, such as interactivity, programmability, versatility and the creation of new revenue streams for artists and collectors.

First of all, dynamic NFTs offer a high degree of interactivity. Flexibility and the ability to change make them more engaging and interesting for collectors and audiences while opening up new possibilities for creative expression.

Secondly, dynamic NFTs are programmable, which means that creators can define rules for how the NFT should behave, providing a high level of automation and control, and enabling new use cases and applications in various industries. For example, a dynamic NFT could represent a character or item in a game that evolves and gains new abilities based on the player’s progress.

Thirdly, dynamic NFTs can be used in a wide range of services beyond digital art, such as in gaming, social networks and others. Their versatility opens up new possibilities for developers and creators to innovate and create new immersive experiences for users.

Lastly, dynamic NFTs provide new revenue streams for artists. Dynamic NFTs provide an exciting long-term source of income for creators since they can earn royalties on the ongoing use or interaction with their NFTs.

4.

What is the difference between static NFTs and dynamic NFTs?

Static NFTs are fixed and represent a single version of a digital asset, while dynamic NFTs are programmable and can change or adapt based on certain conditions or inputs. Both types of NFTs have unique properties and can be used in various applications, depending on the specific needs and requirements of the use case.

5.

What are the various use cases of dynamic NFTs?

Dynamic NFTs have a wide range of potential use cases beyond traditional applications of static NFTs like digital art. 

Similar to traditional NFTs, dynamic ones can be used in art and music to create and represent unique artworks or rare recordings that change over time. For example, an NFT representing a digital painting could automatically change colors or patterns, or an NFT representing a live recording of a concert could update itself to include additional songs as they become available.

Furthermore, dynamic nonfungible tokens can be used in gaming and metaverses to represent in-game items and characters that can evolve or transform according to the player’s actions and interactions. Thus, a digital weapon in a game could gain new abilities or attributes as the player progresses, with these changes reflected in the corresponding NFT.

Another interesting use case is the utilization of dynamic NFTs for identity management and authenticity verification. Dynamic NFTs can be used to represent a user’s digital identity, with the NFT changing according to the user’s behavior or preferences. In the same way, dynamic nonfungible tokens can be used to represent a user’s profile on social media, with the ability to update and evolve based on their actions and interactions on the network.

On top of that, dynamic NFTs can be used to represent assets with constantly changing values that require consistent updates. With the help of oracles that provide a gateway to access external data sources that bring reliable valuations to on-chain assets, dynamic NFTs can promote the tokenization of property, physical commodities, etc.

6.

Are there any examples of dynamic NFTs?

There are lots of dynamic NFT examples in the cryptocurrency space, including gaming items that evolve as players progress and digital artworks that are transformed by the actions of collectors, time or even the surrounding environment.

One of the first examples of dynamic NFTs was the unique work titled “Crossroad” by Mike Winkelman, also known as Beeple. The NFT was created before the 2020 United States presidential election and was supposed to change its appearance depending on the result. After Joe Biden became president, the image changed to depict former President Donald Trump lying in a heap. 

In 2022, the most expensive experimental NFT art project titled Merge by the pseudonymous digital artist Pak sold nearly $92 million worth of “mass” tokens on the Nifty Gateway marketplace. The tokens are combined to form dynamic NFT collectibles that vary in part based on how many tokens were merged. The artwork is generated on-chain using a custom script, similar to the popular “Art Blocks” NFTs. 

Art Blocks is a platform for creating and selling generative art pieces that are represented by dynamic nonfungible tokens. The art pieces are algorithmically generated and can be customized by the owner, creating a one-of-a-kind piece of art.

Async Art is another platform for creating and collecting programmable art pieces that can change and evolve over time based on different external inputs or conditions. The art pieces are represented by dynamic NFTs, making them unique and valuable to collectors.

Permissionless NFT marketplace Rarible also allows for the creation and sale of dynamic NFTs. One example of a dynamic NFT on Rarible is the “Crypto Warrior” series, which allows collectors to upgrade their nonfungible tokens with additional features and abilities over time.

“Organic Growth Crystal Reef” are dynamic NFTs that evolved over time. Within a developer-set period of three months, the crystals grow in traits and transform their appearance based on transactions and time. Moreover, these crystals can be utilized in augmented reality (AR) and will soon have physical replicas showcased in art museums. 

One more notable example of dynamic NFTs is LaMelo Ball’s dynamic NFT collectibles that are maintaining records of the professional basketball player’s game stats and change according to the updates in his points scored, rebounds and assists. 

These are just a few examples of how dynamic NFTs that are being created in the cryptocurrency space are being implemented. As the phenomenon continues to evolve, we can expect to see even more innovative and creative use of them.

7.

What is the future of dynamic NFTs?

The possibilities for dynamic NFTs’ future development and adoption seem limitless. 

Dynamic NFTs represent a groundbreaking innovation in the world of digital assets. With their ability to change and evolve over time, these tokens offer a level of interactivity and engagement that traditional nonfungible tokens simply cannot match. From gaming and entertainment to art and collectibles, dynamic NFTs have already demonstrated a wide range of use cases and applications. And this is just the beginning.

As the technology and ecosystem around dynamic NFTs continue to evolve, it is clear that this exciting phenomenon will play an increasingly essential role in shaping the future of digital ownership and value exchange. Moreover, individuals who identify as creators, collectors or technology enthusiasts may find it valuable to monitor the trend of dynamic nonfungible tokens closely.

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