NFTs or Non-Fungible Tokens are the new kids on the blockchain. An NFT, as opposed to a Fungible Token, is a unique asset you can’t exchange or trade for another asset. In other words, NFTs are unique, and each one is one-of-a-kind.
One of the main reasons NFTs are becoming more popular is that they offer greater flexibility and utility than other digital assets. You can use NFTs for everything from digital art to land titles to digital pets. What’s more, the NFT market is expected to reach $7.63 billion by 2028.
In today’s article, we will explain what NFT utility is and how different brands implement NFTs into their business strategy. So, let’s begin.
What is an NFT?
NFTs, or Non-Fungible Tokens, are unique digital assets, and each of them has a different value. Hence they are not interchangeable. NFTs, cryptographic tokens, are encoded using the same technology as many cryptocurrencies. They represent ownership of items in the digital world, like music, digital artwork, virtual assets in video games, or other digital collectibles.
NFT stats in 2022
To give you a complete picture of the NFT market, let’s look at some stats:
- NFT market generated a total of $22 billion in sales in 2021
- In the third quarter of 2021, NFT trading volume added up to nearly $11 billion
- NFT sales amount to millions per week
- 250,000 people trade NFTs every month on OpenSea
- The most expensive NFT, The Merge by Pak, sold for $92 million
- The most expensive NFT meme is sold for $4 million
Image source: influencermarketinghub.com
- 23% of millennials in the US collect NFTs
- Men are three times more likely than women to be collectors of NFTs.
- As Google searches reveal, people from China and Singapore are the most interested in NFTs.
There has been much discussion about NFTs and cryptocurrencies in the crypto space. But what is the difference between them?
How NFT differs from cryptocurrency
NFT stands for non-fungible tokens, while cryptocurrencies are fungible, just like physical money. It means one dollar has the same value as another dollar, and you can exchange them for one another. One Bitcoin is the same as another Bitcoin, and its fungibility enables transactions in the blockchain.
What does it mean that NFTs are non-fungible? Each has a digital signature that authenticates the item’s originality and is proof of ownership. The digital sign makes NFT unexchangable for one another since they are of different value.
But apart from NFTs like digital artwork, music, or memes, there are also utility-driven NFTs. What are they? Let’s explain.
What is NFT utility?
Utility NFTs, rather than being attractive, bring real-world value to the owner. The creator of NFT utility provides consumers with special perks such as memberships, service access, access to real-world events, digital assets, or physical goods. Different NFT projects bring additional value to their owners’ everyday lives.
Why is NFT utility the next big thing?
New tokenization technologies can present any asset as a digital token on a blockchain. These new tokens can be used to create decentralized marketplaces for trading goods, services, and digital assets.
The concept of a decentralized, trustless marketplace has the potential to disrupt many industries and create new markets in previously unserved areas. One of these areas is digital art.
Unlike physical art, which can only be bought and sold by approved parties, anyone with an internet connection can buy and sell NFTs. That way, digital artists can sell their work directly to consumers without going through galleries or other mediators.
NFTs will disrupt multiple industries in the coming years and soon become a significant part of the digital landscape.
NFT utility will have a massive impact on how we trade, buy and sell objects both online and offline. Their introduction alongside blockchain technology will revolutionize the digital world we live in.
Who are NFT creators
NFT creators are the people who create non-fungible tokens. They are an essential part of the ecosystem and work to develop and distribute NFTs on the blockchain. They are responsible for designing and coding these tokens and ensuring they are safe and secure for users to use.
Some of them include game developers, artists, and virtual item creators. These people all have a unique perspective on the world, which is reflected in their work. They are also experts in their industry with valuable knowledge and skills.
By creating NFTs, NFT creators can share their vision with the world. In addition, they can make a profit from their work. It is especially true for those creating digital assets that can be bought and sold on an exchange.
Some popular NFC creators include:
Image source: influencermarketinghub.com
Mike Winklemann, also known as Beeple, sold his NFT collage for $69 million. In 13 years, he created 5,000 digital images and posted them online for a year. The collage is entitled Everydays: the first 5000 days and is made up of engaging, provoking, and irritating images that often depict real-life events and inspire reflection.
2. Justin Blau
Image source: rewiewjournal.com
Justin Blau is a DJ and music producer from Vegas. He offered his song Waveform as an NFT on auction at Christie’s, the renowned auction house, at the beginning of 2021. The bidding lasted three days and brought him $ 11 million.
