The trend of non fungible tokens grabbed the attention of the whole tech community in 2021 with a 70 million dollar art auction. Experts are wondering whether utility NFTs can offer the next big leap in advancement of the NFT landscape. The total trading volume of NFTS was $200 million in 2020. As of the first quarter of 2022, the same number has climbed to more than $12 billion.
Quite an exciting improvement, isn’t it? The massive growth in the market value of NFTs has invited many discussions on the possible utilities of NFTs. What are the possible use cases for non fungible tokens now and in the future? The following discussion will help you determine the scope for utility of non fungible tokens along with practical examples.
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What is Utility NFTs?
The domain of NFTs is still in the early stages of exploring any value-based real-world use cases for NFTs. Non-fungible tokens are cryptographically unique and can serve more than just images on a blockchain network. The value of an NFT utility token can transcend the mere boundaries of investment into the transformation of how we work, interact, and play.
The simplest definition for a utility NFT would paint them as non fungible tokens with applications beyond the representation of unique digital assets. One of the significant traits of top utility NFTs would refer to the facility of privileges, rewards, or rights to owners, which they wouldn’t have found generally. Let us assume the following simple example for understanding a utility NFT.
Imagine that you have planned a concert with around 800 available spaces with 800 paper tickets. All the tickets are unique and different from each other in terms of the ticket number. However, every ticket piece serves the same utility, i.e., entry to the event. Now, NFT utility ideas might imply the suggestion for issuing 800 NFTs rather than 800 paper tickets. Each NFT would be unique and offer the same utility of entrance to the event.
Working of Utility NFTs
Any individual interested in utility NFT projects would obviously seek clarity regarding how utility non fungible tokens work. The technical specifications imply that the working of utility NFTs is almost the same as that of regular NFTs. Utility NFTs also features cryptographic security like common NFTs, and they are also unique digital assets on a blockchain. On top of it, immutability and transparency benefits of blockchain technology can help NFT owners in verifying provenance of their NFTs.
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How to Convert Standard NFTs to Utility NFTs?
The most striking highlight in a discussion on utility non-fungible tokens would obviously focus on adding utility to standard NFTs. Many of you must be wondering about how to add utility to an NFT for a specific purpose. Do you have to build a separate NFT with new and advanced technology to ensure desired utility? No. You can add utility to a specific NFT or an NFT collection in many ways.
The approach for introducing utility in non-fungible tokens depends more on reforms in the application of the technology rather than changes in the technology. A simple example of utility tokens from the music industry can help you develop an idea about adding utility to non-fungible tokens. Kings of Leon released their album as an NFT collection in March 2021.
The band also used conventional platforms such as iTunes and Spotify while offering different utility NFT variants in the album. The album included an NFT featuring digital artwork and a digital music download option, which owners can redeem for a limited edition vinyl copy. Another NFT variant in the album release also facilitated top seats at Kings of Leon concerts and shows. Interestingly, the NFT music album release fetched around $2 million in sales.
The example of adding NFTs with a new approach in a music album reinvented the way buyers discovered utility with non-fungible tokens. You can notice how utility NFTs helped in offering more than just a music album to the buyers. Music enthusiasts, the target audience of such utility non-fungible tokens, can redeem the NFTs for real-life vinyl record copies of the album. In addition, the music utility NFT owners can also get exclusive rewards like best seats at shows of the band. The example of Kings of Leon music album release as a series of NFTs presents a solid case for utility non-fungible tokens.
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Special Highlight of Utility NFTs
The discussion on future of NFT turns towards the evolution of utility in non-fungible tokens. On the other hand, it is important to note that the advocacy for utility is not explicit. As a matter of fact, many players in the domain of popular culture and business have capitalized on the utility aspect of NFTs.
The striking aspect of the evolution of utility NFT projects refers to the fact that many NFTs have developed utility long after they were launched. The Bored Ape Yacht Club NFT collection is the best example of an NFT collection launched without any specific utility. Over the course of time, BAYC NFTs have served many use cases such as rewards of ability for minting new NFTs or offering passes and tickets to exclusive events.
