The Rise of Dynamic NFTs

In the rapidly evolving world of blockchain technology, Non-Fungible Tokens (NFTs) have emerged as a groundbreaking concept. However, as the industry matures, we're witnessing a shift from static, speculative NFTs to dynamic, data-rich tokens that offer real utility. At the forefront of this revolution is Underdog Protocol, a project that recently won the grand prize at the Solana Grizzly Throne hackathon.

Underdog Protocol is reimagining NFTs as dynamic, updateable assets that can serve as powerful tools for businesses, creators, and communities. By leveraging Solana's high-performance blockchain and introducing the concept of "compressed NFTs," Underdog is opening up new possibilities for on-chain data collection, user engagement, and personalized experiences.

What is Underdog Protocol?

Underdog Protocol is an API-first platform that enables businesses, individuals, and organizations to deploy NFTs at scale. The key differentiator of Underdog is its focus on dynamic NFTs, which can be updated and evolve over time based on user interactions or other triggers. This approach transforms NFTs from static collectibles into living, breathing digital assets that can represent a user's journey, achievements, or engagement with a product or community.

Kevin, one of the founders of Underdog, explains the genesis of the project: "Tony and I started more on the consumer side of crypto looking at social tokens and badging and rewarding. We noticed in that space a lot of rebuilding of the wheel, where there are a lot of really important core primitives on Solana, whether that's Metaplex or even at Cardinal Labs and other tools as well. And there wasn't a way to kind of unite and bring together all these different pieces of technology in one suite of tools."

The Power of Dynamic NFTs

Dynamic NFTs represent a significant evolution in the NFT space. Unlike traditional NFTs, which remain unchanged after minting, dynamic NFTs can be updated to reflect new information or achievements. This capability opens up a world of possibilities for businesses and creators looking to engage their audiences in novel ways.

For example, a loyalty program could issue dynamic NFTs that update as customers make purchases or engage with the brand. A gaming platform could use dynamic NFTs to represent characters that level up or acquire new abilities as players progress. Educational institutions could issue certificates as dynamic NFTs that update with new qualifications or achievements over time.

Solana's Technological Edge

Underdog Protocol's choice of Solana as its underlying blockchain is no coincidence. Solana's high throughput and low transaction costs make it an ideal platform for deploying large-scale NFT projects. Moreover, Solana's unique architecture allows for more complex on-chain operations, enabling the creation of truly dynamic and interactive NFTs.

Kevin highlights the importance of Solana's capabilities: "We're using compression as a way to bring data on chain. The idea is there's really important parts to the customer journey that you want to be marked on chain... We just drop compressed NFTs across all of those points."

Compressed NFTs: A Game-Changer

One of the most exciting innovations introduced by Underdog Protocol is the concept of "compressed NFTs." These are lightweight, gas-efficient NFTs that can be minted and updated at a fraction of the cost of traditional NFTs. This opens up new possibilities for mass adoption and data-rich applications.

Tony explains: "The idea of on-chain cookies is we're using compression as a way to bring data on chain. So the idea is there's really important parts to the customer journey that you want to be marked on chain - examples that we've seen are wallet connect, listing an NFT, viewing an NFT, viewing art, swapping, trading, contributing to a pool. Those are actions that live within a database or live on chain but can also be associated like a receipt or have a marker."

Building a Data-Rich Blockchain

One of the core theses behind Underdog Protocol is that the blockchain with the most valuable data will ultimately win. By enabling the creation of compressed NFTs that can act as on-chain "cookies," Underdog is positioning Solana to become a data-rich ecosystem that can rival traditional Web2 platforms in terms of user insights and engagement capabilities.

Kevin elaborates on this vision: "Our long term thesis is that the most data-rich blockchain is the blockchain that wins. And I think soon in web three, we're testing out these mass air drops as a MailChimp alternative, being able to target wallet addresses based on things that they've done on chain and be able to do customer acquisition."

Beyond Speculation: Real-World Use Cases

While many associate NFTs primarily with speculative trading of digital art, Underdog Protocol is focused on creating real-world utility. The team envisions dynamic NFTs being used for everything from loyalty programs to personalized user experiences across various applications.

Tony shares an example: "Solana Mobile is another big one where we're powering their Genesis token integrated directly into the phone. It's soft and we've now done things with Parcel, SolarPlex as well, really focusing on these NFTs that are more dynamic Web2-like experiences directly into the product or workflow of our customers."

