What are Utility NFTs?
While non-fungible tokens (NFTs) are often associated with JPEG images, their real-world use cases continue to grow.
As interest in digital collectibles increased last year, much of the focus was on Profile Picture (PFP) NFTs, or NFTs that can be used as social media avatars. Influenced by Larva Labs’ successful NFT project CryptoPunks, PFP projects quickly dominated Twitter and marketplaces like OpenSea during the peak of the NFT hype. Other types of NFTs, such as generative art, have also increased in popularity in recent months.
Art-focused NFT projects remain popular with collectors, even as many creators add real-world experiences and rewards to their digital collectibles. This concept is referred to as utility, which gives the digital asset broader value beyond just being a collectible.
Whether the added value is a physical item or a membership to an event or website, NFTs present significant opportunities for brands and creators to expand the use cases for NFTs.
What are NFTs?
NFTs are cryptoassets that represent a unique item, whether it’s a real-world object like a sneaker or a digital asset like a blockchain game skin. These tradable assets cannot be exchanged with each other, and data about NFTs is stored on the blockchain via smart contracts.
Because NFTs are minted and tracked on the blockchain, they are often used to verify the authenticity and ownership of a particular asset.
How to add tools to NFTs
Utility NFTs enhance the concept of digital collectibles by providing holders with real-world rewards and other privileges associated with ownership. Rather than viewing NFTs as mere collectibles, they can be put to a variety of practical uses, such as acting as a ticket to an event or granting a holder long-term membership to a club.
Some NFT projects, such as Bored Ape Yacht Club (BAYC) and Doodles, were launched as PFP artwork and gradually began to add benefits to holders, such as exclusive access to branded parties or meetings. Other NFT projects benefit from the start, such as Coachella Collectibles, which gives holders a lifetime pass to the music festival, along with other perks like unique on-site experiences and physical merchandise.
Tools such as access to events and locations
Some of the original NFTs served as access to unique platforms. One of the most common digital access features provided by NFTs is access to exclusive Discord channels.
As utility NFTs have evolved, they have also presented new ways to give holders digital access to events and platforms. Americana, for example, is an online marketplace for brick-and-mortar collectors seeking luxury items, similar to resale sites like Grailed or StockX. To buy or sell items with Americana, users are required to hold a Something Token (their native NFT) to signify membership in the ecosystem.
Another example is Token Proof, a token gate platform and app, where users can verify the ownership of their NFTs and access real events without connecting to the crypto wallet. Entrepreneur Gary Vaynerchuk, as another example, issued tickets to his VeeCon crypto conference using NFTs.
In addition to ticketing for one-off events, NFTs are also often used as membership cards for exclusive clubs or restaurants. NFT social clubs have created more long-term options for NFT holders who want to meet up with their community and collaborate in the same place. And earlier this year, internet collective Poolsuite Manor launched the DAO, which will provide token-gate access to a property they plan to buy called Poolsuite Manor.
In addition, Vaynerchuk recently announced the launch of a seafood restaurant in New York called Flyfish Club that is only available to NFT holders.
NFTs associated with real-world objects
While token-gated access through utility NFTs presents a unique way for communities to come together, some NFT projects also link physical and digital rewards to NFT ownership.
The PROOF collective, for example, uses NFTs to provide holders with a variety of benefits, including access to future PROOF NFT drops such as the popular Moonbirds PFP project.
And more often, both Web2 and Web3 brands have used NFTs to reward their holders with physical items such as clothing. Adidas, for example, created a custom line of crypto-themed clothing specifically for holders of its Into The Metaverse community, while Nike’s digital fashion brand RTFKT allowed holders of the CloneX collection to “forge” their digital tokens into physical goods.
As the use of utility NFTs continues to grow, they can be used by a variety of industries to provide holders with everything from access cards to in-store discounts, ensuring that NFTs retain value for holders in the long term.
