Non-fungible tokens, or NFTs, have rapidly become the Web 3 community’s prime features.
The encrypted tokens have been making their way into the mainstream. In fact, we can find many high-profile figures who have launched their own NFT art collections and projects. The NFTs also have a wide number of use cases, which makes them exceptionally valuable.
As of May 2022, the aggregated sales number recorded on the Ronin, Flow, and Ethereum blockchains for more than 30 days was around 20.6 thousand.
In addition to this, the underlying technology that operates these tokens are consistently improving. The next phase in the revolution of NFTs is Dynamic NFT. The article discusses what Dynamic NFT is and how it works. Aside from this, we will also discuss other important aspects of the term.
What do we mean by Dynamic NFTs?
To fully understand the meaning of Dynamic NFTs, we need to understand the concept from the beginning. So let us start by describing what NFTs are.
Non-fungible tokens are completely unique digital assets that run over blockchain technologies. Each of the NFTs maintains a one-of-a-kind token ID and contract address.
In addition to it, it’s possible to attach files, images, links, data, etc., to the metadata of a token.
Also, NFTs can represent both physical and digital unique objects. Once a non-fungible token is minted, the metadata and token ID are permanent, making these tokens static.
Now that we have understood what traditional NFTs are, we can move ahead to learn what the term “Dynamic” stands for within this context. It can be understood as a feature that enables NFTs the ability to respond and react to external conditions. Further, this helps NFTs consider a needed alteration to the token’s metadata, which perfectly reflects the term “Dynamic” in NFTs.
For example, let us consider a progression-based game where NFTs represent in-game avatars. These avatars might show several skills, including speed, strength, agility, and so on, embedded in the token’s metadata. As the players take on progress in the game, NFTs need to update elements in the token so that it reflects the efforts of the players.
This indicates that Dynamic NFTs consist of a one-of-a-kind identifier but are also given the accessibility to update and alter aspects of the metadata depending on external conditions. Now that we have learned the meaning of Dynamic NFTs let us see how they work.
Understanding the Working of a Dynamic NFT Work
Dynamic non-fungible tokens can evolve both on-chain and off-chain computations. For this, they use smart contracts. Whenever a non-fungible token is requested, the on-chain and off-chain data are evaluated by smart contracts to prepare a response to be presented in front of the users. Let us understand their workings through this step-by-step processing:
- ✅ First, a request is initiated for an NFT through a smart contract.
- ✅ Next, the request gets received for further processing by the smart contracts.
- ✅ The smart contract then makes a call for data stored on the on-chain and proceeds towards the result.
- ✅ The contract utilizes an oracle to make a call for off-chain data and further processes the results.
- ✅ Next, the process evaluates both on-chain and off-chain data. Then the smart contract tends to return the media to the user who made the request.
In simple words, this indicates that a smart contract is a feature that enables NFTs to update, change and expand over a time period. Additionally, a smart contract determines whether a non-fungible token should be changed. If yes, then it alters the metadata of respective Dynamic NFT depending on on-chain and off-chain data.
How is Dynamic NFTs different from Static NFTs?
A static NFT refers to a non-fungible token that has immutable data and features that are permanently stored over a blockchain ledger. In simple words, a static NFT does not change ever.
On the contrary, a dynamic NFT refers to a non-fungible token whose data and characteristics go through continuous change due to external influences.
What are the use cases of Dynamic NFT?
Aside from in-game avatars, Dynamic NFTs have other remarkable use cases as well. Below we have illustrated two more use cases of Dynamic NFTs along with their benefits. By understanding Dynamic NFTs through these use cases, you’ll better comprehend the concept. The use cases are as follows:
- Real Estate
- NFT Sports Cards
To understand this use case, let us take an example of a house. Now assume there is a Dynamic NFT that represents a house. In the scenarios where tokenization of real-world assets occurs, it’s required to have the possibility to alter metrics.
Here the Dynamic token’s metadata is assumed to reflect certain changes that might take place in the property. And these changes might be of the potential interest to future customers. Let’s consider the metadata representing market value, maintenance history, age, past sales, etc. Hence, when tokenizing real-life assets like property, it is of utmost importance to have the capability to change and update the token’s metadata.
NFT Sports Cards
As per surveys, over 1/3rd of esports fans have shown interest in buying NFTs. And these include NFT sports cards as well. To explain this use case, we will take an example of a football player. Let us assume that there is a Dynamic NFT that represents a real-life football player. The non-fungible token could consist of information like strength, agility, assist, goals scored, etc., stored in the metadata of the token.
With the changes in the season continuous, there would be possible changes in the stats as well.
For instance, the player may score a few more goals. This indicates that the Dynamic NFTs might have an option to take in off-chain data regarding the player’s progression. Further, it would accordingly update the metadata. This feature is not accessible with a static NFT as every metadata content is known to be permanent in it.
In summary, we can conclude that a Dynamic NFT tends to consist of a few aspects of static NFTs. The term Dynamic in the above information reflects the ability of a token to keep updating its metadata parameters depending on both on-chain and off-chain data. This procedure completely differs from static NFTs, which are wholly immutable right after they get minted.
Dynamic NFTs are an evolution in the emerging field of Non-fungible tokens, and it encompasses many requirements that make them extremely useful in solving many real world use cases such as decentralized home rental services, storage of unique data that requires updates overtime, issuance of birth certificates and storage of medical records of an individual.
Camila is working as a Senior Writer with Coinfea. She has completed her bachelor’s from a reputed college. She loves to write about trading technologies like crypto and blockchain.