What are Utility NFTs? Unique tokens that offer real benefits

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

It is still very early in discovering 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 – could nevertheless be the driving force that transforms NFTs from an investment craze into a new way of working, playing and interacting.

What are utility NFTs?

Utility NFTs are NFTs with use cases beyond just being unique digital assets. They are NFTs that give their 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 hold 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 provides the same right, privilege or benefit. In this case, that tool is the entrance to the concert.

Instead of issuing 800 paper tickets, the concert promoter 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 grant its owner the same privilege or benefit: admission 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 transparency 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 utility NFT?

There are many ways to add utility 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 featured different types of NFTs. One type of NFT included digital artwork and a digital download of the music, 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 prime seats at Kings of Leon shows.

Just days after releasing “When You See Yourself” in part 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 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 could work just as well. If NFTs can provide front-row seats at rock concerts, why can’t they guarantee year-round tickets at football matches, effectively replacing season tickets?

What is so special about NFTs?

Utility NFTs have already begun to make their presence felt in the business world and popular culture. And NFT collections that were initially launched without utility 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 to 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 provide holders with tickets to the VeeCon conference via NFT ticket flights.
• ☕ Crypto baristas – An “all-inclusive caffeine experience” that entitles NFT holders to discounts at future cafe locations, in an online store and on merchandise.
• 👩 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 underlying the NFT, and invitations to real-life events.
• 🌲 GainForest – An international nonprofit based in Switzerland that aims to use blockchain to help conserve the rainforest. People who donate to GainForest will receive NFTs that correspond to actual forest areas, track forest health and coin management tokens.

The Future of Utility NFTs

Utility NFTs are in the early stages right now, but innovative new use cases are emerging every day.

In the future, they could replace everything from health insurance cards to loyalty cards to season tickets, with NFT holders able to access health services, discounts or entry to events. Businesses can incentivize sales with NFTs that can be redeemed for discounts or freebies in the future, consigning paper discount tokens to the history books.

With the rise of metaverseutility NFTs may appear that provide benefits to the owner in the virtual shared world, such as entry tickets to games or other exclusive virtual environments.

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