Understanding Dynamic NFTs
You have probably heard that NFTs are helping make real estate an easier business. Perhaps you have also heard how they are taking gaming to a whole new level. But how is any of this feasible?
Introducing Dynamic NFTs, the next generation of non-fungible tokens.
A couple of days before artist Mike Winkelmann’s (aka Beeple) piece went up for auction at Christie’s, their work ‘Crossroad’ made headlines as it sold for $6.6 million on NIFTY gateway. Here’s the interesting part: When Beeple sold it, the buyers had no idea what they were purchasing.
The associated video for the “hotly political” art project was dependent on the outcome of the 2020 US Elections. The artwork would feature (as it does today) an animation of a dejected Trump sleeping in a park if Biden had won.
The NFT was bought by the buyers as a unique method to commemorate a significant political event. This sparked the trend of dynamic NFTs (or dNFTs), which are essentially NFTs that can change based on external events. Since then, these NFTs have gained widespread acceptance and are used in a variety of industrial applications.
Breaking down Dynamic NFTs
If there is one core tenet of blockchains, it is this:
A Blockchain is immutable.
But a dNFT that lives on-chain is able to reflect changes and any chosen event can trigger it to change its state.
Then how do dNFTs work?
Dynamic NFTs can be programmed in numerous ways. The most common method is by changing the details in their metadata with the help of an associated smart contract. If this sounds a little foreign to you, hold my beer.
NFTs have two major components associated with them: TokenID and Metadata.
TokenID is the unique identity of the NFT and metadata includes details of everything (for example, images and links) associated with it.
NFTs are managed with the help of smart contracts, which are programs on blockchain that execute specific actions once predetermined conditions are met.
Dynamic NFTs are created using the more flexible ERC-1155 standard and are able to make these metadata changes with the help of their smart contract, earning the nickname “living tokens” in the industry.
This is the differentiating line between static NFTs like Cryptopunks and dynamic NFTs. Static NFTs do not allow changes to their metadata once they are minted. GIF-based NFTs are also examples of static NFTs as the link to the GIF is encoded in the metadata itself.
How do Dynamic NFTs collect their data?
In popular games, dNFTs can change to accommodate player description and a change in the avatar as the player progresses through the game. These are on-chain events and can be reflected through associated smart contracts.
Here is an important fact about dNFTs:
Both on-chain and off-chain events can trigger a dynamic NFT to change state
Real world changes like weather fluctuations or the occurrence of a social event can be programmed to trigger a dNFT to change its state.
For a dNFT it to reflect a real world change, the blockchain must process data from outside its network. How can blockchains access off-chain data you ask ? Enter the Oracles.
Oracles in web3 are agents that collate and verify information from real world sources like IOT devices before submitting them to smart contracts. An example of such an oracle is Chainlink.
To trigger a change, requests to the NFT smart contracts are initiated upon the occurrence of an event, after which the smart contract makes a call to the oracle. The oracle network collects and verifies data before sending it back to the smart contract, which processes and logs the final result.
Utility of Dynamic NFTs
Dynamic NFTs are increasing the design space for NFTs. Here are some of the numerous applications dNFTs have:
Gaming
Web3 gaming and GameFi (gaming+ decentralized finance) are on the rise. The development of a character’s appearance and strengths as the game progresses becomes easier to record, thanks to dNFTs that allow player NFTs to record developments in the player’s character. DNFTs can also incorporate other game aesthetics and allow hidden elements to unlock enhanced experiences coded into them. Players in these games can also benefit from the fair allocation of rare assets.
Real Estate
The application of NFTs in real estate is one of their most well-liked use cases. Dynamic NFTs keep track of changes to the house agreements and reflect both ownership changes and modifications to the house itself.
Real Life and Social Data Points
Sports and social media are using dNFTs to mark important events. NBA player LaMelo Ball started out with eight NFTs, one of which was promised to change if he won the Rookie of the Year for NBA season 2021. That did happen. Following this, the NBA unveiled its own NFT collection called The Association, whose NFTs change in appearance based on team and player performance. In the social media realm are NFT collections like Pearproof, backed by Reddit Cofounder Alex Ohanion, that allows creators to make NFTs out of their social media posts.
Passport
Dynamic NFTs can be issued as passports which update themselves based on traveler’s information. This eliminates the need for stamps and additional documentation.
Collectibles
Major collections are using dNFTs to release new NFT editions. The Doodles NFT Collection released Doodles 2 to allow its holders to add audio and animation to their NFTs and switch pfps with whole characters.
These NFTs are popular for fundraising purposes too. Regenerative Resources Co plans to plant 100 million mangroves through such NFTs. News statistics and weather reports can also be communicated with the help of NFTs. Some NFTs like Masked help increasing the visibility of regional art and culture.
Dynamic NFTs are thus the natural successors of NFTs and through their flexibility are pushing the boundaries of the web3 world itself.
Check out the RoverX blog for NFT project analyses, NFT news, and the latest alpha.
Join us on Discord to be a part of the RoverX community and BUIDL roverx.io with us!
Article originally published at https://roverx.io
