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Dynamic NFTs
Overview
This article provides an overview of dynamic NFTs, also known as living NFTs. It begins by defining the distinction between static and dynamic NFTs and the increased flexibility and interactivity that dynamic NFTs provide. The article explains the operation of dynamic NFTs and how to modify them. It also draws attention to dynamic NFTs' special ability to update some metadata while retaining their unique identifiers. Overall, this article gives readers a thorough understanding of what dynamic NFTs are, how they function, and some possible applications. The ability of dynamic NFTs to modify and adapt in real time is highlighted, along with the potential for new possibilities in the NFT ecosystem.
Introduction
The most popular NFTs in the market, like BAYC and CryptoPunks, are first-generation NFTs and are static. Static NFTs are primarily used in play-to-earn gaming projects, digital collectibles, and NFT art projects. Every NFT has certain metadata associated with it, and this information defines the NFT's characteristics. For example, the metadata of a Bored Ape Yacht Club artwork might include information about the NFTs name or number, the background color, the features of the Bored Ape's outfit, and so on. Once minted on the blockchain, the NFT's metadata remains fixed, which means the attributes and appearance of static NFTs stay the same forever. This makes static NFTs constrained by their permanence. Data updates are frequently necessary for certain NFT use cases, like tokenizing real-world assets, developing progression-based video games, or establishing fantasy sports leagues on the blockchain; this is where Dynamic NFTs come into the picture.
What are Dynamic NFTs?
Dynamic NFT (dNFT), also known as living NFT, is an NFT variant that changes some of its inherent properties and metadata in response to outside factors that may arise off-chain (by using an oracle) or on-chain (by changing the state of the NFT smart contract). An oracle functions as a bridge between off-chain infrastructure and on-chain code, enabling NFTs and their underlying smart contract to respond to real-world events and communicate with existing systems. All the modifications in metadata get incorporated into the NFT's metadata using smart contracts. One unique feature of dNFTs is that they can update some metadata while retaining their unique identifiers, providing the best of both worlds.
Simply put, a dynamic NFT can change in response to external factors. Any change in a dynamic NFT frequently refers to metadata changes made by smart contracts. In addition to metadata modifications, dNFTs can also implement dynamic elements. For instance, based on specific conditions, such as when a player discovers a 'hidden object' in a virtual reality game, dynamic NFTs can be utilized. This is accomplished by encoding automated changes in the NFT smart contract, which instructs the underlying NFT on how and when to modify its metadata. A dynamic NFT's metadata can alter depending on factors such as time, interactions with other NFTs, external data, statistics, and other data gathered from sources that track real data, like weather or live sports scores. Dynamic NFTs can be programmed in countless ways because they are unique and programmable tokens.
How do Dynamic NFTs Operate?
Smart contracts are a crucial requirement to modify or implement any changes in dynamic NFTs. They perform all the on-chain as well as off-chain computations. The smart contracts evaluate the on-chain and off-chain data upon receiving a request and decide the response for the NFT. As a result, the conditions specified in the smart contract determine how dynamic NFTs change. The following steps are broadly involved in the operation of dynamic NFTs:
The smart contract receives a request for the dynamic NFT and begins to process it.
The smart contract invokes on-chain data and assesses the data on the blockchain.
Now, the smart contract uses an oracle to call off-chain data and process all offline information.
The smart contract would finally return a specific type of media based on the outcomes of evaluating on-chain and off-chain data.
Smart contracts are essential for the working of dynamic NFTs. Additionally, smart contracts decide whether an NFT should be modified and guarantee that the token metadata of the NFT is modified. Most significantly, dynamic NFT smart contracts depend on on-chain and off-chain data to represent changes accurately.