The important highlight of utility NFTs focuses on the fact that the use of non-fungible tokens extends beyond the scope of visual art. If you look at the future, you cannot expect NFTs to still serve as a tool for flexing your cool NFT collection. Even if NFTs are in the initial stages, the possibilities for adding utility to them in different sectors have become clearly evident.
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Applications of Utility NFTs
The uses of utility tokens also account for a significant share in determining the future of utility in non-fungible tokens. Here are some of the notable sectors which are gradually opening up to the prospects of adding utility in non-fungible tokens.
The foremost contender for understanding how to add utility to an NFT is the gaming sector; whether it is the metaverse or play-to-earn games, the applications of NFT blend effortlessly with the domain of gaming. Gaming NFTs such as play-to-earn game NFTs showcase a new approach to exercising ownership over in-game assets and collectibles. One of the best examples of gaming NFTs is evident in the Axie Infinity game.
Virtual Real Estate
The growth of virtual worlds has also propelled the demand for virtual real estate. Many popular metaverse projects such as Sandbox and Decentraland have introduced the concept of virtual real estate with varying use cases. Virtual real estate is one of the popular NFT utility ideas as it can support many use cases such as advertising and hosting new experiences in virtual worlds. NFT applications can also work in actual real estate for representation of physical properties with the land deed data.
The applications of utility in the future of NFT would also help in guaranteeing secure access to exclusive communities and social spaces. A new breed of NFT utility tokens, known as access NFTs, could offer real-time access to communities and content in the virtual and physical worlds. The Bored Ape Yacht Club is one of the best examples of an NFT collection with a utility token. The utility token offers exclusive membership to a special yacht club.
What can users get for their utility tokens in the special yacht club? The membership of the club can grant you access to some exclusive spaces within the Bored Ape Yacht Club community. For example, you can access the Mutant Apes Yacht Club for alternative and quirky versions of their Bored Apes. Other perks of the membership include access to collaborative art space and a Bored Ape Kennel Club to fetch pets for your Bored Apes.
The evolution of the metaverse and web3 technologies would also drive the move towards digital fashion. How can an NFT utility token work in the fashion industry? Improvements in the NFT utility prospects could help in conducting virtual fashion shows alongside exclusive shopping experiences. Virtual fashion for avatars in games is only the beginning of the utility for non-fungible tokens in the fashion industry.
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Examples of Utility NFTs
The scope for introducing utility NFTs across different sectors is not limited to a few selected industries. As the market for NFTs matures, businesses can come up with new ways to leverage them in various use cases. At the same time, it is also important to note whether there are any utility NFT projects working now. Is utility NFT a myth? The following examples present a suitable answer to the question.
Crypto Baristas is a collection of NFTs which is all about the “complete caffeine experience” for all owners. The Crypto Barista NFT holders could receive discounts at online stores or future café locations as well as on merchandise.
The VeeFriends NFT collection has been launched by Gary Vaynerchuk. The utility of the NFT collection is that holders can use them as tickets for the VeeCon conference. In addition, VeeFriends also includes collectibles with different advantages, such as mentoring sessions from Gary.
The next interesting entry among utility NFT projects would refer to GainForest. It is an international non-profit based in Switzerland, focused on using blockchain technology for safeguarding rainforests. People donating to GainForest can receive NFTs representing the actual forest locations. The NFTs could help the owners in tracking the health of the forest and minting governance tokens.
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The development of utility NFTs is still in the nascent stages and would take a lot of time to shape up as a major force of change. The concept of utility in non-fungible tokens showcases proof of the fact that NFTs are more than visual art and collectibles. On top of it, the principles for adding utility to an NFT focus on changing the approaches for using non-fungible tokens rather than modifications in the technology itself.
The prospects for utility would become more prominent in the future of NFT as utility non-fungible tokens discover multiple use cases. For example, NFTs can replace season tickets, health insurance cards, and loyalty cards. Businesses can use NFTs for advertising purposes by offering discounts to owners. Similarly, many other industries can explore innovative utilities with NFTs.
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*Disclaimer: The article should not be taken as, and is not intended to provide any investment advice. Claims made in this article do not constitute investment advice and should not be taken as such. 101 Blockchains shall not be responsible for any loss sustained by any person who relies on this article. Do your own research!