What is a Dynamic NFT and what are its perspectives on the virtual market?
Arseniia KHORIUSHINA, Gaya BENCHABA, Ghouzali ABDERRAHMANI
M2 CEN, Paris 8 Vincennes-Saint-Denis, 2022
NFTs are relatively new tokens on the virtual market, nevertheless, they are taking the digital art and collectors’ world by storm. Why are they getting so popular, which types of NFTs we can find on the market today and what may it become in the future?
Let’s discover that together now.
What is an NFT?
An NFT is a non-fungible token that can be seen as a unique digital certificate that has an owner and can be represented in the form of an animation, an image, a video, a tweet, a song, a game, or any other digital media form. “Non-fungible” means that it’s unique and cannot be replaced with something else.
NFTs are considered today as a new form of digital art and gaming. Traditional pieces of art are highly precious because they are only one of a kind when digital files can be easily and infinitely duplicated. Due to NFTs, any artwork can be tokenized and obtain a digital certificate of ownership that gives a possibility to buy or to sell it.
Luiz Octavio, who worked on the development of the token, calls an NFT “a form of decentralized certification”. An NFT can have only one owner at a time: the token will prove that the buyer owns the original work (the code will differentiate this piece from any digital replicas). Thereby NFTs give us a way to have clear possession over digital items. To provide you with an example of physical art collecting: everyone can buy a Van Gogh print but only one person can be the owner of the original.
Static NFTs Vs Dynamic NFTs
There’s a big chance that even experienced NFT collectors mostly had to deal with Static NFTs. Dynamic NFTs are the next level in the evolution of the NFT space that combine the uniqueness of static NFTs with dynamic data inputs and off-chain computation.
So, what’s the difference between a Static and Dynamic NFT?
A Static NFT is an NFT with constant features and data recorded on the blockchain. Such art piece states up to the moment it was created, so it can’t be altered.
A Dynamic NFT is the one which data and features can modify continually through outside influence. Let’s see an example to make it clearer: a Static NFT of a LeBron James basketball card containing the information given at the moment of its creation will never change when LeBron continues playing new games. While a Dynamic NFT card can be programmed to always update a basketball card when LeBron plays new NBA games. So, a Dynamic NFT will evolve with time according to the changing conditions. It can be also programmed to act together with other NFTs.
Therefore, Dynamic NFTs bring the same qualities as Static NFTs but they are capable of updating according to the new conditions and can also be able to capture and store information about the users themselves.
Oracles and Ceramic Network
For the majority of digital art collections, static data make the most sense. NFTs permanently store their data on decentralized and immutable blockchains. For certain fields like gaming, interactivity is essential, therefore some NFTs get the ability to change.
It’s the moment when we start to use oracles that are third-party data feeds connecting blockchains to external systems. So, in this way, Dynamic NFTs lean on the real-time information from oracles to make their modifications. For example, we could use an oracle with putting on it the weather data that would automatically update and change the NFT in a decentralized way.
There are other possibilities beside oracles where other NFTs could even utilize limited user input, for example on Ceramic Network that is a decentralized source network for storing and managing data, where an NFT owner is able to update its content and to link blockchains, wallets, and social accounts to one single identity via the identity protocol IDX. The goal is to give an artist utter freedom to create customizable, innovative and indeed dynamic NFTs.
Smart Contracts
While talking about oracles that are used to connect blockchains to external systems, it should be important to mention smart contracts which are programming features existing within the blockchain.
NFTs are deployed with smart contracts which govern the various actions such as:
Verifying the ownership
NFT Anglais et perspectives
NFT Anglais et perspectives
- Verifying the ownership
- Handling the transferability
They enable the network to store the information that is indicated in an NFT transaction. Once done this information can be accessed when needed. The smart contract also ensures that the information stored is transparent as well as immutable.
