The NFT market is shifting beyond static PFP (profile picture) art and collectibles. Today, more innovative use cases like phygital (physical and digital) collectibles and utility-driven NFTs are taking the spotlight. Among these innovations, dynamic NFTs (dNFTs) are emerging as a significant evolution, offering new ways for digital ownership to become interactive and responsive to real-world events.
This blog'll explore what dynamic NFTs are, how they work, and the potential use cases they unlock for developers and brands.

What Is a Dynamic NFT (dNFT)?
Dynamic NFTs (dNFTs) are programmable digital assets that can evolve and adapt based on external events or user interactions. Unlike traditional NFTs, which remain static once minted, dNFTs possess interactive metadata that can change over time.
This is made possible through smart contracts, which allow the NFT's metadata to be updated dynamically, triggered by various inputs, such as real-world data or user actions.
For example, a dynamic NFT could change its appearance based on a user's gaming achievements or real-time market conditions. This creates an ongoing interaction, giving NFTs a new layer of utility and relevance.
How Do Dynamic NFTs Work?
Dynamic NFTs utilize three key components to bring their interactive nature to life: token standards, smart contracts, and oracles.
Token Standard: Dynamic NFTs often use the ERC-1155 token standard, which allows the creation of both fungible and non-fungible tokens within the same contract. This is different from traditional NFTs, which typically rely on the ERC-721 standard. ERC-1155 offers more flexibility, enabling developers to update the token's metadata and handle multiple token types — including fungible (like in-game currencies), non-fungible (like character skins), and semi-fungible assets (like weapons that evolve over time).
Smart Contracts: Smart contracts power dynamic NFTs, managing various token types and triggering changes based on pre-defined conditions. These contracts can also manage ownership rights, royalty distributions, and other interactions. For example, a smart contract could be programmed to update an NFT's metadata as a player reaches new milestones in a game or as real-world events unfold.
Oracles: Oracles act as bridges between off-chain and on-chain data, enabling dynamic NFTs to react to real-world events. Oracles fetch real-time data, verify it, and transmit the information to the blockchain, allowing the NFT to update its metadata accordingly. For instance, an NFT tied to real estate could update its metadata to reflect changes in property value.
Use Cases of Dynamic NFTs
Dynamic NFTs open up new opportunities for industries and applications by introducing interactivity and adaptability that traditional NFTs lack. Here are five potential use cases:
Loyalty Programs: dNFTs can evolve loyalty programs as customers engage with a brand. These NFTs can change appearance or unlock new rewards based on the user's purchase history or referrals, adding gamification to the customer experience. Brands can also gain insights into customer behavior through interaction data.
Gaming: In the gaming world, dNFTs can represent characters, weapons, or badges that evolve based on the player's actions or achievements. These dynamic assets can also be traded or sold in secondary markets, giving players full ownership and opening up new revenue streams for game developers through royalties.
Digital Identity: dNFTs can serve as dynamic digital identities, representing a person's credentials, social profiles, and event history. These NFTs evolve over time and can be used for authentication or verification purposes in digital ecosystems.
Tokenization of Real-World Assets (RWAs): Dynamic NFTs can enhance the tokenization of RWAs like real estate. For instance, an NFT linked to a property could update its metadata to reflect changes in market value, renovations, or ownership status, making it a powerful tool for transparency and trust in asset management.
Open-Source Development: dNFTs can incentivize contributors to open-source projects by rewarding them with tokens that evolve based on their participation. These NFTs could also represent voting power in the project's future development, creating a decentralized, collaborative environment.

How to Create a Dynamic NFT
Creating a dynamic NFT typically involves a few steps:
Write the Smart Contract: Developers write a smart contract using Solidity (Ethereum's programming language), adhering to the ERC-1155 standard. The business logic embedded in the contract defines how the NFT will interact with on-chain and off-chain data.
Test the Contract: Before deploying, it's essential to test the smart contract on a testnet to ensure it functions as expected.
Deploy the Contract: Once tested, the contract is deployed on the Ethereum network, incurring gas fees. Alternatively, developers can use pre-built smart contract templates for faster deployment.
Mint the Tokens: After deployment, tokens can be minted by interacting with the smart contract, specifying the metadata and supply for the tokens.
Final Thoughts: Is the Future of NFTs Dynamic?
Dynamic NFTs represent a significant leap forward, offering enhanced functionality and interactivity that static NFTs lack. With the ability to adapt to real-world data and user interactions, dNFTs have the potential to revolutionize sectors like gaming, digital identity, and loyalty programs.
Dynamic NFTs offer developers and brands a versatile tool for creating more engaging, valuable user experiences. As the technology continues to evolve, dNFTs could become the future of NFTs, unlocking new possibilities for digital assets across various industries.
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