From Pudgy Penguins and Bored Apes to million dollar art pieces from Beeple, NFTs have undoubtedly shaped digital culture in ways we never expected. The static and immutable nature of this new asset class makes it fertile ground for creative experimentation. But the digital frontier of web3 isn’t exactly known for stalling in the speed of innovation and although NFTs are still very novel, they’re already evolving.
Enter dynamic NFTs – a new paradigm that will change how we interact with these digital assets.
Historical Evolution of NFTs
The Ethereum blockchain, with its innovative smart contract functionality, paved the way for Terra Nullis, the very first NFT minted on the chain, opening the door to a new world. NFTs, unique and distinguishable from one another, quickly found their niche in digital art. In 2021, known across crypto communities as “The Year of NFTs”, NFTs saw an exponential boom in value. This was in large part kickstarted by Beeple selling his NFT “Everydays — The First 5000 Days” for a record breaking $69 million.
The downside of this mania was that NFTs were quickly typecast as digital art in the mainstream. This categorization severely downplayed the potential of the technology and left most people with an ironclad judgment of NFTs.
However, the market has since evolved. Creators from all walks of life have turned to NFTs to engage their audience, build communities, and fund projects. Anywhere from the music industry to charity projects have embraced the benefit of this asset class. This has further fueled the desire to continue evolving NFTs which is where dynamic NFTs enter the picture. By infusing mutability and real-time adaptability into the previously static asset, we open the door to a completely new realm of assets.
What are Dynamic NFTs?
At their core, dynamic NFTs possess characteristics that allow them to change over time or based on external inputs. Imagine you have a piece of digital art that changes its appearance based on the season, weather, or even global stock market movements. Instead of the static nature of NFTs, dynamic NFTs provide a continuously evolving experience for its holders.
Connecting NFTs to real world information, while maintaining their immutable nature, can happen much thanks to decentralized oracle networks such as Chainlink. In short, oracle networks enable smart contracts that connect on-chain code with real-world infrastructure, allowing developers to build web3 applications and assets that are interoperable with traditional systems.
Potential Use Cases for Dynamic NFTs
The novel flexibility of dynamic NFTs has given rise to a multitude of fascinating applications. We’ll explore some of these here, but remember, this is only the tip of the iceberg.
Dynamic Art
Artwork that evolves based on external events. Imagine a digital painting that subtly changes its hues with the phases of the moon or reacts to global Twitter trends.
Evolving Collectibles
Tokens that grow, evolve, or level up based on external inputs. The imagination is our only limit in this category. Think of a virtual pet, similar to Tamagotchi, that grows older, shifts appearance, and acquires new skills as time passes. This is of course one of the more simplistic use cases for evolving collectibles. To date, one of the best examples would be your Lens profile, which you mint as an NFT.
Adaptive Financial Instruments
The world of finance is making big moves towards tokenizing traditional assets on decentralized networks. By connecting these NFTs to decentralized oracles, they could shift appearance based on market movements. By combining the new technology of Token Bound Accounts (ERC-6551) with oracle networks and AI models, we could theoretically build a stock broker directly into a dynamic NFT and investors could mint their own personal stock broker.
In-game Assets
Games like World of Warcraft and Eve Online have long had their own microeconomies based on various in-game assets. Imagine if we could make each of these assets an NFT and enable its dynamic capabilities. Weapons would automatically upgrade based on the player’s interactions with it and its history. Items in-game would become more and more rare because they would have an immutable record of their history, giving way for a more thriving in-game economy and dynamic marketplace.
Academic Accreditations
Dynamic NFTs could be issued as a soulbound token to every new high school student. This creates an immutable record of their academic performance and accreditations. For every new class, skill, or degree, the NFT shifts to represent their academic standing. This would lead to a more transparent job market and potentially enable gamification in the world of skills acquisition, leading to a more skilled workforce.
Future Outlook
The capabilities of dynamic NFTs have only scratched the surface. As web3 technologies mature and advance, the integration of digital tokens with the real world will craft deeply immersive experiences. As these assets enter the virtual realms, we might soon see entire metaverse landscapes adjust in real-time against collective user interactions.
Moreover, as on-chain activities become more sophisticated, so will the interactions and triggers of dynamic NFTs. It’s hard to tell what could happen but AI will undoubtedly tap into this world and help us create more innovative solutions than we could possibly conjure up ourselves. Given that this is a highly niche space this would require economies that support such AI development. Luckily, that’s what we’re working on here at bitgrit. We’re building a marketplace for AI models that’s powered by web3 financial infrastructure. We’re committed to making AI more accessible for all by increasing the number and quality of AI models available on the market. We do this by orchestrating dynamic competitions that foster the development and birth of cutting edge AI models in the sectors that demand it the most.
Conclusion
Dynamic NFTs are pushing the boundaries of what’s possible in the web3 space. Traditional NFTs offered a glimpse into the world of digital ownership and authenticity. Dynamic NFTs are ushering in an era of interactive, adaptable, and real-time digital assets. For anyone deeply embedded in the web3 ecosystem, keeping an eye on this evolution is not just recommended; it’s essential.
