Static vs Dynamic NFTs

Non-fungible tokens continue to see unprecedented growth in the crypto sector. Apart from being used as speculative assets, they have also found many real-life applications. They have found applications in the art and music world, the gaming industry, real estate, and even in the medical sector. Thus, more people are interested in building, minting, or exchanging these assets.

Due to this growing popularity, the world of non-fungible technology continues to experience innovations. One of those innovations is creating an even more unique type of NFT - Dynamic or living NFTs. This article will discuss dynamic NFTs and how they differ from static NFTs. We will also highlight the use cases of both static and dynamic NFTs.

What Makes an NFT Unique?

To understand the difference between static and dynamic NFTs, we must first understand what makes an NFT special. Non-fungible tokens are unique cryptocurrencies that cannot be interchanged with another. This non-fungibility comes about as a result of a metadata string attached to the NFT. This metadata, like DNA, contains all the information that makes the NFT unique. Thus, each NFT differs from another and is thus not exchangeable, even with other NFTs from the same set.

Take the Bored Ape Yacht Club (BAYC) NFTs, for example. There were 10,000 BAYC NFTs minted at creation. However, no two BAYCs are equal in value, structure, and function. Unlike BTC, ETH, and other fungible crypto assets, 1 BAYC NFT ≠ 1 BAYC NFT.

The picture below illustrates this point. Even though all eight NFTs displayed come from the same BAYC set, each has a different price and structure.

Image Source: OpenSea

How Do Static NFTs Work?

Most static NFTs are created with the ERC-721 token standard. This is the first and most widely-used standard for non-fungible tokens. Similar token standards exist on other smart contract platforms, like BNB chain, Tron, and Solana.

A static NFT’s metadata does not change. It remains intact and permanent. If you create one and then need to adjust or update something about it, you must create a new NFT from scratch. Thus, this type of NFT is most useful when you have to tokenize fixed assets on the blockchain.

How Do Dynamic NFTs Work?

Dynamic NFTs (dNFTs or living NFTs) are designed so that their metadata can change over time. These changes do not bring about a new token; they merely change the structure of the existing token. They are most suitable for games, sports, real estate, and other sectors that experience periodic changes.

Unlike static NFTs, dynamic NFTs are issued on the Erc-1155 token standard system (or similar token standards on other blockchains). This token system is an improvement over the Erc-721 system because it allows creators to issue different types of tokens from the same contract address. Thus, changes can be made within a token’s metadata without altering the token’s identity.

How is a dynamic NFT created? The creator starts by creating a base NFT and imprinting the metadata. Then he adds a smart contract programmed to make specific changes when some conditions are met. Lastly, he links the smart contract with an oracle which will inform it when the conditions have been met.

Pros and Cons Of Static NFTs

Pros

• They take up less storage and bandwidth than dynamic NFTs because they only need to be stored once.
• Because they are immutable, they are usually more secure and fraud-resistant than their dynamic counterparts. This is because it is easier to recognize fake static NFTs since they are not supposed to change under any circumstance.
• They are less complicated than dynamic NFTs.

Cons

• They cannot be updated to adapt to current conditions.
• Because of their inflexibility, they may not be compatible with some blockchain platforms. This further limits their real-world use cases.

Pros and Cons of Dynamic NFTs

Pros

• Due to their flexibility, they make it easier for the crypto and blockchain sectors to see real-world applications.
• They provide a more immersive experience for gaming enthusiasts as gamers can more readily see their activities reflected in real-time.
• They provide a better platform for NFT artists to monetize their art and skill by tracking engagements and rewarding loyalty.

Cons

• Because of their complexity, they require more space and computing power than static NFTs.
• They are less fraud-resistant because of their decreased immutability.

Where Can They Be Used?

Both NFT types are useful in their own ways. However, because they are still both NFTs, some of these uses may overlap. Here are some use cases of static NFTs.

Use cases of Static NFTs

Storage of important documents

The fixed nature of static NFTs makes them most suitable for tokenizing important documents and storing them on the blockchain. This especially applies to important documents that will stay the same over time. They could be title deeds, identity documents, business contracts, etc. Once tokenized, these documents become permanently etched on the blockchain, giving more credence to their authenticity.

In some cases, though, static NFTs may not be best to tokenize some digital identity documents. This may come into play when digital identities need to be updated periodically to indicate changes in credentials, accomplishments, or status. In such cases, dynamic NFTs may work better.