The Future of Customer Engagement

One of the most promising applications of dynamic NFTs is in the realm of customer engagement and loyalty programs. Traditional loyalty programs often struggle with user engagement and data silos. Dynamic NFTs offer a solution by creating a portable, updateable record of a user's engagement that can be leveraged across multiple platforms.

Kevin paints a picture of this future: "Imagine the world where after six or 12 months of you using this Saga to catch all its activity, now you have different apps or app recommendations you can download, maybe new apps that you can download, perks and rewards that are there for you to unlock. And I think that's a lot of what is the future of NFTs."

Breaking Down Data Silos

One of the key advantages of blockchain technology is its ability to create interoperable, shared data layers. Underdog Protocol is leveraging this capability to break down the data silos that exist in traditional Web2 applications. By creating a shared on-chain social graph, different applications can leverage the same user data to create more personalized and engaging experiences.

Tony explains: "Drip, dialect, backpack, otter should share a single on-chain social graph to accelerate everyone's growth. And then I think ultimately that's what should be happening is we should be creating these experiences together and sharing this data."

The Challenge of Privacy

While the idea of a shared, on-chain social graph is exciting, it also raises important questions about privacy and data ownership. How can businesses protect sensitive customer information while still leveraging the benefits of blockchain transparency?

Kevin addresses this concern: "I think the ZK stuff is going to be important and that's when it's going to really come into play and it's going to make a lot of this 'why what data can I bring on chain and why do I want to share that' but I do think users ultimately are looking for these experiences and there's not another technology that enables for that to happen then crypto and blockchain."

Competing with Web2 Giants

One of the challenges faced by Web3 applications is competing with the highly optimized, data-rich experiences offered by Web2 giants like TikTok and YouTube. These platforms have perfected the art of user engagement through sophisticated recommendation algorithms and vast amounts of user data.

The team at Underdog believes that by creating a rich, on-chain data layer, Web3 applications can start to compete on a level playing field. By leveraging compressed NFTs as on-chain cookies, applications can build up a detailed understanding of user preferences and behaviors, enabling them to create equally engaging experiences.

The Role of AI in Web3

The conversation also touched on the potential synergies between blockchain technology and artificial intelligence. As AI becomes increasingly sophisticated, having access to rich, on-chain data could enable the creation of highly personalized and context-aware AI assistants.

Kevin speculates: "I think there is a really like hand-in-hand relationship between AI and blockchain that I think blockchain has a really huge opportunity to solve for. I think AI is going to have this tendency to converge towards some element of not necessarily centralization, but I think the winners continuing to be winners. And it goes back to what we were talking about before with who owns the data."

Rethinking Advertising in Web3

While many in the Web3 space are averse to traditional advertising models, the team at Underdog sees an opportunity to reimagine advertising in a way that's more beneficial to users. By leveraging on-chain data and compressed NFTs, businesses could create highly targeted, value-added promotions that users actually want to receive.

Tony explains: "So much of what we do is powered by advertising and Netflix, Hulu, they make more money on their advertising tier than their subscription tier. So there is a lot of value that we're getting for free because of ads. So I think in Web3, having that fear of introducing advertising into the ecosystem is going to be a big mistake because there is a lot of opportunity in introducing it and it won't look like advertising in Web2 eventually."

The Path to Mass Adoption

One of the key challenges facing the Web3 space is achieving mass adoption. The team at Underdog believes that by creating seamless, valuable experiences that leverage blockchain technology without requiring users to understand the underlying complexities, we can bridge the gap between Web2 and Web3.

Kevin shares his vision: "Crypto is if we can get to that point where this database just works, where I'm using this application, these sets of applications on like a Jupiter or a Radium, and then I'm on Magic Eden, and then I open my Saga Genesis, it comes pre-installed with all those as native apps on that phone. And it's an experience that just works. Then consumers at the end of the day don't really care if it's decentralized or not, they just want an experience that just works."

The Importance of Fun

While much of the conversation around blockchain technology focuses on technical capabilities and business use cases, the team at Underdog emphasizes the importance of creating fun, engaging experiences. They argue that for Web3 to truly take off, it needs to offer experiences that are inherently enjoyable and rewarding for users.

Tony explains: "I think the big value prop is fun. Like I'm going back to my rant about creators and how they want to carry content over and build these communities around silos. I think that ultimately is just fun, right? You're trying to create fun between a creator and a fan and multiplying that out."

The Future of NFT Projects

As the NFT space matures, the team at Underdog sees a shift towards smaller, more focused projects that create real value for specific communities or use cases. Rather than aiming for billion-dollar valuations, they envision a landscape of numerous smaller apps that generate revenue by serving niche audiences effectively.

