Dynamic NFT in the phygital world

Problems arise in the phygital world.

As we all know, NFT is a token that is indivisible and unchangeable. Traditionally, NFTs represent fixed assets used in the metaverse, such as images, video, audio, etc.

But the phygital world is a metaverse linked to the real world, meaning it’s always in motion. So a static NFT would no longer be suitable for use in the phygital world.

For example, a person wants to use NFT to bring his red car into the phygital world. But after a while, he painted that car blue. This will create a conflict between his real assets and his NFT assets.

Furthermore, the phygital world is linked not only with material possessions but also with human activities and the movement of the world. So we can’t make an NFT to represent that movement in real time.

Example: It is impossible to create an NFT representing a basketball player’s score in real time because the number changes.

Dynamic NFT — what will make the phygital world perfect

To solve the above-mentioned problems, the solution of Dynamic NFT was born.

Dynamic NFT is a type of NFT that is not static but changes over time. Unlike how traditional NFTs represent fixed assets, such as images or videos, dynamic NFTs can develop and display different content or behaviour based on other conditions.

Dynamic NFT can be programmed using smart contracts on blockchain platforms like Ethereum. These smart contracts allow the NFT to react to external events or data sources, such as current weather, stock prices, or social media data.

Difference between Dynamic NFT and Static NFT

The main differences between Static NFT and Dynamic NFT mainly lie in how they work and how interactive they are.

• Static NFTs are unique assets with fixed properties that do not change, such as an image, video, or audio file. Once created, a static NFT and its value cannot be modified or updated.
• Dynamic NFT is designed to change over time based on pre-programmed rules and conditions. They can respond to data sources and events, update their metadata, and interact with other smart contracts and NFTs.

How Dynamic NFT Works

• Dynamic NFTs are created using smart contracts on blockchain platforms like Ethereum, BNB Chain, etc.
• Smart contracts are self-executing programs stored on the blockchain. They allow the automation of several tasks and actions, including Dynamic NFT management.
• When a dynamic NFT is created, it is assigned a unique identifier on the blockchain that cannot be copied or changed. This identifier can track the ownership and history of the NFT.
• The Dynamic NFT management smart contract contains code specifying the below conditions that the NFT will change. They can be designed to change over time based on specific requirements set in the smart agreement.
• When the conditions specified in the smart contract are met, the NFT changes according to the pre-specified rules. This may include changing the appearance, function, or value of the NFT.
• Changes made on the NFT are recorded on the blockchain and are visible to anyone with access to the blockchain network. This ensures transparency and allows for easy tracking of NFT ownership and history.

In general, the way Dynamic NFT works is similar to Static NFT. They are all created on smart contracts. The difference is that Dynamic NFT uses input data to influence the output.

• Input data: Off-chain data like weather, match results, etc., or On-chain data like cryptocurrency prices.
• Output: NFT will be changed based on pre-set conditions.

Dynamic NFT Application

There are many applications for Dynamic NFT in the phygital world. Here are some examples that you can imagine:

Dynamic NFT in the vehicle market

In the short term, as more and more real-world assets are tokenized into NFTs, they will require more information than just basic ones, like the names of individual NFTs. Therefore, using a static NFT is not feasible. For real-life assets like vehicles to be tokenized into the DeFi marketplace and be valued, they need Dynamic NFT to include information such as owner records, accident reports, and mileage, …

Thereby, every time the car experiences a wave of interactions, the value of the vehicle will also change according to:

Vehicle value increases when: Vehicle is fully maintained; New accessories are replaced or upgraded when damaged,…

The car’s value decreases when: The vehicle has a traffic accident, the number of kilometres traveled,…

Dynamic NFT in the real estate market

Similar to the car above, the value of the real estate is also affected by many factors, such as the state of infrastructure in the area and the number of years of use;…

Every time the house is restored, Dynamic NFT can reflect that as it can update new records about that house.

For Static NFTs, you may need to create a new NFT on a new smart contract to update the house changes, while Dynamic NFT helps you update right in the smart contract.

Dynamic NFT in Gaming

In the traditional game market, characters can change many features if they play long enough, play well, get lucky to receive items or spend money to buy upgrades. All these features can be applied thanks to Dynamic NFT.

Dynamic NFT in Sports Activity

With this we are going through the looking glass of our partner, the phygital sport application Raramuri. In Raramuri, your training or sport event activities, achievements or records will be recorded in an NFT that represents you in the app. This result will be updated in real-time and converted to phygital instantly.

You can review and compare your achievements with others in the phygital world, as shown in the following video: 3DMap.

Dynamic NFT Benefits and Limitations

Benefits of Dynamic NFT

• Flexibility: Dynamic NFT is subject to change and development over time.
• Interactive: Dynamic NFT can interact to unlock many new features.
• Real-time data: Dynamic NFT can integrate real-time data inputs to make changes based on that data.
• Personalization: Dynamic NFT can be personalized to each user as real assets work in the real world.
• Rarity: If Static NFT differs in smart contracts, but some of the same items may exist, then Dynamic NFT can be even more unique because of the integration of different conditions.
• New opportunities: Dynamic NFTs can create new revenue streams because they have many new applications, unlocking other areas in NFT Finance to be born.

Limitations of Dynamic NFT

• Complexity: Dynamic NFTs are more complex than traditional NFTs and require more technical knowledge to create and manage.
• Risks from smart contracts: Dynamic NFTs rely heavily on smart contracts. If hacked, it could lead to loss or interference with the NFT.
• Limited Compatibility: Dynamic NFTs have limited compatibility between blockchain platforms and markets since they are new.
• Difficult to Valuate: Dynamic NFT pricing can be difficult as its value can change over time and depends on the conditions set in the smart contract.
• Higher gas fees: Dynamic NFTs require more computational resources to execute than traditional NFTs, which can result in higher gas fees for users.