We are certain there aren’t people interested in Web3 but never heard about non-fungible tokens or NFTs. Indeed, they are gaining more and more popularity. Even celebrities create their own NFTs and even whole NFT collections. And it’s not surprising – NFTs have a variety of uses and are continuously improving and evolving. In this article, we are going to explore Dynamic NFTs, a completely new variation of NFTs that broadens the horizons of non-fungible token uses. Here we will answer the question “what are dynamic NFTs?” and their principle of work and uses.
If you are intrigued by the new NFT variation and want to know what dynamic NFTs are, continue reading this article. We will start by explaining their meaning. Then, we will explore how dynamic NFTs work and when they can be useful. And, of course, we will compare them with the regular static NFTs.
What are Dynamic NFTs?
We think starting our exploration of the topic of “What are dynamic NFTs?” is best with the precise definition of NFTs.
“NFT” is short for “non-fungible tokens.” It is a particular kind of digital asset that became possible with blockchain development.
The peculiarity of NFTs is that each of them is unique and unchangeable. Every NFT has a unique contract address and token ID.
NFTs can be represented in the form of pictures, links, data, and other kinds of information that are contained in the NFT’s metadata. NFTs can also represent physical objects, and once a token is minted, it becomes unchangeable, i.e., its ID and metadata are permanent. Hence, these tokens are static.
Now that we figured that the traditional NFTs can actually be called “Static NFTs,” we can move on and explain what “dynamic” means in the name of “dynamic NFTs”.
There are NFTs uses when it is useful and beneficial to make NFTs able to alter their metadata as a response to external conditions. This possibility of alterations is exactly what is meant when talking about “dynamic” in this context.
When can this be useful? For instance, in a game where an NFT represents a player’s character. As the game progresses, the character’s characteristics, for instance, speed, agility, force, etc., also progress. In order for the NFT to be able to show this progression and changes, it has to be dynamic. Then, this information will be added to the metadata of the player’s token. Thus, a dynamic NFT unites the uniqueness of a static NFT, as it maintains its unique ID, with the possibility to update certain elements of metadata in response to external conditions. Now we think you can already answer the question “what are dynamic NFTs?” so let’s delve deeper into how they actually work.
How do Dynamic NFTs work?
We have said that dynamic NFTs metadata can be altered in response to external conditions. These conditions can come both from a blockchain and from outside of the blockchain. This is possible due to smart contracts. Smart contracts analyze data both from the blockchain and outside of it to establish a response that is displayed to users whenever an NFT (non-fungible token) is requested. Here is an example of how the procedure might go to help you grasp this:
- First, a request to a smart contract for an NFT is made.
- The smart contract receives the request for processing.
- The smart contract fetches data on blockchain for an NFT and then processes the results.
- Then, to fetch the information from outside the blockchain, a smart contract uses an oracle. Once the information is received, it is processed by the smart contract.
- Once the data from the blockchain and off-blockchain is evaluated, the smart contract returns media one or two to the requesting party.
Basically, the changes in dynamic NFTs are possible exclusively through the smart contracts that “decide” whether the metadata should change based on the data on the blockchain and off-blockchain.
Dynamic vs. Static NFTs
Now, in our quest “what is a dynamic NFT,” we are going to talk about the differences between dynamic and static NFTs.
Currently, most users and people who have just heard about NFTs are talking about static NFTs, i.e., tokens with unchangeable characteristics and metadata. These NFTs can be represented by pictures, game characters or items, videos, links, etc. They are unique and permanent. It is what probably makes them so valuable and expensive.
Nevertheless, sometimes NFTs do need to be altered. And this need resulted in the creation of dynamic NFTs. Dynamic NFTs combine dynamic data inputs with the provable, unique nature of static NFTs. Besides, dynamic NFTs have the ability to modify the metadata of the tokens using data sources both from the blockchain and outside of it. Accordingly, the capacity of the token’s metadata to alter is the primary distinction between a static and dynamic NFT.
Those who create, buy or sell static NFTs do not need to worry. There are enough uses ad possibilities for both of these types of non-fungible tokens, and dynamic NFTs are not intended to replace the static ones. They are just another step in the development of a blockchain ecosystem that enables more flexibility and brings a completely new range of potential uses for NFTs.
Further in this article, we will talk about the potential uses of dynamic NFTs, so you can better understand their difference from the static ones and the benefits they bring to the crypto realm.
Dynamic NFT Uses
We have already mentioned that dynamic NFTs can be used to show actual statistics of a player’s character in a game. But, in this section, we are going to review other potential uses of dynamic NFTs, so you can better understand their principles and usefulness.
Let’s further explore the topic of “what are dynamic NFTs?” looking at the two additional possible uses:
- NFT Sports Cards
- Real Estate
Sports Cards NFTs
In this example, we will talk about an NFT that represents a real sports personality, an F1 racer. Such a dynamic NFT then will have his information or statistics such as won races, world rating, championship place, maximum speed at the last race, etc. This information is stored in the NFTs metadata. However, clearly, this information will change during the season. And here is why dynamic NFTs are so helpful in this case – through smart contracts, the dynamic NFT will gather the information from outside the blockchain and update the metadata accordingly to the changed athlete’s statistics. Such alterations and updates are impossible in the case of static or regular NFTs in which metadata cannot be altered once the token is created.
Real Estate
Our second use case example is real estate. For example, if an NFT represents a house, it would be great if it could provide such data as the number of owners, repairs, market value, and others. This information may be crucial to potential buyers, which is why it should be up to date. But with traditional NFTs, it’s impossible for a token to reflect these changes in metadata, and here dynamic NFTs come to the rescue again.
What are Dynamic NFTs? – Roundup
Now probably everyone has heard the term NFT. Indeed, lately, they have become one of the hottest topics in the blockchain industry. But not many know that besides traditional NFTs, there are also dynamic ones. What are dynamic NFTs?
In our article, we explained that dynamic NFTs have the same features of uniqueness and verifiability as traditional NFTs, yet they are different in one major aspect – their metadata can be updated. This is made through smart contracts that request the information about the token on and off the blockchain and update its metadata accordingly. We have reviewed several use cases where this can be beneficial – for game characters progression statistics, sports cards, and real estate. But the uses are virtually limitless. Dynamic NFTs represent an evolution of traditional NFT and can greatly broaden NFT design space and applicability.
