NFTs, or Non-Fungible Tokens, are a relatively new and emerging tokenization format in the crypto world. They are largely used by blockchain games that require uniquely scarce items.
The term “Non-Fungible” defines the property of an object that is different from another similar object. The term “Non-Fungible” is, in contrast, “Fungible,” which defines an object as the same object with different names but all identical.
NFTs offer an opportunity for the blockchain community to build applications that would allow for the ownership of digital assets that would be reusable. The concept behind NFTs is fairly simple: Tokens are user-defined digital assets in a blockchain that can be transferred and traded between two parties.
But what are these tokens? NFTs are non-fungible tokens (NFTs) in a blockchain with unique properties. A non-fungible token has a unique, fixed, and verifiable identity that others cannot copy or replicate. This means an NFT’s value cannot be manipulated or changed once created.
What are NFTs used for?
This is where the question of what they can be used becomes relevant. In short: Anything. A digital token that represents ownership and even a digital asset or currency can be created in a blockchain to represent anything, including but not limited to:
- Digital assets include skins and equipment in video games, smartphone applications, casino games, and more.
- Virtual items in online first-person shooters (FPS), such as weapons and ammunition.
- Items in trading card games, such as Magic: The Gathering, Pokemon TCG, and others.
- Currencies like Litecoin, Dogecoin, and others.
Video games are a great application for NFTs because the items in many of these games can be highly valuable. Skins in Counter-Strike: Global Offensive can sell for thousands of dollars on the secondary market.
It is important to note that NFTs are not limited to digital assets or virtual items; they can represent anything of value, such as real-world properties.
What Is A Dynamic NFT?
Dynamic NFTs are non-fungible tokens that can change over time based on data stored in the blockchain. A dynamic NFT is a unique token that is a variant of another token.
The value and capabilities of a Dynamic NFT can change based on information or events in any other smart contract. Each variant has a unique identity and may have different properties from its parent token.
A sort of NFT known as a dynamic NFT, abbreviated as NFT, can alter parts of its intrinsic qualities in response to environmental changes. These alterations are captured on record and incorporated into the NFT’s metadata.
Changes in Dynamic NFTs are brought about via smart contracts, activated when data is received from oracles or when certain other on-chain and off-chain events occur.
How Dynamic NFTs Work?
Dynamic NFTs are constructed by storing data on the blockchain that creates a new set of features for each variant. That data is unlocked to the corresponding NFTs at a later time, at which point it becomes irrevocable.
Dynamic NFTs is to introduce new possibilities and capabilities in the blockchain ecosystem by enabling new forms of trading and value transfer.
Smart contract templates will create and define different Dynamic NFT pathways between two parties. As of the time this article was written, dynamic NFTs almost always make use of Ethereum’s ERC1155 token. Similar token proposal projects on other blockchain platforms, such as Solana, are now in development.
In a Dynamic Networked Financial Transaction (Dynamic NFT), smart contracts give instructions on how the NFT’s metadata should be updated in response to a triggering event based on data received from an oracle or an event on the chain.
A base The NFT is initially developed, and then, after that, the smart contracts that regulate updates, revealing previously concealed characteristics or features, and image upgrades are put into place.
These alterations are subject to certain conditions and will take effect only when a smart contract is activated. Each smart contract can be activated by various events, including those that occur on-chain or off-chain, at a specific time or price, or in a specific area.
Dynamic NFTs can be used for almost any purpose, such as:
- In a regular cryptocurrency transaction, the ability of the sender to change the amount of currency in the transaction is based on various triggers.
- The NFT itself could be traded at a higher price for collectibles if its statistics have improved since its creation.
- For digital assets and virtual items, a Dynamic NFT could become rarer over time due to becoming more difficult to acquire and use.
- For currencies, Dynamic NFTs can represent the purchasing power of a currency in real-time and allow holders to exchange their currency at a lower rate (this was used, for example, in the case of the Venezuelan bolívar, which is set to be replaced by dynamic NFTs).
A piece of digital art presented in a dynamic NFT can display certain time-bound elements and modify the colors or hues it displays based on the place in which it is displayed, the temperature, the season, the time of year, or the position of the moon.
For a change in the elements, smart contracts would need to be implemented to take data from APIs or oracles associated with the events being discussed.
An additional illustration of this would be a digital rendition of Andy Warhol’s Marilyn Diptych.
A digital artist or a programmer can design a calendar that includes significant dates related to the life of Marilyn Monroe. On those days, particular colors or details commemorating the unique events could be displayed to draw attention to them.
Dynamic NFTs are easiest to understand when they are conceived as the basis for shared access rights, the type of digital rights management (DRM) created when music and other content are distributed online.
In that context, an individual can share access to her completed work with a group of friends or even the entire world. If she chooses, these friends could be able to change elements within the work at any time. They edited the work, which could then be saved in various versions.
When a Dynamic NFT is used this way, it is referred to as a shared access right, also known as a shareable right. It can be best compared to something like a Creative Commons license. When there is more than one owner of an NFT, all owners are listed on the metadata and need to consent to changes.
Use Cases of Dynamic NFT
There are a variety of use cases in which Dynamic NFTs could be used to empower groups of people or communities. One particularly relevant to a blockchain is creating a token that will include pro-social attributes.
Environmentalist groups, for instance, could create NFTs to represent renewable energy and plant trees in a local community. The trees would be associated with individual NFTs, each of which would be encoded with an ID system that could track its growth and determine whether it needed to be cut down.
This new development in NFTs will open the door to various applications and use cases. The following are just a few examples, but many more are coming to light.
This data can be maintained in the metadata of a dynamic NFT. In-game character progression refers to the process through which a player’s character advances through the game, gaining access to new levels or attributes as they do so.
When a player character does a certain activity, a piece of equipment in the game may become more useful. The action causes an increase in productivity as a result.
For instance, a user can increase the speed and accuracy of a racecar in a game by taking the racecar for maintenance and upgrading its wheels; however, the efficiency of the racecar gradually decreases as more time passes.
Generative art is art in which numerous characteristics can change or evolve based on the conditions that are externally imposed.
It has tokenized real estate with the ability to update and depict changing metrics of the underlying asset on its corresponding non-fungible token. Chainlink is responsible for the image and the example.
Certifications and identification based on dynamic non-fungible tokens. Passports with Dynamic Near Field Technology (NFT) elements save the most recent version of a person’s personal information and travel history.
You can take ownership of assets in augmented reality worlds by employing dynamic NFTs. You may adjust the characteristics and attributes of those assets by performing several user-generated activities and location-based events.
An example is an interactive virtual hologram of a tour guide sitting in front of the Itsukushima Shrine. The information that the hologram provides to guests can alter depending on the time of year, the time of day, and the level of the tide.
The experience can be controlled by a dynamic NFT, which uses smart contracts and oracles to regulate and tailor the experience to the user’s preferences.
The potential for Dynamic NFTs is enormous, and it will only grow in the coming years. As creators and developers continue to conceptualize new ideas for how these NFTs can be used, their applications in new environments are bound to increase.
The important thing to remember is that these NFTs can exist across different mediums, including video games, augmented reality experiences, music, and art programs, among other platforms.
Shortly, dynamic NFTs are likely to emerge as highly competitive. As a result, it will be important for creators and developers to consider the factors that will set their Dynamic NFTs apart from others. This is why it is critical to understand how the system works and its implications on future NFTs.