3. All Seeing Seneca
Image source: vulcanpost.com
All Seeing Seneca, a graduate of the Rhode Island School of Design, is a famous artist who created an NFT collection of cartoon ape-related animal characters called Bored Ape Yacht Club. Sales of the NFT cartoon ape profile pictures have reached over $1 billion. Apart from intellectual property rights for the illustration, each holder of an individual ape gets access to exclusive events and a private online club.
Who are NFT holders?
Many celebrities invest in NFT projects. Examples of NFT holders from the celebrity world include:
- Paris Hilton – calls NFTs the future of the economy. Paris owns a collection of digital works from various artists. In 2021 she received an award for her charity NFT.
- Jimmy Fallon, the talk show host, owns Bored Ape #599.
- Gary Vaynerchuk, the chairman of VaynerX, owns Bored Ape #1452, #7912, and #8106.
Since 2021 NFTs have gained popularity with the masses. More and more people are interested in buying or creating their own NFTs. In addition to that, various businesses are becoming open to applying different utility NFT types in their strategy.
Let’s look at different types of utility-driven NFTs.
Utility NFT types
The list is by no means comprehensive. We will only mention a few utility NFT types to give you a general overview of different NFT utility ideas.
1. Access NFTs
The holder of an NFT may use it as a pass to access an event, just like he would use a ticket. Thanks to blockchain technology, it is easy to verify ownership of a token. Access NFTs offer their owners access to experiences, goods, or communities in the digital or real world. It might include exclusive channel access on Discord, access to songs not included on an official album, podcasts with limited availability, and other special perks.
2. Redeemable NFTs
Another form of NFT utility is redeemability. The idea behind a redeemable NFT is that its holder can exchange it for a digital or physical asset, like exclusive merchandise. For instance, a leading creator of virtual sneakers and collectibles, brand RTFKT, developed a collection of digital sneakers in collaboration with Fewocious, a crypto artist. In their NFT project, bearers of specific NFTs could redeem a pair of physical shoes. Each of the three utility NFTs corresponded to a different pair of physical sneakers.
3. Royalty NFTs
NFTs can be sold on a secondary market. Each time an NFT is resold to a new collector, its creator may receive dividends. Various NFT platforms give the creators a certain percentage of the total sale price in the form of cryptocurrency tokens, providing them passive income.
4. NFT voting rights
Certain NFT holders get the privilege of voting to decide an aspect of a decentralized autonomous organization. For instance, one NFT may represent the right to give one vote.
Now that you know how to add utility to NFTs, you probably wonder how much you could earn from them.
What’s the value of a utility NFT?
It’s hard to determine the average price of NFTs. Most marketplaces use one large sale to calculate averages, which can be misleading. We can tell for sure that over 50% of all NFT sales are below $200. Collectibles have reached prices between a few dollars to over $100k.
Key benefits of utility NFTs
Why did the popularity of utility NFTs grow so much in the previous year? Reasons are many, including:
- Safe technology – The blockchain technology that stands behind the NFts ensures a lot of safety. It is impossible to alter, hack, or delete information recorded in the blockchain. Thus we can say that blockchains preserve the authenticity and rarity of NFTs.
- Transparency – The NFT market ensures the highest clarity of business activities because of blockchain technology. It makes dishonest practices and corruption impossible.
- Diversification of investment – There are considerable differences between traditional assets like stocks and NFTs. It allows investors to diversify their portfolios.
- Ownership – NFTs provide proof of ownership of a digital good.
Though NFT is an exciting concept, it’s not free from drawbacks. What are the main ones?
Key disadvantages of utility NFTs
- Uncertain value – the prices of NFTs are very volatile, and their value is speculative.
- Environmental concerns – blockchain is a technology that eats up plenty of energy, harming the environment. According to Cambridge University, the increase in blockchain activities and crypto mining has enlarged global warming by 2%. The power consumption of only one cryptocurrency, Ethereum, is comparable to Hungary and Qatar.
- Possibility of fraud – though NFTs are backed by secure technology, there is some space for fraud while producing them. It is possible that someone creates a digital copy of the original work, adds a token to it, and offers it for sale. Many artists have already reported that they discovered their artwork was put up for sale on virtual markets without their knowledge.
Like everything, NFTs have two sides of the coin. But in case you decide to join the hype and enter the blockchain game, we give some tips on how you could do it.
How to use NFT utility for your business
As the popularity of utility NFTs is increasing, you can use the trend to improve the image of your company. The possibilities are endless, so here are just a few NFT utility ideas you could use:
- Turn your graphics, music, or other digital collectibles into NFTs.
- Give NFT holders early access to merchandise sales.
- Make membership NFTs that give holders exclusive access to events or digital assets like music, podcasts, or community.
