Understanding Dynamic NFTs: Key Use Cases and Examples

According to Statista, the NFT market is expected to reach $1,601 million in 2023. Revenue is expected to grow at a compound annual rate of 18.55% from 2023 to 2027, resulting in a market size of $3,162 million by the end of 2027.

Unlike their static counterparts, dynamic NFTs possess the ability to change and respond to various external factors and user interactions, thus presenting a wide range of innovative use cases that benefit both creators and collectors.

Read on for a detailed explanation of what dynamic NFTs are and how they differ from their static alternatives. Discover the most prominent use cases for dynamic NFTs and explore some real-life examples.

What are dynamic NFTs?

A dynamic NFT or dNFT is a digital token that can change its properties based on external factors, with the changes being recorded in the token’s metadata.

Dynamic NFTs include programmable and interactive features enabling the creation of digital assets that can transform over time. dNFTs empower artists and creators to deliver a more engaging experience for buyers and collectors.

To take an example of a vintage car NFT, the metadata of a dynamic NFT could change based on various factors such as historical data, maintenance records, and market value. Dynamic NFTs can also reflect changes in ownership as well as modifications made to the vehicle.

Benefits of dynamic NFTs

The key benefits of dNFTs include a high degree of versatility and interactivity, programmability, and the capacity to provide new revenue streams.

A high degree of versatility and interactivity comes from the flexibility of dynamic tokens, and their ability to change, making them more engaging for collectors. This also opens up new exciting opportunities for developers and creators who want to deliver immersive experiences for their audiences.

Dynamic NFTs offer programmability, allowing creators to establish rules governing the behavior of tokens and providing them with a significant degree of control. Let’s take gaming as an example. A dynamic NFT can represent a game item that undergoes continuous evolution and acquires new features based on the player’s advancement. By enabling dynamic changes and adaptations, these NFTs enhance player engagement and enjoyment.

In addition, dynamic NFTs ensure new revenue streams for artists and creators who earn royalties on the continuous use or interaction with their non-fungible tokens.

How do dynamic NFTs work?

Just like their static alternatives, dynamic NFTs are based on blockchain technology, which involves the creation of immutable records of ownership and authenticity. While static NFTs use the ERC-721 token standard, dynamic NFTs leverage the ERC-1155 standard, sometimes referred to as “semi-fungible” since it can be changed if necessary.

Changes to a dynamic NFT can be triggered through the use of smart contracts — self-executing programs encoded within the non-fungible token. Smart contracts enable the automation of different functions, for example changing the behavior of an NFT based on specific factors. Overall, smart contracts provide instructions to update, expand, and change dynamic NFTs.

What are the differences between static and dynamic NFTs?

The main difference between static and dynamic NFTs is that the first represents a single version of a digital asset that cannot be modified, while the second is programmable and can change and adapt its properties based on certain conditions.

In the infographic below, you can find other key differences between static and dynamic NFTs.

What are the most prominent dynamic NFT use cases?

The most prominent use cases of dynamic NFTs include gaming and the metaverse, digital art, real estate, digital identity, sports, collectibles, rewards and royalties, and fundraising.

Let’s take a closer look at each of these use cases.

Gaming and the metaverse

Dynamic NFTs are of great use in gaming and in the metaverse, where they can represent items or characters that evolve in line with the player’s actions and interactions.

Imagine you develop a role-playing game where players embark on quests and battles to defeat different creatures. You can create digital weapons as dynamic NFTs that can be transformed throughout the game, for example when the player completes a specific quest or wins a battle with a particular creature.

All game advancements will be reflected in the corresponding NFT’s metadata. This provides a tangible representation of players’ in-game achievements and ensures their increased engagement.

Dynamic NFTs can also represent in-game characters with their various traits recorded in the dynamic NFT’s metadata.

Another interesting scenario for dynamic NFTs is play-to-earn games, where they could be used to create dynamic objects such as in-game currencies, power-ups, and virtual goods.

Digital art

Another popular dynamic NFT application is digital art. For example, you may consider implementing a collection of NFT artwork that changes color or has specific time-bound features depending on the location, temperature, or season. This will add uniqueness to your artwork.

Dynamic NFT art can also mimic real-world art installations that need audience participation to be appreciated. A dynamic NFT could change based on the token holder’s interaction with the asset. This will help improve engagement at digital art exhibitions.

Real estate

Dynamic NFTs can help promote the tokenization of real estate property and physical commodities. Real estate tokenization can be a tricky process due to constantly changing property prices based on supply and demand, interest rates, property maintenance work, and other factors.

