NFTs relate to fine art and crazy stoners shilling silly artworks upon first thought. In reality, though, what we’re seeing is merely the surface. As mentioned in my article on NFT utility and use cases, I speak about the practical application of an NFT beyond the artwork. In this article, I will dive deeper into Utility NFTs. A new form of the token? Or further validation that Web3 is a rising tide taking many things up with it.
Beginning to gain traction and pique the interest of curious technologists. Gaining popularity as companies figure out new types of uses cases. The evolution of the NFT is taking form. Utility NFTs right now are things like domain names and user handles. They’re not just digital collectibles anymore. They’re things that can and should be used regularly.
Are they what’s next for NFTs? I’d argue they’re what’s right now.
Zooming out, an NFT can hold value simply for the sake of art. A collector may not expect anything other than artistic and emotional value. Other times someone may collect something due to specific historical importance. Whereas the desire for “Veblen goods” serves as a way to display status. Scarcity and alternative investment assets are also other drivers.
But one may also buy an NFT for practical purposes.
What is an NFT, FT, and SFT?
An NFT (non-fungible token) is not as easily exchangeable for those unaware. It can’t be easily replaced because it’s typically something unique. In this case, we are dealing with individual digital items with blockchain-managed ownership. An FT (fungible token) is an easily exchangeable item easily replaced by a mutually identical item. Fungibility allows for exchanging or replacing a token for other types, resulting in no value change. An SFT (semi-fungible token) contains fungible and non-fungible tokens; SFTs can be traded for other identical SFTs.
What are Utility NFTs?
Utility NFTs are NFTs that carry underlying utility or application. It is a container that holds unique data that allows businesses to transact outside of the transference of digital artworks and collectibles. Utility NFTs are essentially interactive experiences spanning a variety of mediums and media. They are also a technology applicable in enterprise corporations or for pure entertainment.
Utility NFTs enable much more engaging user experiences. They provide companies with vehicles to test new ways of doing business.
Proof of ownership on the Blockchain alone isn’t enough to satisfy the growing needs everywhere. Utility represents how an NFT can be used and what you can actually do with it.
We can create memorable experiences that span both physical and digital realms. For example, I learned of an instance where a studio created an interactive, immersive puzzle that, once completed, allowed for the participant to apply for a career opportunity at a notable institution. With Utility NFTs, the experiences get increasingly more elaborate and varied.
It depends on how the technology gets applied and how the holder values it. The intrinsic value of NFTs are usually based on the following:
Value = Utility + Reputation + Future Value + Liquidity.
Where utility value depends on how the NFT is used. And overall value depends on the issuer’s reputation, scarcity, and speculation. Liquidity represents how easy it is to buy and sell NFTs. However, when you remove art from the context, you can start to look at how Utility NFTs can push this space forward. Applying the technology in other ways and in conjunction with dApps and Web3, we can begin to see the possibilities unfold.
Outside the crypto/NFT community, NFTs are still looking for product-market fit.Source: https://medium.com/liquiditeam/unfts-more-utility-and-ux-for-nfts-5bf71eaf7a2f
Types of Utility NFTs and use cases
What are the types of Utility NFTs? There are quite a few. Some of the more common ones are related to Defi (decentralized finance), where you can stake to a protocol earning a yield. Others are heavily tied to games associated with buying and selling in-economy assets. Games like NiftyVille are creating real-world redeemable equivalents. Personalization is even an approach as people buy digital counterparts of fashion items to dress their avatars.
Utility NFTs and utility grants access to music, websites, in-game experiences, newsletters, media, and real-life events. We’re seeing creators leverage their IP and create all sorts of items. No-code and low-code creator solutions are coming to market. Large companies are making NFTs and linked metaverse experiences. Streetwear brands mix utility to develop experiences and animated stories. Non-intrusive monetization solutions for games and digital spaces that put player experience first.
Utility NFTs are being used online and offline and are literally at the beginning of their existence. They are directly limited by our abilities and imaginations plus acceptance of changing methods.
Examples of utility use cases:
Utility NFTs and utility can come in various shapes and sizes. Here are some examples:
- Bored Ape Yacht Club is a popular NFT collection. Their utilities offer lifetime membership to the community, exclusive games, digital merch, and VIP parties.
- VeeFriends NFT gives users an NFT when they buy books. NFTs holders access real-world lectures, events, and even a members-only restaurant.
- Ghetto Sharkhood focuses on real-world utilities. Games mirror the real world and support real-world initiatives plus NFT holders to create a self-sustaining social program.
- Tarantino NFT holders gain access to bonus content, including original, handwritten script pages, new commentary, and details about uncut scenes.
- King of Leon NFT special perks include limited-edition vinyl, digital download of the music, enhanced media cover, and fans will get the chance to auction six golden tickets, including front-row seats for life.
- The Last Raptor uses NFTs to gain awareness for an NFT portfolio tool. Users are encouraged to stake their coins to earn long-term benefits based on roadmap completion and building of a DAO.
Examples of Utility NFTs:
There are quite a few ways that Utility NFTs can be applied in a business context. Here’s a shortlist showcasing a few examples:
Utility NFTs can build long-term value by changing how we move value across the global economy. The internet revolutionized how we transfer information. For NFTs and crypto to go mainstream, barriers to entry must come down. Ecosystems created on value must arise. We need to move away from capital being required to be part of this revolution.
There are all sorts of things one can do. I find the social aspects of NFTs to be exciting. Most meaningful social interactions require identity. Identity is built from actions taken by an individual. Social networks aren’t made just on cash; they’re built on mutual interests, shared intelligence, goals and desires, belief systems, and values.