In previous blog articles, we’ve covered the basics around cryptocurrency, a broad view of NFTs, how to generate your own NFT collection, as well as different kinds of NFTs such as phygital and fractional.👀 In this article, we’ll take a closer look at dynamic NFTs and provide information on what they are and how they work. Here is our brief guide to get you on a clearer path to understanding.
❓ WHAT EXACTLY ARE DYNAMIC NFTs?
👉 In essence, dynamic NFTs (also known as “living” NFTs or dNFTs) are NFTs that are capable of evolving or changing over time, based on external conditions or events.
They offer interactive and flexible possibilities as they can respond to user behavior, real-time market data, time, weather, and other environmental factors, making them adaptable and dynamic.
🤷♀️ THE DIFFERENCE BETWEEN TRADITIONAL / STATIC NFTs AND dNFTsTraditional or static NFTS are fixed once minted to a blockchain, meaning the associated data, such as artwork🖼️, music tracks🎵, GIFs, or videos📹, remains unchanged even when ownership is transferred. This immutability provides enhanced security and ensures that the NFT won't change after purchase, making them suitable for situations where asset stability is preferred.
In contrast, dNFTs can be programmed to change their metadata and appearance after minting based on external factors like events or achievements. This makes them perfect for interactive projects that require user engagement, such as avatars in a metaverse game🎮 that evolve as players progress.
⚙️ HOW DO DYNAMIC NFTs WORK?
Dynamic NFTs utilize smart contracts and oracles to enable changes in their metadata and appearance. Smart contracts📄 execute the necessary alterations based on data received from oracles🔮, which connect blockchains to external systems. This allows dynamic NFTs to interact with real-world information and update their characteristics accordingly. The use of smart contracts and oracles provides the flexibility for dynamic NFTs to adapt and evolve over time.
✔️❌ DYNAMIC NFT ADVANTAGES & DISADVANTAGES
✔️ Adaptable, flexible and versatile, able to evolve
✔️ High level of user engagement and interactivity
✔️ Suited to represent real-world assets
✔️ Allow for a higher level of user control due to their programmable features
✔️ Offer new revenue streams for their creators, such as royalties
✔️ May never become outdated
❌ Being more complex to create implies a higher risk of bugs and errors
❌ May be harder to determine dNFT legality and ownership as the nature of the underlying asset is constantly evolving
🖼️ dNFT EXAMPLES
🐱 CryptoKitties, a popular game and collection, was an early example of dynamic NFTs. Players could buy, sell, and breed virtual feline NFT pets, called “CryptoKitties”. Each CryptoKitty was a dNFT with alterable attributes like genes, temperament, and characteristics controlled by its owner.
Another example of a dynamic NFT was “Crossroad” by Mike Winkelmann (better known as Beeple). This animated art piece was released shortly before the 2020 🇺🇸U.S. Presidential Election between Joe Biden and Donald Trump. It was designed to feature one of two short animations, depending on the outcome of the election — one a triumphant Trump breathing fire like Godzilla, the other a forgotten, despondent Trump tattooed with his own insults. After the election results were confirmed, the NFT format switched to the “loser” clip permanently.
Still images from both versions of Beeple’s dynamic NFT artwork “Crossroad”.
The piece tied itself to the outcome of the election and attracted an auction sale of USD$66,666.60 shortly before the election took place. Early the following year, Crossroad was resold for USD$6.6 million.
🎮🏘️💰 dNFT USE CASES
Dynamic NFTs can be used for much more than artwork, such as the following.
With dynamic NFTs, gamers can own NFTs representing their characters🧙♂️ and items🗡️🛡️, which evolve alongside in-game progress. This ownership remains secure in the players' wallets, even if the game company ceases to exist, preserving their assets and achievements.
🏠 Tokenization & Real World Assets
Dynamic NFTs have the potential to disrupt real-world assets like real estate🏘️. Traditional property deeds📜 could be replaced by dNFTs that automatically update when ownership changes. Additionally, dNFTs can represent individual homes and be updated to reflect repairs⛏️ or upgrades, providing an efficient and transparent solution for maintaining accurate property records✍️.
💰 NFT Fundraising
Regenerative Resources is utilizing dynamic NFTs to fund their initiative of planting 100 million mangroves🌱. They have created the Five Short Film NFT collection, where each transaction reveals a frame of the film, contributing to the fundraising efforts. This innovative use of dNFTs demonstrates the positive impact of blockchain technology in creating meaningful change.
🔮 DYNAMIC NFTs: LOOKING AHEAD
Dynamic NFTs are revolutionizing the digital asset space, offering flexibility and interactivity. They are particularly valuable for Play-to-Earn games and have the potential to shape the future of digital ownership. As the web3 world progresses, dNFTs can become ubiquitous and seamlessly integrated into our daily lives. The increasing adoption and diverse use cases of dynamic NFTs are driving their development and pushing the boundaries of digital value exchange. It's an exciting innovation with limitless possibilities and significant implications for the DeFi industry.
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The information provided on this website does not constitute investment advice, financial advice, trading advice, or any other sort of advice and you should not treat any of the website's content as such. Bloom does not recommend that any cryptocurrency or NFTs should be bought, sold, or held by you. Do conduct your own due diligence and consult your financial advisor before making any investment decisions.