NFT Utility - What Are NFTs Good For?
When the technology behind NFTs (non-fungible tokens) was first introduced, art NFTs began selling for exorbitant prices.
The problem is that having JPEGs selling for millions of dollars isn’t sustainable. We’ve begun to see this with the price of many NFTs crashing.
Thankfully, NFTs have evolved a lot since their early days, and the amount of real-world NFT utility only continues to grow. Today, NFTs can be used to grant access to exclusive communities, allow artists to publish music, and everything in between.
Actual use cases for NFT technology are exactly what’s needed to transform NFTs from simply speculative investments into useful pieces of technology.
In this article, we’ll explain what NFT utility is, why it’s important, how it works, and some real examples of NFT utility.
What is NFT utility?
Many people still think of NFTs as nothing more than cartoon pictures of monkeys.
The truth is that NFTs are more than just profile pictures or online collectibles. Many NFTs have real utility. They grant those that hold them special privileges and access. Plus many other great benefits.
We’d define a utility NFT as one that has a practical application use case. Or at least some form of extra value besides just owning the NFT itself.
It’s also important to note that while the NFT is non-fungible, the rights or privileges they provide don’t need to be one-of-a-kind.
As an example, think about when you take a number in line at a deli. Every piece of paper has a unique number, making it non-fungible. But each ticket is redeemable for the same thing. In this example, it’s a spot at the counter to place your order. The ticket’s utility is providing you with a spot in line.
The difference is that NFTs provide their utility through blockchain technology. While a piece of paper at the deli would be fairly easy to forge, the blockchain uses decentralized cryptographic technology that is nearly impossible to hack or forge.
This secure nature of NFTs is where most of their value comes from. And the number of applications for them is growing by the day.
NFT utility is going to have to become the exception rather than the rule of NFT projects that want to appeal to a more mainstream audience.
People will soon come to expect a selection of extra perks to come with owning an NFT. Scarcity alone might not be a unique selling point for NFTs for much longer, especially when the market is saturated with tons of NFTs that no one is buying, and the barrier to entry is only becoming lower.
To stand out, NFTs are going to need to offer real value and utility.
Why is NFT utility important?
NFTs have seen a huge rise in popularity over the past few years. The monthly trading volume of NFTs has gone from $12 million in December 2020 to over $12 billion in April 2022.
For that to be sustainable and not simply a bubble, NFTs are going to need real utility.
Simply being profile pictures or a vehicle for financial speculation is not going to be enough for NFTs to thrive long-term. The days of NFTs being popular simply for the sake of popularity or because celebrities own them may soon be over.
Luckily, more and more NFT projects are evolving and adapting by offering more utility.
How does NFT utility work?
On the surface, utility NFTs work in pretty much the same way as any other NFT.
They’re uniquely-identifiable digital assets that are stored on the blockchain. An NFT makes proof of ownership easier. After all, it’s kept in only one digital wallet and no one else’s.
The actual NFT utility isn’t stored in the NFT itself. The NFT is just a unique identifier, like a phone number or credit card number, only more secure.
Once you’ve got this identifier, the applications are nearly limitless.
To grant access or give special privileges to the holder of a particular NFT, that NFT’s unique identifier just needs to be added to a whitelist.
Then your NFT acts kind of like a membership card, granting you access to various additional types of utility.
The great news is that this also means that any NFT can add additional NFT utility at a later point in time. It doesn’t need to be programmed into the NFT when it’s first minted.
For example, Bored Ape Yacht Club NFTs started off as nothing more than a series of pictures. But now, those same NFTs provide their owners with access to exclusive rewards and events.
Applications and examples of NFT utility
Although NFT utility is still in its infancy, there's already a wide range of applications for the technology in use. Over time, we’ll likely see even more NFT utility emerge, but here are some examples that are already in practice today.
Gaming
One of the most popular applications of NFT utility so far is in the gaming industry.
Some of the top game NFTs include Axie Infinity, Cryptokitties, and Splinterlands.
Axie Infinity even has its own currency, which is currently in the top 50 of all cryptocurrencies, with a market cap of over $1.2 billion.
Most gaming NFTs represent characters or creatures that are used to battle within their respective games. But some NFTs represent outfits and other cosmetic items for your characters.
Fashion and luxury goods
Brands like Gucci, Louis Vuitton, and Dolce & Gabbana are getting involved with the world of NFTs and digital fashion.
For example, Dolce & Gabbana recently sold nine NFTs for a total of 1885.719 ETH (about $6 million at the time.) The NFTs came with corresponding one-of-a-kind physical clothing items.
It’s expected that NFTs will be widely used to prevent counterfeiting of luxury goods in the future as well. This will help prevent people from getting scammed with fake merchandise.
Sports and gambling
The biggest sports NFT collection right now is undoubtedly NBA Top Shot. This NFT collection is officially licensed by the NBA and allows you to trade and collect them in a similar manner to traditional sports trading cards.
Other NFT utility in this area includes Coinleague, which holds fantasy sports leagues that NFT holders get a revenue share from. There’s also Autograph, which grants NFT holders fan meetups and other exclusive offers from their favorite sports stars.
Websites
Believe it or not, you can now even create websites that run on blockchain technology. Unstoppable Domains sells decentralized NFT domains where you can build your own web 3.0 domain.
Alternatively, you can use your NFT domain as a human-readable payment address for crypto wallets or a universal username across various apps and websites.
Decentralized finance
Can’t afford an expensive blue-chip NFT yourself? No problem. Fractional.art enables people to own fractional shares of the world's most popular NFTs.
Another decentralized finance (DeFi) example of NFT utility is PWN Finance, which is a platform offering peer-to-peer loans that are backed with NFTs as collateral.
Restaurants and clubs
Flyfishclub is the world’s first members-only dining club, where membership is granted through an NFT.
We could see NFT memberships becoming the norm for golf & country clubs and other exclusive organizations in the near future.
Revenue sharing and royalties
NFTs allow their owners to back companies and projects they believe in.
In return, they may be granted royalties or a revenue share.
For example, Stack Browser’s NFT includes a share of Stack's income on premium memberships.
Other projects allow you to stake or farm your NFT for income.
Virtual land
Along with gaming, virtual worlds in the metaverse are another one of the most widely-publicized forms of NFT utility.
A couple of the largest virtual land NFTs at the moment are The Sandbox and Decentraland.
Even some large companies like Adidas have bought virtual land NFTs to cement their place in the metaverse. Although at this point, it’s hard to say which platform will be the industry leader.
Tickets and event access
We could soon see NFTs replace printed physical tickets for sports, movies, theater, and other events.
So far, only a handful of companies have started using NFTs for their events. But we expect this to be more common in the future.
For example, the Coachella Keys Collection is 10 one-of-a-kind NFTs that grant their holders lifetime access to Coachella music festivals every April.
NFT utility is here to stay
NFT utility will be crucial to the long-term success of NFTs as a technology.
Luckily, many NFT projects seem to be turning away from speculation and quick gains and toward actual use cases that’ll help to ensure NFT longevity.
This will help create a better and more healthy NFT ecosystem for everybody involved.
The amazing part is that we’re still in the early days of NFT technology. We can’t wait to see what applications and NFT utility the future will bring!
If you share Stack’s vision for the future of the internet and want to be part of our journey, please consider supporting Stack by picking up our utility NFT.
Every Stack NFT comes with built-in utility like a lifetime license of Stack PRO and revenue sharing, with even more future utility planned in our roadmap.
