Non-fungible Tokens (NFTs) are often considered to be overpriced JPEGs on the internet. Seen as a picture of a bored ape or some other digital art that can readily be copied, NFTs have been viewed with skepticism by most people. OpenSea, the biggest NFT platform in the world, has over 80 million NFTs listed on its platform. It also has over 1.2 million users and averages 50,000 transactions per day.
In 2020, the global total trading volume of NFTs was about $200 million, according to 101 Blockchains. By the first quarter of 2022, it had grown to over $13 billion. To sustain this huge investment, it is clear that NFTs have to move away from being mere digital art to becoming some reserve of value and offering real-world benefits.
That’s where utility NFTs step in.
An NFT is a token that exists on the blockchain and is used to represent a unique asset. Because it is on a blockchain, verifying authenticity and ownership is possible. In simpler terms, NFTs allow us to tokenize anything, especially valuable items. They provide “digital bragging rights,” as often described, and are valued almost as highly as the items they represent.
Utility NFTs are NFTs that offer real-world applications beyond being mere digital tokens. They provide tangible privileges to their owners in the real world. These privileges can come in many forms, including exclusive rights, claimable rewards, and access to certain events and spaces.
Some industries have adopted utility NFTs more readily than others. Industries with clear cases of utility NFT include:
1.Gaming
Utility NFTs have a high penetration and adoption rate in the gaming industry. Utility NFTs in gaming can represent in-game assets. As gamers progress in games and win in-game collectibles, they can claim them as NFTs. These gaming NFTs can then be swapped for valuable items or money (crypto or fiat). It is common in blockchain play-to-earn games (P2E). In games where more challenging levels unlock unique NFTs, these utility NFTs are verifiable ways to rank gamers globally. Also, gaming NFTs can be used for purchasing in-game tools and financial transactions in the gaming world. Axie Infinity is one of many games that use utility NFTs.
2. Exclusive Event and Community Tickets
Because NFTs are immutable and verifiable, a good real-world utility is in using them to grant access to events. In this case, utility NFTs act as event tickets and community passes. They offer secure and fraud-proof access to communities, events, and hangouts- all in real-time. Social clubs, closed communities, and high-end events have started exploring this use case, and we are likely to see more of this in the near future.
An example that readily comes to mind is the Bored Ape Yacht Club (BAYC). Owners of this particular NFT are confirmed club members, as it acts as a form of membership card. Some of the perks they enjoy include exclusive merchandise, access to private online forums, and member-only special live events. Quite a few celebrities own the BAYC NFTs, including Tom Brady, Justin Bieber, Madonna, Neymar Jr., Memphis Depay, Stephen Curry, and Serena Williams.
3. Governance
Another way utility NFTs can be used is in governance. For example, if people all over the world pool funds together for an investment, because they are all spread across different continents and time zones, governance can be difficult. To improve project governance, each investor can receive a utility NFT based on the value of their contribution. Open-source blockchain technology like Snapshot allows NFT owners to participate in governance, voting, and decision-making. Many charity organizations, even DAOs (Decentralized Autonomous Organizations), are using this already.
In nonprofit organizations, donors with NFTs can be part of a cause — tracking the use of their donor funds and participating in problem-solving. GainForest is one nonprofit organization that is already adopting utility NFTs. Their utility NFTs allow donors to actively influence their projects by choosing what to fund and when to fund it.
4. Customer Loyalty Programs
Yet another way that utility NFTs are providing value is through customer loyalty programs. Artists, brands and celebrities can give those with their utility NFTs continuous benefits and perks. Some of those benefits could be early access to products, limited edition items, or investment opportunities.
This year, Shopify partnered with NFT collection, Doodles, at SXSW 2022 to create a unique experience called Doodleland. The event was for festival attendees and Doodle NFT owners. Although the event was open to all, Doodles NFT holders could unlock all kinds of additional benefits, such as exclusive access to clothing and limited-edition merchandise.
These are just a few of the industries that have embraced and adopted the use of utility NFTs to date. We are likely to see many more of them as blockchain becomes more mainstream and, as usual, we’ll be here to give you a heads-up and insights to help you stay ahead of the curve.
Do you own utility NFTs? Do you think they’ll catch on quickly? Let us know in the comment section below.
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