Mainstream NFT adoption will be mainly driven by their utility
Nonfungible tokens (NFTs) have seen a stratospheric rise in popularity accompanied by skyrocketing values, giving rise to legitimate and ongoing concerns of a market bubble, as many projects lacked real-world applications or tools.
The NFT tool is an important component because it adds value and functionality to the technology. One of the most well-known use cases for NFTs is the ownership of digital artworks such as CryptoPunks. Play-to-earn (P2E) gaming is another use case that saw immense popularity in 2021.
NFTs can assist firms in various sectors with their operations, as at their core they contain proof of ownership and proof of origin. In addition, collections have access to a strong branding strategy that works with their public image due to granting commercial rights to NFT owners for their assets.
However, the market needs additional use cases for NFT technology to reach mainstream adoption, as it adds value and utility to NFTs, helping them stand out among the crowded digital asset projects.
For example, Picture-for-proof (PFP) projects may have driven huge NFT growth in 2021, but much of it was based on speculation by investors trying to make money. Additionally, market leaders like the Bored Ape Yacht Club actually benefit, with each ape giving its owner access to events and copyright licenses to monetize their NFTs. Many copycat projects lacked any utility, other than mimicking popular projects and vaguely promising “future development” for holders.
Furthermore, brands looking to use NFTs need a solid strategy that spans their business model and industry for particular use cases. Unfortunately, many have entered the NFT market without a proper plan or vision, rushing with the hype train or cash. As a result, NFT hype has led to confusion among investors and consumers.
Users will benefit
However, as the market has matured, it seems to be shifting towards a focus on utility, with investors getting smarter and expecting more use cases for their NFTs.
Kameshwaran Elangovan, co-founder and chief operations officer at NFT launchpad GuardianLink, told Cointelegraph:
“People have also grown beyond just thinking about speculative profit. They have started thinking about long-term investments. The growing knowledge and awareness of NFTs has in many beneficial ways helped the market and offerings to shift towards NFTs that have tools rather than those that merely represent a gimmick.”
Ted Mui, CEO of Chibi Clash – a P2E blockchain game – told Cointelegraph, “The market is going to shift towards a focus on utility because people are becoming more careful about how and where they spend their money. That’s why they say that a bear market is for building. People will need more than the promise of good art to convince them and boost their confidence to invest their hard-earned money.” He continued:
“That’s where the tool will come in and also be the reason NFTs are adopted in the wider community. As it stands, owning digital art is still relatively foreign to most people and at most it’s a cool concept. The tool will allow the mainstream to add a more tangible value to owning an NFT – this will ultimately be the catalyst for wider mainstream adoption.”
What are the use cases?
When it comes to real-world tools, digital ticketing is a promising application area for NFTs. NFT tickets are essentially digital assets that store a user’s credentials to grant them entry to an event.
To make the experience of being a fan even more immersive, they can also provide ticket holders with additional benefits, such as access to the backstage area, merchandise and other items. In addition, NFT tickets can potentially reward artists, event organizers and other stakeholders with recurring royalties, helping to establish a stronger connection with fans.
When using NFT tickets, everyone can follow the transactions on a blockchain ledger, which makes it easier to know when and where the ticket was bought and sold. In addition, smart contracts can enable NFT tickets to maintain a fixed price, preventing ticket scalpers from inflating prices on the secondary market. As a result, the NFT ticket market is expected to be worth $68 billion by 2025 and presents a practical application area for NFT technology.
Organizers can set up a rule that will result in royalties being paid if a ticket is transferred to a new owner. This will allow them to decide how royalties are distributed after secondary ticket sales.
Metaverse property has also gained traction as an NFT tool. On a metaverse platform, an area of digital land that users can own is called NFT virtual land. Because each NFT is unique and it is easy to demonstrate digital ownership, they are well suited to represent land ownership. Additionally, people can use NFT land for various purposes, including work, socializing, gaming, and promoting their businesses. The value of a plot of land is determined by factors such as its utility value, rarity, the project it will host and market speculation.
Users can acquire NFT land directly from a project via a land sale or on the secondary market through an NFT exchange such as OpenSea. However, before making a purchase, users should understand the potential risks and benefits of the virtual property and the project to be built on it. Benefits include being able to build on the virtual land and resting places for other users. One of the risks of investing in virtual land is that an investor loses money if the land’s value declines over time.
Putting more focus on utility will lead to several positive changes, one of which is the potential solution to the problem of investors seeking quick liquidity and immediate returns. While cryptocurrencies and NFTs will always appeal to those looking to get rich quick, utility encourages ownership over short-term turnarounds.
