How to create Dynamic NFTs using Chainlink oracles?

One of the latest Internet sensation is NFT trading. If you are looking forward to or are already into NFT trading, you might also be interested in learning how to create NFTs. In this insight article, we will discuss how to create NFTs using Chainlink oracle. Do you know there are 16 ways to create Non-Fungible Tokens (NFT) using Chainlink oracles? And the most worth mentioning fact is that Chainlink oracles facilitate the creation of dynamic NFTs, which are said to be the next level evolution over static NFTs.

This article will cover dynamic NFTS in detail, especially their uses cases and the role of Chainlink oracles. However, for the beginners, there is a brief introduction explaining the concepts of Chainlink oracles and NFTs. If you already have a clear understanding of oracles and NFTs, you can skip the first three sections and straight away dive into reading about dynamic NFTs.

Table of content:

• What are NFTs?
• What is the use of NFTs?
• What are Chainlink oracles?
• What are dynamic NFTs?
• How to create dynamic NFTs using Chainlink oracle?
• Uses cases of dynamic NFTs
• What kind of NFT services are offered by LeewayHertz?

What are NFTs?

NFTs stand for Non-fungible tokens; they are cryptographically secured tokens that exist on Blockchain and represent ownership of something unique. NFTs are popular as digital assets that can be bought and sold in NFT marketplaces. They are not to be confused with cryptocurrencies like Bitcoins and Altcoins.

Though cryptocurrencies are also crypto tokens, but they are fungible, which means they are exchangeable or interchangeable with another of like-kind. For instance, you can exchange one bitcoin for another bitcoin because their worth or value is the same. But 1 NFT doesn’t equal another NFT, and that is why they are non-fungible. You cannot exchange or replace one NFT with another NFT, just the way you cannot swap two diamonds. Every NFT is unique because it is encoded with a unique blockchain-native identification code.

To understand NFTs better, it is important to understand their usage.

What is the use of NFTs?

Around us, there are piles of digital content such as digital artworks, games, videos, Gifs, images, and other kinds of digital design and text content. Now, one issue with digital content is that they are easily replicable, so there is the challenge of authenticating the ownership for digital content.

For instance, if an artist has created a digital art, how would he proof his ownership. Certainly, he can copyright it, but when he sells the art to a buyer and ownership changes, what is the way out to maintain the records for the change-of-ownership. Another challenge is that of artists’ access to the secondary market. When digital assets are sold in the secondary market, what is the way for the artist to earn a royalty for it. NFT, as an indestructible and immutable record of ownership stored in blockchain, is the solution to all these challenges.

Tokenization of assets

NFTs are digital tokens that represent assets, mostly digital assets like digital art, a rare NBA shot clip, an audio file, a video, an article, a popular tweet or a game collectible. Although mostly applied to digital assets, but NFTs can also be used to tokenize physical world assets like property, lands, expensive commodities, etc.  Now, it is important to understand that NFTs are not the assets themselves; they are just the digital records of those assets. NFT as a unit of the record is stored in the Blockchain, whereas the real asset can be anywhere, in a personal computer or a server.

Immutable proof of ownership

NFTs are so valuable because they are the immutable proof of ownership that validates the real owner of an NFT-backed asset. The owner can sell the NFTs in NFT marketplaces and earn profits. It works the same way as Stock markets and cryptocurrency markets. The owner can quote any price for his NFT, but whether he will receive his quoted price or not depends on various factors, like the popularity of the NFT creator. (1 liked) Many NFTs have been sold for whipping values in millions.

Selling of assets

NFTs are the new-found ways for digital artists to sell their artworks directly to buyers through NFT marketplaces without depending on intermediaries. Also, NFTs extend artists’ reach to secondary markets. For every change-of-hand, NFTs can continue to earn royalty for the original NFT creators. Even, game publishers, fashion brands, celebrities, and the real estate industry are using NFTs to tokenize their brand items for selling them out in the NFT marketplaces.