Kevin predicts: "I think we're like a world where smaller apps will win and I've talked about this with Tony is that crypto apps or exits will probably be smaller than what we're used to seeing in Web2 where it's like a billion dollar exit or some massive acquisition like an Activision and Microsoft. And I think Web3 is going to tend towards smaller apps and it's this same trend that I think you'll see we are seeing with ChatGPT where it's really easy to build small apps and small apps that generate revenue."

Challenges and Opportunities

While the vision presented by Underdog Protocol is exciting, it's not without its challenges. The team acknowledges that there's still work to be done in terms of user experience, privacy protections, and creating compelling use cases that can drive adoption.

However, they remain optimistic about the potential of dynamic NFTs and compressed NFTs to revolutionize how we think about digital assets and online interactions. By focusing on creating real value for users and businesses, rather than speculative trading, they believe they can help push the entire Web3 ecosystem towards mainstream adoption.

The Role of Developers

One of the key advantages of Underdog Protocol is its focus on making it easy for developers to create and deploy dynamic NFTs. By providing a simple API and handling complex backend operations, Underdog aims to lower the barrier to entry for creating sophisticated NFT-based applications.

Kevin explains: "What we end up providing for developers is really this like fully integrated indexer of all your NFTs, a minter for the NFTs that you're creating, and then a way to update the metadata on those NFTs as well."

Interoperability and Composability

A key theme throughout the discussion was the importance of interoperability and composability in the Web3 ecosystem. By creating shared data layers and standardized protocols, different applications can build on each other's strengths and create more value for users.

Tony emphasizes this point: "I think that's exactly where we should be and how I think we think about this data is hey, there's a ton of valuable information that everyone is using. How do we put this in a decentralized way, put this somewhere where people can pick and grab?"

The Importance of Context

One of the key advantages of dynamic NFTs and on-chain data is the ability to create context-rich experiences. By having access to a user's entire on-chain history, applications can create highly personalized experiences from the moment a user first interacts with them.

Kevin explains: "Instead of just having to learn about your customer every single time, opening an artifact, I think that was the name of the app, and typing in all your preferences like I like the NBA, I like politics, crypto, it already knows that out of the box, it gives me something that I care about."

The Future of Social Graphs

The team at Underdog sees great potential in creating decentralized, on-chain social graphs. By allowing users to own their social connections and engagement history, and by enabling different applications to tap into this shared data layer, they believe we can create more user-centric and interoperable social experiences.

Tony shares his vision: "Drip, dialect, backpack, otter should share a single on-chain social graph to accelerate everyone's growth. And then I think ultimately that's what should be happening is we should be creating these experiences together and sharing this data."

Rethinking Community Building

While many NFT projects have focused on initial community building through PFP (profile picture) collections, the team at Underdog believes the next phase will be about sustaining and scaling these communities. Dynamic NFTs offer new tools for engaging and rewarding community members based on their ongoing contributions and engagement.

Kevin explains: "PFPs probably won't go away because they go to a really simple use case of community building. And I think community building is great, it's like the first step of the funnel, but there's a lot to it there. And that's where I think a lot of the communities have deteriorated, meaning that they did a great job of building community, but they didn't do a good job of sustaining and scaling community."

The Power of Compressed NFTs

One of the most exciting innovations discussed is the concept of compressed NFTs. These lightweight, gas-efficient tokens enable mass distribution of NFTs at a fraction of the cost of traditional NFTs. This opens up new possibilities for large-scale engagement campaigns, on-chain analytics, and more.

Tony elaborates: "The idea of on-chain cookies is we're using compression as a way to bring data on chain. So the idea is there's really important parts to the customer journey that you want to be marked on chain - examples that we've seen are wallet connect, listing an NFT, viewing an NFT, viewing art, swapping, trading, contributing to a pool."

Bridging Web2 and Web3

A key focus for Underdog Protocol is finding ways to bridge the gap between Web2 and Web3. Rather than trying to replace existing Web2 systems entirely, they're looking for ways to enhance them with blockchain technology and create seamless experiences that combine the best of both worlds.

Kevin explains their approach: "I think right now Web3 is focused on really shoving Web3 in their faces with Web2 and it's like with Nike, Starbucks, a lot of the examples are the same. It's like sell this JPEG for a lot of money. And there's only a very small subset of the population that cares enough or is willing to speculate on random JPEGs. So I think Tony and I think of it as backward the other way, like we need to pull Web2 into Web3."

