What are Dynamic NFTs? The ‘living’ tokens that change over time

Dynamic NFTs, also known as Living NFTs, use smart contracts to change based on external data sources. Here’s how they work – writes Robert Stevens on Decrypt.

Non-fungible tokens, or NFTs, are unique digital assets that exist as a permanent record on blockchain. But if you thought that meant they were static and unchanging, think again. There is, in fact, a whole genre of living NFTs. Also referred to as dynamic NFTs, these non-fungible tokens can shift and mutate over time, according to programmable features encoded by their developers.

“A living NFT is all about dynamism – as opposed to a normal profile picture (PFP) project such as CryptoPunks, which remains static,” Alexander Guy, Head of Marketing & Growth at Zerion, told Decrypt. “Living NFTs offer exciting ways for holders to link their behavior and actions on-chain – and IRL – with the NFTs they collect.”

So how does a dynamic NFT differ from a regular NFT? In simple terms, a dynamic NFT’s metadata can change based on varying conditions. That can include the passage of time, interactions with other NFTs, or – more commonly – external data, including information drawn from sources that monitor real-world data, like weathervanes or real-time sports scores.

Living NFTs accomplish all of this by using smart contracts to embed these factors within an NFT’s metadata. For instance, the hat sported by a PFP might change depending on the weather in France, or an expression on a sports star’s face might be contingent on the result of their most recent game.

Guy’s employer, DeFi portfolio manager Zerion, has launched its own dynamic NFTs using “Zerion DNA”, which change based on data pulled from on-chain actions in Zerion’s web wallet. “Rarity, then, is a function not of random attributes, but real actions taken by holders,” says Guy.

Although each of Zerion’s living NFTs is rare, the company is just one of many to have launched dynamic NFTs.

NFTs that change

One of the first NFTs to change its state was created by digital artist Mike Winkelmann, aka Beeple.

In late 2020, ahead of the U.S. Presidential election, Beeple created the NFT artwork Crossroad, which changed its appearance based on the outcome of that contest.

If the former president, Donald Trump, pipped Joe Biden at the ballot box, Beeple could flip a switch and have the NFT display an animation of a bloated Trump corpse rotting in a park. And if Trump secured a second term, the NFT would permanently show a clip of Trump running through a hellscape, Godzilla-style.

Of course, Biden beat The Donald, something reflected in the current state of Beeple’s NFT. But Beeple sold his NFT before that happened; his pitch to buyers was that although they had no idea which NFT they would eventually buy, it would codify a piece of history forever more. One buyer was clearly inspired; after Beeple initially sold Crossroad for $66,000, it was subsequently resold for a then-record-breaking $6.6 million.

While it certainly raised eyebrows at the time, Beeple’s living NFT only hinted at the possibilities of NFTs that could change their state. Using programmable smart contracts, developers can program NFTs to autonomously update themselves based on anything they’re competent enough to code.

Growth and evolution

Take Organic Growth: Crystal Reef, a generative art project by Danil Krivoruchko, Michael Joo and Snark.art that comprises 10,301 3D crystals minted in October 2021. Over time, these crystals will become a collective artwork. Eventually, the collective crystals will be turned into a physical sculpture, then carted across the world’s museums and galleries for anyone interested in seeing it.

The idea is that creatives could buy an individual “seed crystal”, which several days later turned into a unique OG:Crystal. This crystal would reflect the owner: the smart contract’s algorithms would generate its contours based on each wallet’s history and ID – CryptoPunk holders, for instance, had a chance of adding a special shape to their crystal.

For three months after the date of the first sale, an algorithm would add new bits to the crystal whenever the crystal after each subsequent sale. Then, the crystal would “lock” its shape so that the artists could add it to the sculpture. Did the crystals prove as lucrative as Beeple’s Crossroad? Not really! The floor price of a crystal, as of July 2022, is just 0.06 ETH (about $100). But art’s not about the money, right?

Social data points

Living NFTs need not live in a vacuum, where the passage of time is the main thing that affects their mutation – they can draw on data from an individual’s real life, too. In 2021, Playground Studio launched a set of collectible NFTs for LaMelo Ball, the 2021 NBA Rookie of the Year.

The NFTs would rack up points according to data about his performance sourced from Chainlink Sports Data Feeds. A holder could choose to harvest ‘Silver Moons’ every time the Charlotte Hornets player assisted the netting of a ball, or ‘Blue Neptune’ whenever LaMelo stole the ball from an opponent. If thresholds are met, an NFT avatar could transform.

This type of approach offers a new way to treat digital collectibles, said Guy. “In the real world, if you collect baseball cards or art, the only way to expand your collection is to buy more. Living NFTs offer the possibility to have a collection that evolves over time.”

Where LaMelo led, the NBA has followed; in 2022, the league launched its own collection of dynamic NFTs, The Association. Each NFT represents a player from one of 16 participating teams. Over the course of the playoffs, the NFT changes its appearance based on the player’s performance, with dunks, blocks, three-pointers, rebounds, or assists causing the player image to change, while the team’s performance affects the NFT’s background and ‘frame.’

Pearpop’s living NFTs, launched in 2022 with backing from Reddit founder Alexis Ohanian and billionaire Mark Cuban, let creators mint NFTs of their social media posts. These NFTs, which live on Solana, are dynamic because they grow in rank if the post goes viral, taking data from web2 metadata, such as comments, shares and likes. Each level, among which are silver, gold and platinum, entitle holders to different benefits, like private Discord channels.

In both instances, what is “living” is not just the NFT itself but the thing from which it draws data, whether that be an NBA star living out his hoop dreams or a blogger’s social media post.

Speaking about the value of living NFTs in relation to communities, Guy said, “Builders and DAOs can leverage this innovation to create gated communities, ultra-exclusive perks and unique gameplay opportunities.”

The future of the living NFT, then, seems inextricably linked to that from which it draws data. Of course, that also creates a potential point of failure, should a living NFT’s datapoint, well… die.