Trading of assets

The market for NFTS has surged to $2.5 billion in first-half of 2021, and with that, the popularity of NFTs as a tradable digital asset has grown exponentially. Not just content creators and brands are interested in creating their NFTs to monetize their digital work, but even investors participate in NFT trading. They buy NFTS, wait for value appreciation and then sell it.

What are Chainlink oracles?

Blockchain technology is unprecedented, but it has one limitation that extends to NFTs also. Blockchain is static, which means it can interact with on-chain data only. Its inability to interface with real-world data systems and sources imposes many limitations on the usability of Blockchain as a solution to real-world problems.

Chainlink decentralized oracle network (DON) plays an important role in resolving this connectivity problem. Chainlink oracles can securely and reliably connect blockchain smart contracts to external data sources and systems. This way, it enables Blockchain to interact with off-chain data in the real world. To understand in detail how Chainlink decentralized oracles integrate with Blockchain, enabling on-chain data to interact with off-chain data, please read about Hybrid Smart Contracts.

What are dynamic NFTs?

Being powered by blockchains, NFTs are static because they are limited to the blockchain world only. But when you build NFTs using Chainlink oracle, it is no more a static NFT. Chainlink-powered NFTs are dynamic as they can connect to off-chain data sources like IoT data, web APIs, and other data providers. With its ability to interface with real world data sources, dynamic NFTs are much more relevant and usable. Also, dynamic NFTS can leverage Chainlink VRF to interface with existing backend systems, access verifiable randomness and even trigger cyber-physical systems.

How to create dynamic NFTs using Chainlink oracle?

1.The first step is to fetch off-chain data through Chainlink oracles in your NFT’s smart contracts. This can be done in three steps:

• Chainlink price feeds: It retrieves the latest prices of assets in your smart contracts.
• Chainlink VRF: It consumes randomness in your smart contracts.
• Chainlink contract library: Here, you can request & receive data from any API

For instance, if you are minting NFTs in Binance Smart Chain, then Chainlink Price Feeds will fetch and aggregate the off-chain data from multiple premium data aggregators and then delivers it onto the BSC network.

2. Once the off-chain data is on-chain, you can query the data feed from your smart contracts, and depending on the values provided by Chainlink oracles, you can modify the NFT assets and proceed with the minting.

3. Once minting is done, you can list the dynamic NFTs in the NFT marketplace platform for selling.

Uses cases of dynamic NFTs

Currently, there are around 16 use cases accessible to developers for creating dynamic NFTs using Chainlink oracle. These NFT use cases can be categorized into the following four categories:

1. Competition Based NFTs

• Game Performance
  NFTs for in-game items are popular. Chainlink oracles can use off-chain data to create NFTs for in-game items. This can settle competition outcomes by rightly transferring NFTs ownership among the players based on their game performance. For example, if a player owns an NFT for a special sword but loses a battle to another player, the NFT will automatically be transferred to the winner, who becomes the new owner of the NFT.

• Verifiable Randomness
  As an input, Chainlink VRF (Verifiable Randomness Function) can apply random traits to an NFT, such as the placement, creation, and distribution of in-game items. The unbiased randomness of dynamic NFTs can determine the rarity and power ranking of each new-minted NFT for in-game items.
• Augmented Reality
  Games like Pokemon GO showcased how digital games can create global competitions in the real world. Chainlink oracles can create a similar experience through NFTs. Using subjective or objective user data, Chainlink enables NFT minting in real-world locations. These NFTs can be placed at random locations or at sponsored locations using Chainlink VRF.
• Real Life Fantasy Sports
  Minted NFTs using Chainlink oracle can represent real-world sports players. This can facilitate fantasy sports competitions, where the value of the NFTs representing specific players will depend on the real-life statistical outputs of the associated player. Simply by sourcing the real-life performance data of the player, Chainlink oracles can determine the value of NFTs and, with all transparency, can decide the winners of the fantasy sports competition and trigger the winning payouts.

