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Dynamic NFT Meaning

Nov 27, 2023 | Updated Nov 27, 2023
Dynamic NFTs are a category of NFTs designed to change their characteristics based on certain pre-defined conditions. They have codes in their smart contracts that enable them to achieve this change.

What is a Dynamic NFT?

Non-fungible tokens, or NFTs, are unique digital assets that exist on the blockchain. They are designed with different guidelines compared to regular cryptocurrencies. Creators can attach files, videos, links, or images to an NFT’s metadata. The moment these NFTs are minted by a user, the metadata and characteristics are usually permanent. This is known as a static NFT. However, dynamic NFTs or dNFTs are different because they can evolve under certain conditions..

dNFTs are a type of NFT whose metadata changes in real time in response to a user’s activity. A program in the code of the NFT or other external factors triggers these changes. For example, in NFT games, an in-game NFT may be designed to display certain attributes like changing appearance or behavior when the player reaches a particular level in the game. These attributes can also result from a user purchasing an upgrade. 

Dynamic NFTs have intrinsic features that make them different from other tokens. They are built with the ERC-1155 token standard, which combines elements of the ERC-721 and ERC-20 token standards. They react to codes in a smart contract, and finally, oracles transmit changes to the NFT’s smart contract from outside the blockchain. These three features are essential to a dynamic NFT’s evolution.

Static NFTs vs. Dynamic NFTs 

Static NFTs are digital arts or collectibles with a fixed set of characteristics that are immutable on the blockchain. Static NFTs, such as images, videos, or music, can only represent stationary items. Dynamic NFTs, on the other hand, change when the conditions are right. The metadata of a dynamic NFT can interact with external sources and evolve based on these interactions. Static NFTs only provide traditional NFT revenues like staking rewards, while dynamic NFTs provide more revenue streams for the owner, including royalties and rewards from interacting with the NFT.  

What Are the Various Use Cases of Dynamic NFTs?

Dynamic NFTs have several use cases besides the regular utility they offer alongside static NFTs like digital arts. The ERC-1155 token standard of dynamic NFTs makes them perfect for blockchain gaming, where they can transform according to a player’s activity. Dynamic NFTs can also be used to represent art and music, such as a digital painting that can evolve its characteristics.

With the growing use of blockchain-based identification, dynamic NFTs can be used as a form of digital identity. The NFT evolves based on the user’s behavior, achievements, or activity. dNFTs can also be used to represent real-world assets, like real estate. Real estate tokenization is something that can be done with static NFTs, but dynamic NFTs can be used to track properties like price change, ownership, and size.  

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