The Future of Digital Identity

Dynamic NFTs have the potential to play a significant role in the future of digital identity. By creating updateable, on-chain records of a user's interactions, achievements, and credentials, we can create more robust and versatile digital identities that users truly own and control.

This could have far-reaching implications for everything from professional networking to credit scoring to access control for digital and physical spaces.

Rethinking Loyalty Programs

One of the most immediate and practical applications of dynamic NFTs is in reimagining loyalty programs. Traditional loyalty programs often suffer from low engagement and siloed data. Dynamic NFTs offer a way to create more engaging, interoperable loyalty programs that can evolve with the user's journey.

Kevin paints a picture of this future: "Imagine the world with after six or 12 months of you using this Saga to catch all its activity. Now you have different apps or app recommendations you can download, maybe new apps that you can download, perks and rewards that are there for you to unlock."

The Importance of User Experience

Throughout the discussion, the team at Underdog emphasized the importance of creating seamless, intu itive user experiences. They argue that for Web3 technologies to achieve mass adoption, they need to be as easy to use as the best Web2 applications.

Kevin explains: "Crypto is if we can get to that point where this database just works, where I'm using this application these sets of applications on like a Jupiter or a Radium and then I'm on Magic Eden and then I open my Saga Genesis it comes pre-installed with all those as native apps on that phone. And it's an experience that just works then consumers at the end of the day don't really care if it's decentralized or not they just want an experience that just works."

The Role of Fun in Web3

While much of the discussion around Web3 focuses on technical capabilities and business models, the team at Underdog emphasizes the importance of creating fun, engaging experiences. They argue that for Web3 to truly take off, it needs to offer experiences that are inherently enjoyable and rewarding for users.

Tony explains: "I think the big value prop is fun. Like I'm going back to my rant about creators and how they want to carry content over and build these communities around silos. I think that ultimately is just fun, right? You're trying to create fun between a creator and a fan and multiplying that out."

The Future of NFT Projects

As the NFT space matures, the team at Underdog sees a shift towards smaller, more focused projects that create real value for specific communities or use cases. Rather than aiming for billion-dollar valuations, they envision a landscape of numerous smaller apps that generate revenue by serving niche audiences effectively.

Kevin predicts: "I think we're like a world where smaller apps will win and I've talked about this with Tony is that crypto apps or exits will probably be smaller than what we're used to seeing in Web2 where it's like a billion dollar exit or some massive acquisition like an Activision and Microsoft. And I think Web3 is going to tend towards smaller apps and it's this same trend that I think you'll see we are seeing with ChatGPT where it's really easy to build small apps and small apps that generate revenue."

The Potential of On-Chain Analytics

One of the most exciting possibilities opened up by compressed NFTs and on-chain data is the potential for rich, real-time analytics. By capturing user interactions as on-chain events, businesses and creators can gain unprecedented insights into how users are engaging with their products and content.

This could lead to more data-driven decision making and enable the creation of highly personalized experiences that adapt in real-time to user behavior.

The Intersection of AI and Blockchain

The team at Underdog sees significant potential in combining blockchain technology with artificial intelligence. By creating rich, on-chain data sets, we can provide AI models with high-quality, verifiable data to work with. This could lead to more accurate predictions, more personalized recommendations, and new types of AI-powered applications that leverage blockchain data.

Kevin explains: "I think there is a really like hand-in-hand relationship between AI and blockchain that I think blockchain has a really huge opportunity to solve for. I think AI is going to have this tendency to converge towards some element of not necessarily centralization, but I think the winners continuing to be winners. And it goes back to what we were talking about before with who owns the data."

The Future of Digital Advertising

While many in the Web3 space are averse to traditional advertising models, the team at Underdog sees an opportunity to reimagine advertising in a way that's more beneficial to users. By leveraging on-chain data and compressed NFTs, businesses could create highly targeted, value-added promotions that users actually want to receive.

This could lead to a more ethical, user-centric advertising model that respects user privacy while still enabling businesses to reach their target audiences effectively.

Conclusion

The vision presented by Underdog Protocol represents a significant evolution in how we think about NFTs and blockchain technology. By focusing on creating dynamic, data-rich experiences that offer real utility to users and businesses, they're pushing the boundaries of what's possible in the Web3 space.

As we move forward, it's clear that projects like Underdog will play a crucial role in bridging the gap between Web2 and Web3, creating the seamless, engaging experiences that will drive mainstream adoption of blockchain technology. While challenges remain, particularly around privacy and user experience, the potential benefits of this approach are immense.