2. Reward and Governance Systems

Chainlink Oracle-based dynamic NFTs can be one of the innovative ways to incentivize certain consumer behaviors like on completing specific off-chain objectives, users can gain access to rare NFT tokens. For example, Chainlink can connect the data of the Fitbit band to an NFT smart contract and apply the logic that on completing a certain number of steps, the user will be rewarded with an in-game NFT. The same mechanism can be applied to link various real-world lifestyle data like students’ grades, eating habits and even IoT data to the minting smart contract to determine whether or not the user receives the NFT.

Chainlink oracle NFTs can be used for event-based rewards like if a soccer player scores a hat-trick, five limited-edition NFT tokens will be minted throughout the city, and the finders will be rewarded with a special chance to meet the players. Same way, Chainlink can facilitate NFT based consumer participation rewards, replacing paper or digital coupons. Such a reward system will be highly accurate and automatically trigger fair distribution of rewards.

3. Authenticity Verification

Minting NFTs using Chainlink Oracle can transform how NFTs interface with existing systems. This kind of provision is especially needed for tracking unique real-world assets and incorporating them into the existing supply chain and financial processes. If NFT-enabled blockchain cannot interact with existing infrastructure, then NFTs may exist only as isolated assets with little to no real-world adoption.

But Chainlink oracles NFTs are transformative because they are useful in tracking physical assets, such as luxury items, products in a supply chain, rare artifacts and others. Quality control and counterfeit reduction are two major advantages of tokenizing real-world assets with NFTs, as they can easily verify the provenance of goods by querying the Blockchain.

Chainlink oracles can help with certifications needed for verifying someone’s credentials. It can mint credentials as immutable NFTs on the Blockchain by directly accessing real-world data verified by authority-based approval.

4. Valuation Updates

NFTs are used to tokenize or represent assets, but the value of assets is not static. Thus, dynamic NFTs are needed because they are consistent and accurate in maintaining valuation updates. Using Chainlink oracles gateways, dynamic NFTs can access external data sources and bring reliable valuations to on-chain assets.

Property, Land, physical commodities, all such assets that are tokenized with NFTs, can use Chainlink oracles to relay external data for adjusting the updated rates of the assets on crypto mortgage payments. Also, in scenarios where asset ownership verification is needed, then Chainlink oracle serves as a bridge for external applications to access the smart contract data. Oracles can even be used to provide the GPS location of physical commodities.

What kind of NFT services are offered by LeewayHertz?

As a blockchain development company, we provide services and solutions for smart contract and dApp development, node creation, wallet development, blockchain consultancy, maintenance and upgrade. We take up on-demand projects and also offer quick-to-deploy custom solutions. For NFT, we provide all-comprehensive services, and can help you with the following:

• Designing and developing smart contracts for your NFTs
• Create NFTs for your digital assets
• Launch your own custom NFT marketplace

Launching your own NFT marketplace is another way to capitalize on the rage and popularity of NFTs. With the growing popularity of NFTs, even the demand for NFT marketplaces has surged.

Using our ready-to-deploy NFT marketplace solution, you can promptly launch your own custom NFT marketplace and cut the time-to-market. For facilitating bidding, selling, and trading of NFTs, LeewayHertz’s NFT white-label marketplace solution supports the following features:

• NFT Rankings on an hourly basis
• Search filters
• The listing of tokens as a collection
• Easy browsing by categories
• Unlockable Content
• The option to add a collaborator
• Wallet integration and much more.

Our white label NFT marketplace solution can help blockchain-focused entrepreneurs, art platforms, start-ups, game publishers and other interested businesses create a vested NFT-driven business model.

If you are interested in creating NFTs for your digital assets to retain an immutable record of your ownership or to participate in NFT trading, you can reach out to our team of NFT experts. We also provided other NFT related services like wallet development and smart contract development.