Dynamic NFTs, also known as dNFTs, are 'dynamic' in nature, which means they are influenced by external conditions or whatever is going on in the world.

An NFT is a Non-Fungible Token or a digital token stored on the blockchain. Every NFT is unique and the legitimate owner can be found easily via blockchain. To know how NFTs work read more in detail about “What is an NFT?”

Types of NFTs

Just like we mentioned that NFTs can be almost anything, an image, a video, a sound, a sketch, a painting, basically anything which is unique. They are broadly classified into two types, Static NFTs and Dynamic NFTs.
Let’s have a look at both.

1. Static NFTs

Just like the name, these digital tokens are static in nature. Although ‘still’ in nature these tokens are still non-fungible. Usually static NFTs consist of artworks, photographs, sketches etc. In these NFTs, the metadata cannot be changed but the wallet address can.

In simple terms, if there is a photograph of a sunset at a certain location on your device then that same photograph can be transferred to your friend’s device. The photograph will be the same on all the devices, even if the location ceases to exist even then the photograph will remain the same. It will still show the same sunset happening at the same location without changing even a single bit.

Therefore static NFTs are bound by a fixed smart contract which remains uninfluenced by external conditions or whatever happens in the world. They are simple, fixed and a majority of the NFTs are in fact static in nature, Crypto Punks for example.

Creating a static NFT is simple, all one has to do is choose a blockchain (Ethereum, Polygon, Solana, Avalanche etc.), upload their art, image, music etc. on the marketplace.
Mention the traits, list a price and publish. The NFT will stay on the marketplace till someone purchases it.

2. Dynamic NFTs (dNFTs)

Dynamic NFTs also known as dNFTs are ‘dynamic’ in nature which means they are influenced by external conditions or by whatever is happening in the world concerning them.
Imagine a scorecard of a football match, it has a section of goals scored along with a timer. During the game, the value of time will change and so will the value of the score section if a goal is scored. Hence the scorecard is directly influenced by whatever is happening in the football game i.e. it has a live utility.

Now if this scorecard was owned as an NFT by someone they would hold a token which retains its unique identity but it is able to update aspects of their metadata. This change in metadata happens because of external factors but gets triggered by a smart contract. (Metadata in NFTs is the data describing the NFT, it can include descriptions, traits and the actual content stored on the blockchain.)

Smart Contracts of dNFTs Explained

Smart contracts are codes on a blockchain that run when a set of certain conditions are met. They run on highly mathematical algorithms which change from condition to condition. The terms of the contract are deployed immediately as soon as the preset conditions are met.
Since these smart contracts are digital and automated, they are highly accurate and efficient. Furthermore, being blockchain-based they are decentralised hence the added elements of trust, security and transparency.

A Dynamic NFT is made possible only because of a smart contract. Conditions are inspired externally and put into the contract. Once the conditions are met, a request is made to a smart contract for an NFT token Uniform Resource Identifier (URI). The smart contract receives the request for processing and makes a call for “on chain data” to process the results. The smart contract then calls for “off-chain” data using an Oracle and results are processed further. It then evaluates the on-chain and off-chain data and returns the newly changed NFT to the requestor. It is important to note that either “on chain”, “off-chain” or a combination of both may be used to create a dynamic NFT.