How Are Smart Contracts Created? When you make an NFT it is known as minting. You are basically writing the underlying smart contract code. The smart contract code decides the qualities of the NFT and it adds them to the relevant blockchain on which the specific NFT is coded. There are many standards that have been established for smart contracts. Ethereum is one of the very first to use standards.
Standards of Smart Contracts for Creating NFTs Since Ethereum is the most used NFT, we will look at the Ethereum standards. The standards in Ethereum are ERC 1155 Standard and ERC 721 Standard.
Chainlink oracles
It would be interesting to mention Chainlink decentralized oracle network that can securely connect blockchain smart contracts to external data sources and systems and therefore enable a blockchain to interact with off-chain data sources (e.g., IoT, web APIs) in the real world. That makes Dynamic NFTs more relevant and practical than Static ones. Moreover, they can relate Chainlink to existing backend systems, access verifiable promiscuity and trigger cyber-physical systems.
Creation of Dynamic NFTs using Chainlink oracles
The first step will be extracting the off-chain data through Chainlink oracle in our NFT’s smart contracts. Once it’s on-chain, we can query the data feed from the smart contracts and alter the NFT attributes and proceed with the minting. As soon as it’s done, we can list the dynamic NFTs in the NFT marketplace platform for selling.
Use cases of Dynamic NFTs
There are four main categories of the use cases available to developers for creating dynamic NFTs using Chainlink oracle:
1. Competition based NFTs
- Game Performance: The use of the off-chain data for creating NFTs for in-game items with the possibility to transfer NFTs ownership among the players in accordance with their game performance.
- Verifiable Randomness: Applying random features to an NFT that can determine the power ranking and rarity of each new-minted NFT for in-game items.
- Augmented Reality: Creating digital competitions in the real world (like Pokemon GO) by using subjective or objective data. Chainlink can empower NFT minting in real-world locations and can place NFTs at random locations.
- Real Life Fantasy Sports: Simplification of fantasy sport competitions where NFTs can represent real-world players, evaluate them by their real-life statistical outputs and trigger the winning payouts.
- Reward and Governance Systems Dynamic NFTs based on Chainlink oracle may urge certain consumer behaviors on completing specific off-chain objectives where a user can be rewarded by an access to rare non-fungible tokens. This potential reward system can replace paper and digital coupons and, more than that, will be exceedingly accurate and trigger fair distribution of awards.
- Authenticity Verification With Chainlink oracle minting NFTs can transform the way of interacting with existing systems that can be especially useful for tracking unique real-world assets (e.g., luxury items, rare artifacts, products in supply chain, etc.) and their registration in the supply chains or financial processes. Two biggest advantages in this case will be quality control and forgery reduction. Chainlink oracles can also help with certification by verifying credentials after minting them as immutable NFTs on a blockchain as they might have a direct access to real-world data confirmed by authority-based approval.
- Valuation Updates As Dynamic NFTs tokenize or represent assets, have access to external data sources and can credibly estimate on-chain assets, they might be interesting to use for their consistency and accuracy in maintaining valuation updates. If we tokenize property, land or physical commodities, NFTs can relay external data using Chainlink for adjusting the updated rates of the assets on crypto pledge payments. In case if we need, for example, ownership verification, Chainlink oracle may provide access to the smart contract data for external applications and even the GPS location of physical commodities.
Building Dynamic NFTs with Polygon
What is Polygon?
Polygon (formerly Matic Network) is a scaling framework for building Ethereum-compatible blockchains. Polygone can create an ecosystem that connects multiple different scaling solutions instead of creating one or two, and it includes different consensus mechanisms and 2-layer options. This framework allows a quicker and easier build of their own scaling solutions.
By the way, Polygon is unique compared to other blockchain scaling with its Ethereum virtual machine compatibility, with an advanced flexibility and optional shared security model.
Popular NFT-based gaming projects have launched using Polygon’s scaling technology, with integrated chain-link verifiable random function. However, it’s the only way to build dApps on Polygons.
