Within the broader class of non-fungible tokens (NFTs) is a sub-category of tokens called dynamic NFTs. These NFTs differ fundamentally from their static counterparts as they can evolve, thanks to smart contracts and the conditions encoded by their creators.
NFTs are unique, irreplaceable crypto assets on the blockchain. These one-of-a-kind assets are typically created using a guideline, also known as a token standard, that ensures that each NFT has a unique token ID.
Apart from crypto collectibles and NFT art, static NFTs can digitize real-world assets like passports, certificates, and real estate deeds. However, these experimental use cases of NFTs — while already a reality — may be unable to fully represent real-world assets that carry non-static information.
When smart contracts create static NFTs, these assets are minted with permanent, immutable token data — in other words, this data cannot be altered. Therefore, regardless of external circumstances, static NFTs remain unchanged and as such, become outdated in the event of information change.
Dynamic NFTs, however, can address this limitation. While the token IDs of these NFTs stay the same, dynamic NFTs have the unique ability to change under certain conditions.
What Are Dynamic NFTs?
Dynamic NFTs are a sub-category of NFTs whose characteristics can be altered when certain conditions are met. Every NFT contains information called metadata, which describes its characteristics.
Metadata can include names, descriptions, and even specific NFT features. For instance, gaming NFT metadata could include the traits of an avatar, like strength or stamina. For NFT art, this could include the artwork’s colors or accessories.
You may have heard of the Ethereum-based game, CryptoKitties, one of the first NFT projects that quickly gained popularity when it debuted in 2017. CryptoKitties is a blockchain game where players can collect, breed, and exchange dynamic NFTs in the form of virtual cats.
Unlike static NFTs, dynamic NFTs’ metadata can be changed and visually translated. This is because while static NFTs are typically created using the ERC-721 token standard, dynamic NFTs are designed using the ERC-1155 token standard.
According to Ethereum, tokens created with the latter standard bear similar features to fungible ERC-20 tokens and non-fungible ERC-721 tokens. ERC-1155 tokens are, therefore, technically semi-fungible and can be changed if necessary.
How Can Dynamic NFTs Be Changed?
Here’s how it typically works:
A dynamic NFT is minted by a smart contract with a set of metadata.
The smart contract obtains data from oracles. These are third-party services that provide external information from data sources, such as Internet of Things (IoT) data and web application programming interfaces (APIs).
The NFT is then evaluated by the smart contract using data obtained from oracles to evaluate the NFT and encode changes during the minting process.
The characteristics of the dynamic NFT will then be updated when necessary.
Dynamic NFT Applications
If blockchain-based identity becomes a reality, dynamic NFTs may actually be used to represent digital identity cards or passports around the world. The flexibility of these NFTs would allow changes to be updated automatically without digital identity documents needing replacement. This can include details like place of residence, marital status, and contact details.
The ERC-1155 token standard is used mainly in NFT gaming, so it’s no surprise that dynamic NFTs are most commonly found in blockchain games. Players can level up their avatars using dynamic NFTs to represent their in-game characters, thereby enhancing the gaming experience. As a player gains more experience, their characters’ growth could be reflected in their NFT avatars’ changing appearances or stats.
The concept of progress in games is essential in game design in order to engage players, and dynamic NFTs make this possible. Dynamic NFTs could also facilitate choose-your-own-ending games and other participatory experiences that require external data to work.
Virtual real estate
While real estate tokenization has been around for some time, static NFTs are unable to reflect changing factors, like property prices, age, and ownership. Dynamic NFTs, on the other hand, can capture the finer details of real estate and possess the flexibility needed for specific information updates.
As exemplified by the traditional Japanese aesthetic art form wabi-sabi, which focuses on transience instead of permanence, art that is fleeting and transitionary is widely appreciated worldwide. Thanks to dynamic NFTs, digital artists can use real-time data to encode changes in their artwork to convey this impermanence, making their art pieces more unique. For instance, there are dynamic NFT artworks whose appearances change based on the current weather or season.
NFT art can also be elevated by mimicking real-world art installations that require audience participation to be appreciated. In this instance, a dynamic NFT could change depending on the token holder’s interaction with their asset and in doing so, advance engagement at digital art exhibitions.
Dynamic NFTs are a “smarter” class of NFTs than their static counterparts, as they can adapt to and reflect information from the outside world in real time. In addition to the applications mentioned in this article, there are countless use cases for dynamic NFTs, which can easily meet the need for NFT modification.