What are Utility NFTs? Unique tokens that offer real benefits

Total trading volume for non-fungible tokens (NFTs) left $ 200 million in 2020 to over $ 12 billion in the first quarter of 2022. For this value to be sustainable, there must be more to NFTs than just market hype and FOMO.

It is still very early to discover real use cases for NFTs. But the cryptographically unique tokens have the potential to be more than just JPEGs on one blockchain. NFTs – NFTs with actual use cases – can nevertheless be the driving force that transforms NFTs from an investment mania to a new way of working, playing and interacting.

What are NFTs?

Utility NFTs are NFTs with use cases beyond just being unique digital assets. They are NFTs that give the owners privileges, rights or rewards that they would not otherwise have access to.

Perhaps the easiest way to understand utility NFTs is with an example. If you are holding a concert with 800 available seats, you can issue 800 paper tickets. Each paper ticket will be unique, or non-fungible, in the sense that it will have its own ticket number. But each unique paper ticket gives the same right, privilege or benefit. That tool is in this case the entrance to the concert.

Instead of issuing 800 paper tickets, the concert organizer could issue 800 NFTs. Each of the 800 NFTs would of course be unique and non-fungible, but just like the tickets, each one would give their owner the same privilege or benefit: entrance to the concert.

How do NFTs work?

From a technical perspective, utility NFTs work in the same way as other NFTs. They are cryptographically represented and unique digital assets stored on a blockchain. The immutability and openness of blockchain technology makes it easy for NFT owners to prove that an NFT is stored in their wallet and no one else’s.

How can a standard NFT become a tool NFT?

There are many ways to add benefit to an NFT or series of NFTs; it is less about the technology itself, and more about the application of that technology.

To take an example from the world of music, in March 2021, Kings of Leon became the first band to release an album, “When You See Yourself”, as a series of NFTs.

In addition to being released as NFTs, the album was also released in conventional formats, on platforms such as Spotify and iTunes. The album release contained different types of NFTs. One type of NFT included digital artwork and a digital music download, and could also be redeemed for a physical, limited edition vinyl copy of the album. Another type of NFT offered as part of the series can be redeemed for top seats on the Kings of Leon show.

Just days after the release of “When You See Yourself” partly as a series of NFT tokens, Kings of Leon had already earned two million USD from NFT sales. Of that, more than half a million dollars went to Crew Nationa relief fund for music crews during the COVID-19 pandemic and beyond.

Just looking at the Kings of Leon example, it’s easy to think of other types of NFTs that might work just as well. If NFTs can provide seats in the front row at rock concerts, then why can they not guarantee year-round tickets to football matches, and effectively replace season tickets?

Did you know?

In February 2022, a home in Florida was sold for $ 653,000, or 210 Ethereum, in one NFT auction.

What’s so special about NFTs?

Utility NFTs have already begun to make their presence felt in the business world and popular culture. And NFT collections, which were originally launched to no avail, are increasingly evolving into utility NFTs.

For example, the well known Bored Ape Yacht Club first launched as nothing more than a series of NFT images. Since then, Bored Ape NFTs have become access cards exclusive events such as partiesas well as offering rewards in the form of being able to create new NFTs.

What are some examples of NFTs?

• 🧑‍🤝‍🧑 VeeFriends – A series of NFTs from Gary Vaynerchuk that give holders tickets to the VeeCon conference via NFT ticket flights.
• ☕ Crypto baristas – An “all-inclusive caffeine experience” that gives NFT holders the right to discounts at future café locations, in an online store and on goods.
• 👩 Women’s world – An NFT project that seeks to support and educate women and increase female participation in NFTs and Web3. World of Women NFT holders gain access to benefits, including ownership of the artwork that underpins NFT, and invitations to real-life events.
• 🌲 GainForest – An international non-profit based in Switzerland that aims to use blockchain to help preserve the rainforest. People who donate to GainForest will receive NFTs that correspond to actual areas of the forest, track forest health and coin management symbols.

The future of utility NFTs

Utility NFTs are in the early stages right now, but innovative new utility items are popping up every day.

In the future, they can replace everything from health insurance cards to loyalty cards to season cards, with NFT holders who can access health services, discounts or admission to events. Businesses can stimulate sales with NFTs that can be redeemed for discounts or freebies in the future, and send paper discount tokens to the history books.

With the emergence of metaversBenefit NFTs can emerge that provide benefits to the owner in the virtual shared world, such as entrance tickets to games or other exclusive virtual environments.

NFTs can be used to prove and stimulate ownership, build community and even protect the planet. The technology already exists; how we use it is only limited by our imagination.

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