A static NFT is a minted item, like a piece of artwork or a document. A dynamic NFT changes when things in the market change or an event triggers a change. Dynamic NFTs defy a basic tenant of a non-fungible token—the idea of permanence—but really what they do is take this idea of uniqueness and program in the very real notion that value changes over time.
Let’s start with a couple of examples:
Essentially, what we want to do is take the idea of an NFT, something unique, singular, backed by the blockchain, and program into it information, rewards, accruals, or events, making it dynamic.
With some picture in our mind of what a dynamic NFT is and why we might want to program changes into our NFTs, let’s brainstorm a few ways dynamic NFTs can help an enterprise improve the way they work or grow revenue.
Dynamic NFTs can be used to make contracts more intelligent. Imagine you’re operating a supply chain and processing an order via a contract NFT. At various stages, the NFT could reference external data and the amount paid can change. External data might include a damage assessment of the goods, delivery time, storage conditions, or even market prices like the cost of a commodity.
We know Web 3 gaming is applying NFTs in novel ways. Play-to-earn games and blockchain-backed fantasy sports reward participants with digital cards or trophies that can increase in value. These NFTs can change because of real world events, like the growth in popularity of a player, or based on external conditions. Dynamic NFTs are popping up regularly in gaming and there are lessons to be learned here for the enterprise. How can we gamify participation with a brand? Or trigger rewards by smart contract when x-number of people share our tweet? Lessons learned in blockchain gaming are applicable for more than game designers.
External conditions impact value, which we discussed above. Where is this more obvious than when it comes to collectibles? By using a dynamic vs static NFT we can program conditions into our NFTs and make them respond to demand. A Lamelo Ball card is worth more when he wins Rookie of the Year, so we can plan for that in initial designs. NBA Top Shot also markets Moment Badges, badges that are applied to NFTs to show when a moment happened or during what matchup. In the future maybe NFTs change for events like awards, championships, or accomplishments.
With digital art, we know value will increase if an artist becomes famous, but the work can change as well. A dynamic NFT might expose a new image each time it’s viewed, shared, or sold. Might a dynamic element make a digital collectible more of a digital asset—something to be watched instead of collected?
Passports, ID cards, titles to our car—we all have documents that could be represented digitally. It would be nice if these automatically updated as well. And not just with a new picture each year we age. A dynamic car registration could update each time you pass an inspection, replacing the sticker on the license plate. It might renew when your taxes are paid. When we move, our registration and other documents could update automatically. This type of NFT could save us time and money, and save governments labor if executed well.
Static NFTs can garner attention. If a .jpg costs a ton of money, a lot of people are sure to check it out. But we can incentivize audience building with dynamic assets. NFT smart contracts can be programmed to reveal a new frame of a video or change the image each time an item is shared, forcing virality on a distracted web. For an enterprise looking to create buzz and stickiness in crowded markets, dynamic NFTs give us new ways to create interest.
Everyone loves koozies and it’s great to get new pens (if they’re decent pens). But dynamic NFTs can help us drive better participation at events. Say we distribute 100 NFTs at an event. Each person who gets the NFT is encouraged to tell five more people to visit our booth. We scan the badges of booth visitors and when 500 people visit, an event triggers in the NFT and five holders are randomly selected to get a prize. For the price of five prizes, we’ve used dynamic NFTs to build a scrappy team of brand ambassadors on the ground at a tradeshow, which is a nice ROI.
Tokenizing real world items happens everyday. We can create a digital asset out of almost anything. But an NFT collection is only the beginning. Dynamic NFTs empower us to link our asset to external events or data and trigger happenings to make the NFT more enticing. This has major implications for businesses that want to drive engagement, capture user information, and make assets that are more culturally relevant.
Kaleido is your easy button for developing next era blockchain based business applications.