- Create NFT collectibles. Many celebrities create NFT cards of themselves and put them on sale. But NFT collectibles can relate to anything like logos, fantasy characters, animals, or memes. Just like the creator of Bored Ape Yacht Club, you can link each collectible to some perks.
- Give NFT holders exclusive access to events in the Metaverse.
- Link physical goods to NFTs and use them for supply chain tracking.
- Secure your platform with NFTs.
If you still don’t know what NFT utility ideas to use in your business, look at some brands that mastered the art of creating utility NFTs.
NFT utility ideas to get you inspired
How to connect NFTs with utility? Look how big players on the market do it:
1. Taco Bells
Taco Bells, the fast-food chain, created 25 pieces of NFT art. The collection consisted of five versions of digital Tacos, and five copies of each. The images were related to the Taco Bell menu, and the starting price was $1 for each of them. All the 25 NFTacoBells were sold in under 25 minutes. The highest bid was for the Ever-Crunching Tacos piece – it reached $3,646.
Image source: autos.yahoo.com
In 2021, Coca-Cola released their first-ever NFT collectibles in the form of a “loot box” with four NFTs. The Friendship Box image of a vintage Coca-Cola cooler contained three other NFTs inside:
- The custom-designed Bubble Jacket featuring the Coca-Cola color palette, to be worn in the virtual reality platform Decentraland 3D
- The Sound Visualizer that illustrates sounds of enjoying a Coca-Cola
- The Friendship Card artwork that includes 3D features, motion, and light.
The Coca-Cola NFT collectibles were sold in an online auction for $575,883.61. The winner also received a real-life add-on for the NFTs – a fully stocked Coca-Cola refrigerator.
Image source: coca-colacompany.com
3. Robert Mondavi
Robert Mondavi, the Californian winery, launched a new wine label represented by 1996 NFT bottles. Each of them is a key to redeeming a real-life bottle of wine and is sold for $3,500.
Image source: bloomberg.com
Final words: Is utility NFT right for you?
To wrap things up, NFTs are non-fungible tokens that prove digital asset ownership. Originally, they were used to represent ownership of digital collectibles, but with time, people started to attach utility to NFTs, and utility NFTs attracted the business world’s interest.
Many brands use utility NFTs to engage with their customers, create digital communities, establish new income streams and build customer loyalty.
Should you join the blockchain game and add utility NFT to your business strategy? Well, it’s advisable to carefully weigh all the pros and cons and think about how NFTs could fit your business nature. On the one hand, they can bring a lot of value to your company. On the other, they bring about considerable risk. If you decide to join the blockchain movement, do it responsibly. Don’t invest a lot of money from the very beginning to avoid significant financial loss.
NFT utility FAQ
What are NFT utilities?
NFT utilities are NFTs that provide real-world value to their owners. For example, NFT holders gain access to VIP events, voting power, or special discounts on limited products.
Is NFT a utility token?
NFTs can be utility tokens if they provide some additional perks to digital collectibles. For example, an NFT utility token can grant exclusive membership to an online community.
What is the meaning of the NFT?
NFT stands for Non-Fungible Token. NFTs are digital tokens that cannot be changed one for another since each has a different value. Cryptocurrencies like Bitcoin, on the other hand, are fungible. It means that two owners of bitcoins can exchange them, and they will still have a bitcoin of the same value. An NFT holder has something unique, like the original piece of digital artwork.
How do I send the utility to NFT?
You can add utility to an NFT project in various ways, for instance:
- Apart from the digital version, provide a real-life version of the product. Many businesses in the jewelry and fashion industry use this method. Apart from creating one-of-a-kind digital assets that cannot be copied, they provide a physical counterpart, a unique piece of art.
- Link perks like special event access to NFTs.
- Offer discounts for limited-edition products for NFT bearers.
What are a few examples of utility NFT?
Some well-known examples of utility NFTs include:
- Axie Infinity – a crypto game with millions of community members. Axie Infinity is inspired by the Pokemon series and offers a play-to-earn gaming model. Items in the game are represented by NFTs, which confirm the user’s ownership of the item.
- CloneX – NFT collection of avatar set created by RTFKT and Takashi Murakami. Each avatar includes unique features like eyes, mouths, haircuts, accessories, and clothing styles. The unique properties of avatars are defined on the blockchain, and it is possible to take your CloneX avatar wherever you go.
Why would anyone buy an NFT?
You can compare it to having a piece of physical art. Just like the owner of a physical piece of art can prove they own the original copy, an NFT allows its holder to prove they own the original copy of a digital good. Additionally, NFTs give you the possibility to financially support your favorite artists.