The future of NFTs is not just about digital art or speculative trading, but about creating rich, interactive digital experiences that enhance our online interactions, protect our digital identities, and give us more control over our data. As this vision becomes reality, we may find ourselves in a digital world that's more user-centric, more interoperable, and ultimately, more fun.

Facts + Figures

• Underdog Protocol won the grand prize at the Solana Grizzly Throne hackathon in April.
• Underdog Protocol is an API that helps businesses, individuals, and organizations deploy NFTs at scale.
• The project emphasizes dynamic NFTs, which can be updated over time.
• Underdog Protocol is built on Solana, leveraging its high performance and low transaction costs.
• The team introduces the concept of "compressed NFTs" as a way to bring more data on-chain efficiently.
• Compressed NFTs can be used as "on-chain cookies" to track user interactions and build rich user profiles.
• Underdog Protocol is powering Solana Mobile's Genesis token, which is integrated directly into the phone.
• The team believes that the blockchain with the most valuable data will ultimately win.
• They envision a future where NFTs are used for everything from loyalty programs to personalized user experiences.
• The project aims to break down data silos by creating a shared, on-chain social graph.
• The team sees potential in combining blockchain technology with artificial intelligence for more personalized experiences.
• They predict a shift towards smaller, more focused NFT projects that create real value for specific communities.
• Underdog Protocol provides developers with an indexer, minter, and metadata updater for NFTs through their API.
• The team emphasizes the importance of creating fun, engaging experiences to drive Web3 adoption.
• They see potential in reimagining digital advertising using on-chain data and compressed NFTs.

Questions Answered

What is Underdog Protocol?

Underdog Protocol is an API-first platform that enables businesses, individuals, and organizations to deploy NFTs at scale. It focuses on dynamic NFTs, which can be updated over time based on user interactions or other triggers. The platform aims to transform NFTs from static collectibles into living, breathing digital assets that can represent a user's journey, achievements, or engagement with a product or community.

What are dynamic NFTs?

Dynamic NFTs are a new type of Non-Fungible Token that can be updated and evolve over time. Unlike traditional NFTs which remain unchanged after minting, dynamic NFTs can reflect new information or achievements. This capability opens up a world of possibilities for businesses and creators looking to engage their audiences in novel ways, such as evolving loyalty programs, leveling up game characters, or updating educational certificates with new qualifications.

What are compressed NFTs?

Compressed NFTs are lightweight, gas-efficient NFTs introduced by Underdog Protocol. They can be minted and updated at a fraction of the cost of traditional NFTs, opening up new possibilities for mass adoption and data-rich applications. Compressed NFTs can be used as "on-chain cookies" to track user interactions across different platforms, building up a rich, on-chain user profile that can be leveraged to create personalized experiences.

How does Underdog Protocol use Solana?

Underdog Protocol is built on Solana, leveraging its high-performance blockchain and low transaction costs. Solana's unique architecture allows for more complex on-chain operations, enabling the creation of truly dynamic and interactive NFTs. The platform uses Solana's native programs like Metaplex and adds its own custom program on top to create a more user-friendly and versatile NFT creation and management system.

What is the future of NFTs according to Underdog Protocol?

The team at Underdog Protocol envisions a future where NFTs are used for much more than digital art or speculative trading. They see NFTs becoming powerful tools for businesses and creators to engage users, track interactions, and create personalized experiences. This includes reimagined loyalty programs, on-chain social graphs, and data-rich applications that can compete with traditional Web2 platforms in terms of user engagement and personalization.

How does Underdog Protocol aim to bridge Web2 and Web3?

Underdog Protocol aims to bridge Web2 and Web3 by creating seamless experiences that combine the best of both worlds. Rather than trying to replace existing Web2 systems entirely, they're looking for ways to enhance them with blockchain technology. This includes bringing valuable Web2 data on-chain, creating interoperable experiences across different platforms, and making it easy for traditional businesses to incorporate Web3 technologies into their existing products and services.

What role does AI play in Underdog Protocol's vision?

The team at Underdog sees significant potential in combining blockchain technology with artificial intelligence. By creating rich, on-chain data sets through compressed NFTs and dynamic NFTs, they aim to provide AI models with high-quality, verifiable data to work with. This could lead to more accurate predictions, more personalized recommendations, and new types of AI-powered applications that leverage blockchain data to create highly contextual and personalized user experiences.