Nowadays developers can create dynamic NFTs that change based on off-chain data provided by secure oracles, by using weather temperature feeds provided by Chainlink on Polygon.
Why Are Dynamic NFTs Important?
Dynamic NFTs powered by oracles play a key role in gaming dApp Aavegotchi, which integrated Chainlink VRF to supply it with a source of provable randomness.
Aavegotchi launched on Polygon’s layer-2 PoS chain, enabling the game to cost-effectively scale to meet user demand thanks to near-zero transaction fees and fast settlement times. Chainlink plays a crucial role in supporting scaling solutions such as Polygon by providing low-cost off-chain services that are resistant to manipulation.
One use case for dNFTs like this is to support blockchain-based insurance. Insurance policies can be turned into dNFTs, allowing for customizable crop insurance policies based
on weather data. dNFTs are a powerful alternative to traditional forms of insurance that are often subject to manual processing delays and subjective assessment.
FarmerNet NFTs, the winner of the GeoDB Geolocation Oracle and Government Tech prizes of the Chainlink Virtual Hackathon Spring 2021, used Chainlink to create a blockchain marketplace for farmers to earn revenue with carbon credits. Projects like this can grant buyers access to immutable proof for their claims of carbon reduction and renewable energy use through dNFTs.
Future of Dynamic NFTs
If we consider future perspectives of Dynamic NFTs, “Smart contracts” might be the main benefit. For example, if you study, let’s imagine you start your course and you receive an NFT, every time you progress, your NFT evaluates and shows your new level. In the end, when you finish your course, you get a completed NFT in the form of a certificate. Or another example can be with a passport: instead of a passport, you use a personal NFT that contains your credentials from the real world. Each time you travel, the NFT updates your personal information about the countries you’ve visited and you don’t need any stamps after this moment and you’re not afraid of losing your passport. There are lots of possibilities with technology, as far as our imagination can bring us.
Thus, there might be 7 main opportunities for Dynamic NFTs :
- Gaming: getting an in-game item that upgrades when you reach milestones
- Passport and identity: verification of your personal data and managing your information
- Certification in education: an NFT can be modified when your level pushes up
- Drive business: discounts/points/monetization when NFTs can become redeemable
- Tickets and access: a Dynamic NFT that becomes “used up” once you enter an event, for example
- Valuation: for investments (property, stocks, equity) and startups
- Supply chain: to track and control physical assets
Conclusion
The utility of Dynamic NFTs goes much further than cards’ collecting and the gaming industry. Through oracles, governments could launch fraud-proof digital passports connected to NFT duplicates on the blockchain. With smart contracts, we’ll be able to query and verify personal credentials and to join data to a person’s digital identity on a real-time event. We could also imagine, for example, the stored information about the car’s vitals on the blockchain for an automobile owner or integration of a dNFT to a fitness app or tracker to preserve a jogger’s fastest time, heart rate, or number of steps per day that would evolve each time the athlete hits his new personal best. These are just a couple of examples of the utility and potential of a dNFT that is a more flexible, data-driven and accessible asset.
Dynamic and oracle-powered NFTs are relatively new in the digital world and need to earn users’ trust and to evolve beyond the Static ones. We can clearly expect Dynamic and Static NFTs to act more together with an eye to create better opportunities for artists, brands and industries of the future.
Sources:
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https://books.google.com/
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https://blog.doingud.com/nfts-101-what-is-a-truly-dynamic-nft/
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https://www.leewayhertz.com/create-dynamic-nfts-chainlink-oracles/
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https://www.nftqt.com/dynamic-nfts-smart-contracts-that-change-your-nft/ 8. Chainlink “How to Build Dynamic NFTs on Polygon”,
https://blog.chain.link/how-to-build-dynamic-nfts-on-polygon/
9. Adelyn Zhou “The Next Wave of NFTs will be Dynamic”,