What is a dynamic NFT (dNFT)?

by James · April 24, 2023

NFTs have undoubtedly taken the internet by storm, but they are not all the same. NFTs can come in a variety of forms, including a dynamic NFT (dNFT).

So, what is a dynamic NFT, how does it work, and is it better than a regular NFT?

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What is a dynamic nFT (dNFT)?

A static (ie a regular) NFT, once created and minted, will always be the same, meaning the metadata it references cannot be changed. This is not necessarily a bad thing, but can pose limitations if the creator or owner wants to change things. Perhaps they want to change a certain property of the NFT or update certain information. With a static NFT, this cannot be done.

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Enter dynamic NFTs (dNFTs).

Of course, a dynamic NFT is still a non-fungible token, meaning it is a unique blockchain asset that is used to tokenize something else, such as a drawing, video, song, or similar.

But, as the name suggests, dynamic NFTs have a number of additional features not offered by static NFTs. In short, they are programmed to be more dynamic.

How do dynamic NFTs work?

A dynamic NFT uses smart contracts to function. Smart contracts are programs that are used to execute a process as long as predefined parameters are met. These are particularly popular on the Ethereum blockchain and are now relevant in dynamic NFTs.

Smart contracts are used to access both on-chain and off-chain data in the creation of a dynamic NFT and are encoded in the NFT itself.

The smart contract plays a key role in allowing the dynamic NFT’s attributes to change. To change, NFT requires external (off-chain) data. Blockchains cannot access external data themselves and instead use a blockchain oracle to do so. It is the smart contract that receives data from the oracle, which is then used to modify or update the NFT.

Dynamic NFTs are also characterized by means of smart contracts. Once minted, they are associated with a set of metadata, but unlike regular NFTs, this can be changed if necessary.

Are dynamic NFTs better than static NFTs?

Three objects with NFT written on them placed on three platforms

Dynamic and static NFTs both have solid use cases, although the former may outperform the latter in many scenarios.

For example, dynamic NFTs can offer a higher level of user engagement or interactivity. This is because dynamic NFTs can be changed and updated to better suit user demand and can gather hype by offering new features.

In addition, dynamic NFTs are more suitable for representing real-world assets. For example, a dynamic NFT can be used to represent a piece of real estate. Because real estate prices are always fluctuating, the smart contract encoded in NFT can retrieve external data about these price changes, which will then be forwarded to NFT.

In the case of real-world data, dynamic NFTs can also be used to verify identity. While static NFTs can be used here, if a person changes their name or gender or wants to update their identification picture, a dynamic NFT will be able to update this information.

Dynamic NFTs also allow a higher level of user control due to their programmable features and can offer artists the ability to earn revenue through royalties based on the ongoing user interaction with their music or videos.

Dynamic NFTs can also contribute to NFT loyalty in general. With greater interaction and programmability, users are more likely to remain interested in a given NFT collection or project, knowing that there are more updates and developments to come.

Dynamic NFTs have a promising future

It is clear that dynamic NFTs have some interesting properties that could make them a widespread part of the DeFi industry. There are so many ways these NFTs can be used, and increased use can also improve NFT adoption and attitudes. One day we may all use dynamic NFTs in some way.