Some Use Cases and Examples of Dynamic NFTs
Category | Use Case and Example | |
|---|---|---|
| 1 | Sports | NFT projects with a sports theme can utilize dynamic NFTs. For instance, a real-time NFT of an athlete that adapts to how they perform in the game. Additionally, a team that has won a championship may allow changes to its NFT to reflect its new championship status. |
| 2 | Art | In the world of art, dynamic NFTs can create interactive artworks that evolve over time in response to various inputs. Consequently, there is a higher probability that the assets will increase in value over time and that artists and creators will profit from their evolving works of art. |
| 3 | Gaming | Due to the unique features of dNFTs, in-game avatars in progression-based games can be represented using dNFTs where the skills and characteristics of the in-game avatar are stored in the token metadata by the NFTs. As players advance through the game's many levels, their avatar upgrades—handled through dNFTs. |
| 4 | Real-world | A dynamic NFT's metadata can change based on external events, which opens up various applications for dNFTs in real-world problems. For example, NFTs can be linked to a house's maintenance and sales history, enabling real-time updating of the non-fungible token's metadata. |
Dynamic NFTs: Advantages and Challenges
One of the key features of dynamic NFTs is their interactivity. Unlike traditional NFTs, which are simply digital representations of a some asset, dynamic NFTs can be programmed to respond to certain events or user interactions. Another advantage of dynamic NFTs is their flexibility. Because they are programmable, they have utility for a wide variety of purposes and in a variety of contexts. This flexibility makes dynamic NFTs a versatile and powerful tool for creators and developers. The potential for value appreciation of dynamic NFTs can also make them an attractive investment opportunity. dNFTs can change over time and respond to various inputs and therefore they can increase in value over time.
Despite various advantages of dynamic NFTs, there is a need to address several associated challenges. One of the biggest challenges for dNFTs is scalability. As dynamic NFTs are interactive and modify their metadata over time, they require more processing power and data storage than traditional NFTs. This makes it more difficult and expensive to create and maintain large numbers of dynamic NFTs. Security is also a major concern for dynamic NFTs as they are interactive and modify over time. They are also more vulnerable to hacking and other forms of tampering. Owners, creators, and developers must take extra precautions to ensure the security and integrity of their assets. Ensuring the security of smart contract and the blockchain network is crucial to prevent unauthorized access and manipulation of dynamic NFTs.
Real-world Examples of Dynamic NFTs
One of the earliest NFTs to change its state was created by digital artist Mike Winkelmann, well known by his stage name Beeple. Just before the U.S. Presidential election in late 2020, Beeple created the NFT artwork Crossroad, which underwent changes based on the election outcome. If former president Donald Trump defeats Joe Biden in the election, the NFT displays a specific animation, and if he loses to Biden, the NFT displays another animation.
OGCrystals, created by Michael Joo, Danil Krivoruchko, and the OG:CR community is another dNFT project. A communal artwork will develop from a generative art project made up of 10301 unique 3D Crystals as NFT collectibles that transform and grow every time they are purchased from another collector. Later, the ‘Crystal Reef’ will be made into a physical sculpture and displayed worldwide in art galleries and museums. It is a lengthy artistic endeavor with unique mechanics that bridges the gap between the traditional and NFT art worlds.
In 2021, a professional NBA athlete LaMelo Ball utilized dNFTs to reimagine player-fan connections. LaMelo Ball NFTs record a distinct set of LaMelo's player statistics, such as points scored, rebounds, and assists. Depending on LaMelo's continuous performance in the real-world games, NFT holders get exclusive access to NFT-specific benefits. The Gold Evolve NFT, one of these NFTs, had a special guarantee—if LaMelo Ball were to win 'Rookie of the Year' award for the 2021 NBA season, the NFT would change to reflect a new image. LaMelo won the award, and the NFT changed.
Conclusion
The adoption and utilization of dynamic NFTs will increase over time as a result of technology advancements and the identification of new use cases. Dynamic NFTs are a brand-new and revolutionary advancement in blockchain technology. They can transform how we interact with digital assets and open up new opportunities for artists, creators, collectors, and investors. Traditional NFTs cannot compete with the new level of engagement and flexibility dNFTs offer or the vast array of new options they create. However, creators and developers need to be aware of the challenges, such as scalability and security and take steps to mitigate them to ensure the success and growth of the dynamic NFT ecosystem.