After achieving widespread adoption throughout the Web3 community, Non-Fungible Tokens (NFTs) are making their way into the mainstream, with spotlights in major media outlets and a series of high-profile athletes and public figures launching their own collections. As a result, NFTs have become one of the most publicly prominent applications of blockchain technology.
The next step in the evolution of NFTs is just getting started. Dynamic NFTs (dNFTs) are expanding the design space that NFTs are able to address through their ability to adapt and change in response to external events and data. In this article, we cover what NFTs are and how dNFTs are taking them to the next level, current and potential dNFT use cases, and how Chainlink can be leveraged by those looking to build dNFTs to give them access to trust-minimized off-chain data and computation.
Understanding NFTs
In a nutshell, NFTs are unique digital objects that exist on a blockchain. Every NFT can be differentiated from another through a 1-of-1 tokenID and its unique contract address. From there, metadata such as images, video files, or other data can be attached, meaning that it’s possible to own a token that represents a unique digital object.
The most common NFT use case is currently digital art; an artist mints a token representing a digital artwork and a collector can purchase that token, marking their ownership. Once NFTs are minted, their tokenIDs don’t change. Keep in mind that ascribing metadata, which incorporates an NFT’s description, image, and more is completely optional. In its most bare-bones form, an NFT is simply a transferable token that has a unique tokenID.
This static NFT model provides a host of benefits for digital artists around the world. Beforehand, digital artists were unable to stop, or even track, unauthorized distribution of their original artwork, because there was no means by which to distinguish the difference between any two files and therefore no single authentic file that could be owned. For the first time in the history of the Internet, creators can sell digital art to their fans by giving them verifiable ownership, while fans can prove that they own an original artwork even if the underlying image is copied.
Going Beyond Static NFTs With Dynamic NFTs (dNFTs)
Static NFTs are currently the most common type of NFT, used for the most part by NFT art projects and play-to-earn game projects and as digital collectibles. Beyond these use cases, they also offer a unique value proposition for digitizing items in the real world, such as real estate deeds, patents, and other unique identifiers.
However, this model is limited by the permanence of static NFTs, because the metadata attached to them is fixed once they’re minted on a blockchain. Use cases such as tokenizing real-world assets, building progression-based video games, or creating blockchain-based fantasy sports leagues often require data to be updated. dNFTs offer a best-of-both-worlds approach, with NFTs retaining their unique identifiers while able to update aspects of their metadata.
Put simply, a dynamic NFT is an NFT that can change based on external conditions. Change in a dynamic NFT often refers to changes in the NFT’s metadata triggered by a smart contract. This is done by encoding automatic changes within the NFT smart contract, which provides instructions to the underlying NFT regarding when and how its metadata should change.
dNFTs can be upgraded in multiple ways based on external conditions.
Dynamic elements besides metadata changes can also exist. For example, dynamic NFTs can be minted based on certain conditions, such as when a hidden spot is found in an augmented reality application. Dynamic NFTs can also house “hidden traits” manifested through user interactions instead of within the metadata. As fully unique and customizable tokens, NFTs can be programmed in an infinite number of ways. However, most dynamic NFTs must implement some form of metadata change in order for non-technical users to “see” the changes.
Potential Use Cases
NFT metadata is where the token’s name is specified, traits are assigned, and file links are placed. While the tokenID provides a permanent identifier for verifiable ownership, the metadata is the essence of the NFT — housing the elements that make it useful.
Generative NFT art projects often have a variety of traits, with some rarer than others. These traits are placed within an NFT’s metadata alongside an IPFS link to an image or video that corresponds to the NFT’s traits. In a dNFT, these traits change based on external conditions.
This functionality can be useful for character progression — a core tenet of many different game models — in blockchain games. When first starting a game with a playable NFT character, the NFT has base stats reflected in its metadata. As the player continues leveling up, the metadata in the NFT changes to reflect the character’s growth.
In-game character dNFTs can be upgraded to reflect player progression.
Another case where metadata changes are useful is in the tokenization of real-world assets, where a host of changing metrics are often required. For example, an NFT representing a property could reflect its maintenance history, age, market value, and more. Tokenizing these changing assets therefore requires NFTs which have the ability to update with changing metadata.
The metadata of dNFTs representing property can change to reflect maintenance history, past sales, and more.
These are just a few hypothetical use cases for dNFTs. In reality, changes to a dNFT’s metadata can be triggered by any number of off-chain or on-chain events, speaking to the limitless potential of dNFTs have for expanding the NFT design space.
While the current Web3 ecosystem mostly consists of static NFTs, a few standout projects have already kickstarted dNFT innovation, including PECULIUM.
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