Summary
Within the broader class of non-fungible tokens (NFTs) there is a subcategory of tokens called dynamic NFTs. These NFTs fundamentally differ from their static counterparts because they can evolve thanks to smart contracts and conditions encrypted by their creators.
Introduction
NFTs are unique, irreplaceable cryptoassets on the blockchain that are typically created using a guideline, also known as the token standard, which ensures that each NFT has a unique token ID.
In addition to crypto collectibles and NFT art, static NFTs can digitize real-world assets such as passports, certificates, and real estate deeds. However, these experimental use cases for 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 modified. Therefore, regardless of external circumstances, static NFTs remain unchanged and in this way, if information changes, they become obsolete.
Dynamic NFTs, on the other hand, can address this limitation. While the token IDs of these NFTs remain the same, dynamic NFTs have the unique ability to change under certain conditions.
What are dynamic NFTs?
Dynamic NFTs are a subcategory of NFTs whose characteristics can be modified when certain conditions are met. Each NFT contains information that describes its characteristics. This information is called metadata.
Metadata can include names, descriptions, and even specific characteristics of the NFT. For example, the metadata of a gaming NFT can include an avatar's traits, such as strength or stamina. In the case of NFT art, this could include the colors and accessories of the artwork.
You may have heard about the Ethereum-based game CryptoKitties, one of the first NFT projects that quickly gained popularity after its launch in 2017. CryptoKitties is a blockchain game where players can collect, breed, and trade Dynamic NFTs in the form of virtual cats.
Unlike static NFTs, the metadata of dynamic NFTs can be changed and translated visually. 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 this latest standard have similar characteristics to ERC-20 fungible and ERC-721 non-fungible tokens. ERC-1155 tokens are therefore technically semi-fungible and can be exchanged if necessary.
How can dynamic NFTs be changed?
This is how it normally works:
A smart contract mint a dynamic NFT 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 Application Programming Interfaces (APIs).
The smart contract then evaluates the NFT with data obtained from oracles to encrypt changes during the minting process.
The features of the dynamic NFT will be updated when necessary.
Applications of dynamic NFTs
Identity
If the blockchain-based identity system becomes a reality, dynamic NFTs can 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 the need to replace digital identity documents. These changes may include information such as place of residence, marital status and contact details.
Games
The ERC-1155 token standard is primarily used in NFT games, so it's no surprise that dynamic NFTs are commonly found in blockchain games. Players can enhance their avatars with dynamic NFTs to represent their characters in the game, which in turn enhances the gaming experience. When a player gains more experience, the growth of their characters could be reflected in the change in appearance or statistics of their NFT avatars.
The concept of progress in games is essential to the design of games in order to maintain the interest of players. Dynamic NFTs make this possible. Dynamic NFTs could also facilitate “choose your own ending” games and other participatory experiences that require external data to function.
Virtual real estate
While real estate tokenization has been around for some time, static NFTs cannot reflect changing factors such as prices, age, and ownership of the asset. In contrast, dynamic NFTs can capture the most specific details of real estate and can be flexible enough to allow information to be updated.
until
As exemplified by the traditional Japanese aesthetic art form wabi-sabi, which focuses on impermanence rather than permanence, art that is fleeting and transitory is highly prized in the world. Thanks to dynamic NFTs, digital artists can use real-time data to encrypt changes to their artwork and convey that impermanence, making the artwork even more unique. For example, there are dynamic NFT artworks whose appearances change depending on the weather or season at the time.
NFT art can also be elevated by imitating real-world art installations that require public participation to be appreciated. In this case, a dynamic NFT could change depending on the token holder's interaction with their asset and, in doing so, increase interest in digital art exhibitions.
Conclusions
Dynamic NFTs are a “smarter” class of NFTs than their static counterparts, as they can adapt 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 that can easily satisfy the need for NFT modification.
Further reading
What is an NFT?
7 things you should know about NFTs | Binance Academy
How to create your own NFTs | Binance Academy
How to Be an NFT Artist: Getting Started on the Binance NFT Marketplace
What are token standards?