Collectibles

Static NFTs can also be used to collect and store digital art. This is the most popular use of ERC-721 NFTs today. Each NFT can be used to tokenize individual works of art on the blockchain. Even though it is more commonly used for digital art, the same principle can also apply to some music and blockchain games. Examples of collectibles in this respect are Cryptokitties, Bored Ape Yacht Club, and CryptoPunks.

Supply chain tracking

Static NFTs can be used to improve the efficiency of supply chain operations by tracking each product in a particular shipment. Unique information about the product may be entered into the NFT’s metadata. Once entered, they cannot be changed. Thus, tracking and managing a company’s inventory would be easier. An example of a company that has already implemented this is Koinearth.

Use cases of Dynamic NFTs

Virtual competitions

Dynamic NFTs can be used to monitor and personalize in-game performances in crypto games. The dynamism makes the games more realistic and adds to the fun of it. For example, if a game involves P2P battles, dynamic NFTs could be introduced to indicate a player’s progress. In a case like that, an in-game item (like a medal or a sword) may be automatically taken from the loser’s NFT avatar and given to the winner. It is easy to see how this can enhance the immersive and competitive quality of blockchain games.

Sports is another area where dynamic NFTs shine. The sporting world is very progressive, therefore, static NFTs cannot keep up. But with dNFTs, it is easier to integrate blockchain technology into the sporting world. An example is the case of the LaMelo Ball NFT collection - a series of eight NFTs that track the professional life of LaMelo Ball, an American basketballer.

Other examples of dynamic NFTs in the sporting world include the NBA Association NFT collection and the OWNIC dynamic NFT drop.

Reward and loyalty-based systems

Artists, companies, and celebrities can employ dynamic NFTs to add some spice to the way they reward the loyalty of their fans and users. For example, social media influencers could create dNFTs that track how much users engage with their content. They could then automatically reward the user interacting most with their content in a set period.

Progressive asset valuation

The value of real-estate properties changes over time. Therefore, dynamic NFTs can provide a medium to track these changes over time and present an accurate valuation to assessors and buyers. This assists them in making better investment decisions. The same principle applies to physical commodities, company stock shares, and crypto loan payments.

Examples of Static NFTs

Doodles

Doodles is an Ethereum-based NFT project that issues 10,000 colorful profile picture avatars. Apart from being desirable to look at, Doodles NFTs also offer some utility perks to holders. Holders can vote on community proposals and participate in website live events and sales. The most expensive Doodle was sold on January 7, 2022, for 296.69 ETH.

Bored Ape Yacht Club (BAYC)

One of the most popular NFT collections, BAYC is a set of 10,000 bored ape-like cartoon characters produced by Yuga Labs. It sits on the Ethereum blockchain and is one of the most expensive NFT collections. The floor price is currently 65.5 ETH, but it has sold for as high as 852 ETH.

CryptoPunks NFT

CryptoPunks is one of the earliest NFT collections. It launched in mid-2017 as a set of 10,000 pixelated avatars. The collection has amassed a total volume of about 1.1 Million ETH on OpenSea alone. Its floor price is currently about 65 ETH, and its most expensive NFT sold for $23.7 Million in February 2022.

Examples of Dynamic NFTs

CrossRoads by Beeple

This NFT was created in 2020 and programmed to reflect the result of the 2020 US presidential elections. It currently displays a giant corpse of Donald Trump with profanities all over. That was because Trump lost the election. If Trump had won, the NFT would have shown Trump charging through fire with a crown on his head.

Clock by Pak

Clock is a dynamic NFT created to display the number of days since Julian Assange, Wikileaks founder, has been imprisoned. It was purchased for $52.7 Million, and the proceeds were used to aid Assange’s legal defense. It displays the number of days Assange has been imprisoned, which is currently more than 1400 days.

Conclusion

Non-fungible tokens, both static and dynamic, have always been hot topics in the crypto world. Their uniqueness allows them to be helpful in various sectors on and off the crypto world. While static NFTs are most suitable for tokenizing fixed assets, dynamic NFTs have grown in popularity due to their versatility and flexibility.

Whichever one you go for, it is essential to note that NFTs are still cryptocurrencies. Therefore, the golden rule of crypto trading and investing still applies - only invest what you can afford to lose.