Exploring Evolving NFTs
As the popularity of non-fungible tokens (NFTs) continues to grow, their use cases and features are expanding. This has led to a growing discussion about a new category of NFTs known as dynamic NFTs. Unlike static NFTs, dynamic NFTs have the ability to evolve and change over time.
Continue reading to discover the distinctions between these two NFT types and what sets dynamic NFTs apart.
What are NFTs?
NFT, short for Non-Fungible Token, represents a digital asset that can take the form of artwork, music, in-game items, videos, and various other forms.
These items are traded online, often involving cryptocurrency for transactions, and they share a common underlying software with many cryptocurrencies.
They are typically created using similar programming as cryptocurrencies like Bitcoin or Ethereum, but their characteristics differ significantly.
Unlike physical money and cryptocurrencies, which are “fungible” and interchangeable with each other, NFTs are unique and not equal in value.
For example, one dollar is always equivalent to another dollar, and one Bitcoin is always equal to another Bitcoin. The fungibility of traditional currencies and cryptocurrencies makes them reliable for transactions on the blockchain. However, NFTs stand out because each one has a distinct value and identity.
Static NFTs
- Static NFTs exist in isolation from off-chain environments. Once minted to a blockchain network, they remain unaltered.
- Static NFTs are unable to be transferred between different blockchain networks. Associated content, such as artwork, music tracks, GIFs, or videos, stays the same even with ownership changes.
- Static NFTs do not react to real-world events.
Dynamic NFTs
- Dynamic NFTs engage with the off-chain environment. Also known as “living NFTs,” they can change based on external factors like events or achievements.
- Dynamic NFTs are able to be transferred between different blockchain networks.
- Dynamic NFTs react to real-world events.
- Examples include a metaverse gamer’s avatar evolving as they progress in the game.
- Modification is possible after minting, typically by adjusting the NFT’s metadata, which includes its name, content, traits, description, transaction history, etc. This process usually involves off-chain storage in a JSON file and requires coding knowledge, making it potentially complex and time-consuming.
How NFTs Operate
NFTs are built on a blockchain, a decentralized public ledger that records transactions. You likely associate blockchain with its role in enabling cryptocurrencies.
Usually, NFTs are stored on the Ethereum blockchain, although other blockchains can support them too.
An NFT is generated or “minted” from digital representations of both physical and intangible objects, including:
- Digital art
- GIFs
- Videos and sports highlights
- Collectibles
- Virtual avatars and video game skins
- Designer sneakers
- Music
Even tweets are eligible. Jack Dorsey, co-founder of Twitter, auctioned his first tweet as an NFT for over $2.9 million.
Essentially, NFTs are akin to physical collectibles, but in a digital form. Instead of receiving a physical painting to hang on a wall, the purchaser obtains a digital file.
Furthermore, they acquire exclusive ownership rights. NFTs can only have one owner at a time, and their utilization of blockchain technology simplifies the verification of ownership and the transfer of tokens between owners. Creators can also embed specific information in an NFT’s metadata. For instance, artists can sign their work by incorporating their signature into the file.
The Technical Aspects of Dynamic NFTs
Dynamic NFTs are designed to store data in a format that can be easily edited.
These digital assets make use of the ERC-1155 token standard, which is distinct from the ERC-721 standard used for static NFTs. The ERC-1155 standard is considered “semi-fungible,” allowing for essential modifications.
Changes to dynamic NFTs can be initiated swiftly via a smart contract.
Typically, an oracle is responsible for transmitting external data to the smart contract, which in turn triggers an update to the NFT’s metadata. This update affects not only the token’s characteristics but also its appearance.
llustrations of Dynamic Digital Assets
To provide a broader perspective, there are numerous instances of dynamic digital assets. Let’s take the well-known NFT-based game, Cryptokitties, as an example.
In this game, players have the opportunity to buy, sell, or breed virtual cats.
Each cat is considered a dynamic NFT, granting owners the ability to modify certain elements of the associated data, including the cat’s genes, temperament, and traits.
Another remarkable case is “Crossroad” by Mike Winkelmann, also known as Beeple.
These dynamic NFTs were created in 2020, just before the US presidential election, with the unique feature of altering their appearance based on the election result.
To add a touch of humor, after Joe Biden became president, the image transformed to depict President Donald Trump in a humorous scenario following his election loss.
In Brief – The Demand for Adaptable NFTs
Dynamic NFTs represent an exciting advancement in the world of NFTs, offering a flexible and versatile solution for digital assets.
Unlike static NFTs, which stay constant in digital collectibles and art projects, dynamic NFTs shine in play-to-earn games by enticing gamers with regular updates.
As the Web3 realm continues to progress, dynamic NFTs are poised to assume a progressively vital role in influencing the trajectory of digital assets and the Web3 ecosystem.