For the real estate industry, it’s critically important to keep all records accurate and up to date. Therefore, it’s crucial to be able to update all necessary data in real time. With dynamic NFTs, this becomes possible since these tokens can keep immutable records of sales transactions, maintenance works, and ownership credentials that can be updated as they change. This will help easily track the value of property over time.

Digital identity

An interesting potential use case for dynamic NFTs is digital identity management. Dynamic NFTs can represent a person’s digital identity and store such data as place of residence, marital status, and contact details. Due to the flexibility of dynamic non-fungible tokens, this data can be changed automatically and without the replacement of digital identity documents.

In a similar way, a dynamic NFT can be used as the representation of a user’s profile on social media. It can evolve based on the user’s actions and interactions on the network.

Sports

The sports industry can also make use of dynamic NFTs, for example in sports collectibles. With static NFTs, the metadata becomes permanent when the token is minted. This means that any changes in a sportsperson’s stats, such as a football player’s goal scores, cannot be changed.

Dynamic NFTs can store a sportsperson’s performance in the metadata, which can be updated accordingly with the athlete’s achievements.

Collectibles

Dynamic non-fungible tokens offer some exciting opportunities for the collectibles market, from representing evolving artwork to providing collectors with interactive experiences.

With dynamic NFTs, it is possible to add personalization and allow collectors to customize NFTs, including their appearance, attributes, accompanying elements, etc. in line with the collector’s preferences.

Dynamic NFTs can be also used to create limited edition collectibles that gain rarity and exclusive attributes over time. For example, they can represent a rare football card that can evolve by showcasing the player’s achievements and career milestones, thus increasing the value of the collectible.

It is also possible to add gamification to dynamic NFTs in collectibles to increase user engagement. You can empower collectors to earn rewards based on their participation.

Rewards and royalties

You can use dynamic NFTs to reward your users for completing certain tasks or achieving certain milestones on your platform. For example, after a user completes a certain milestone, you can use a dynamic NFT to grant them exclusive content.

By leveraging dynamic NFTs, you can also automate the payment of royalties to creators and investors. These NFTs can be programmed to automatically distribute revenue based on predefined rules.

Fundraising

Dynamic NFTs can help you enhance the entire crowdfunding process, making it more engaging and interactive for users. For instance, Regenerative Resources, an ecosystem services company, uses dynamic NFTs to collect funds to conserve mangroves. The company has released an NFT for a short film. At the initial stage, the film contained just one single frame. New frames were added every time the film was resold. This process will continue until the film is completed.

Examples of dynamic NFTs

The Merge by Pak, LaMelo’s NFT collection, Async Art, and CryptoKitties are some of the most interesting dynamic NFTs examples that showcase the potential of evolving non-fungible tokens. Let’s take a look at each of them.

Sports: LaMelo’s NFT collection

NBA player LaMelo has introduced a collection of dynamic NFTs that reflect his performance and offer various benefits to their holders. When LaMelo won the Rookie of the Year award, the NFT underwent a visual transformation, turning gold.

Gaming: CryptoKitties

CryptoKitties is an NFT-based game that allows players to buy, sell, and breed digital cats. Each cat is represented by a dynamic non-fungible token that can transform over time. This provides token holders with the ability to update certain data, for example, the cat’s personality, genes, or appearance.

Digital art: The Merge

The Merge is one of the most expensive experimental NFT art projects created by the pseudonymous digital artist Pak. In 2022, digital artwork was sold for nearly $92 million in the form of “mass” tokens on Nifty Gateway. The artwork represents a mash-up of “masses” that anyone could buy. At first it consisted of just three large dots against a black background with the size of the dots increasing as the number of buyers went up.

Collectibles: Async Art

Async Art is a platform for creating and collecting programmable digital art pieces that can transform and evolve based on various external inputs and conditions. Each work of art is represented by a dynamic NFT, which makes it unique and valuable to collectors.

What is the future of dynamic NFTs?

Dynamic NFTs hold great potential for non-fungible token innovation and expansion. They allow creators to unlock new possibilities across industries, from gaming and artwork to digital identity and fundraising.

If you are looking to explore the world of NFT development and harness the power of blockchain, our PixelPlex NFT development team is here to assist you. With 80+ successfully delivered blockchain projects for clients across diverse domains, we have the necessary expertise and experience to bring your NFT ideas to life.

Whether you need assistance with smart contract development, dynamic NFT creation, or blockchain integration, our team can help you tackle any challenge. Contact us today to get started.