NFT utility is an aspect that sometimes makes or breaks your decision for joining an NFT community. In other words, an NFT collection is going to sound a thousand times better if they offer utilities. Nowadays, people don’t buy NFTs just for art- they are just buying them to flip for a quick profit. However, people are lured to buy into the non-fungible world for the benefits that come with it. Keep reading to find out more about NFT utility and the 10 ways it could possibly benefit YOU!
What Is NFT UTILITY?
Utilities are NFTs that you can use outside the limitation of non-fungible tokens. They give you certain privileges or rewards and sometimes even certain rights that no one else can access. Therefore, the value of the NFT in question increases with the way we can interact with it. Or, how we can benefit from it!
In definition, an NFT utility is a non-fungible token with added applications and use. Aka, uses other than just representing unique digital assets. They have additional characteristics in the form of benefits, rewards, or more rights to their holders.
Imagine that you have a rollercoaster ride with 200 seats and 200 tickets. Each ticket is numbered differently from 1 to 200 and every ticket allows its holder entrance to the ride! Therefore, the utility of the ticket is the entrance to this ride!
Therefore, the NFT utility works in a similar way of granting you something in return. If you invest in the NFT, you get something in return! Ultimately, this cultivated the mindset of “what’s in it for me?”.
Usually, you can check whether or not a collection offers utilities from the project roadmap. They include the utilities and all other benefits that come from joining their community.
How Do NFT Utilities Work?
NFT utility work in the same way that any other NFT works. So, this means that they are both crypto assets on a particular blockchain. The project creators decide what they want to give the holders of their NFTs. Therefore, it doesn’t actually need anything added directly to the NFT. Some creators could opt for additions to the smart contract – especially when it relates to commercial use!
Top 10 Types of NFT Utility With Examples
1- Community Status
The first and most important NFT utility is belonging to an NFT community. It reflects where your interests and thoughts lie when you choose to get an NFT PFP from a specific collection.
For example, if you own a BAYC or Cryptopunks you’re considered one of the Whales. If you own a Sappy Seals NFT you are part of a very bubbly and joyful community. While, owning a Moonbirds NFT says that your are an art collector.
2- Profit Sharing
It’s unclear if NFTs will ever be deemed securities, which would open the door for direct profit-sharing. However profit sharing can be a utility that comes in many ways. its ultimate goal is to generate passive income for the NFT holder.
For example, if you an an owner of a pudgy penguin NFT that got made into a physical toy ,you get profit every time that toy is sold. You can read about that here.
3- Digital Rights
Some NFTs drop with A CC0 license, meaning anyone can copy the artwork without legal prosecution. However, others out-right claim that there are consequences if you just “screenshot” the artwork. That’s why one of the attractive NFT utilities out their is owning digital copyrights to the NFT.
For example, holders of BAYC NFTs have commercial usage rights of their apes and can do whatever they want. This includes creating merch and selling them, or opening a restaurant with that BAYC logo. Which is what Eminem and Snoop Dogg did with their apes when they created a music video out of them.
4- Exclusive Experiences
One of the most captivating types of NFT utility projects is ones that offer exclusive access, specifically in-real-life experiences. Sometimes exclusive access could mean special discounts for limited-edition products. They can also give you spots on future whitelist projects for early NFT drops.
5- Voting Rights
You may be familiar with the concept of a DAO. One of the special perks an NFT utility can offer is the ability to vote on the future of the NFT project. It’s like owning a seat at the director’s table.
6- Physical Products
For example, Azuki created a physically-backed token to their NFTs’ holder that allowed them to receive special merch. CloneX also took on that road and shipped their community some merch, unfortunately it was kind of a disappointment!
7- Loyalty Rewards
Best utility NFT projects offer special rewards for their most attentive and loyal members. This acts as an incentive for a holder to feel like his NFT investment paid off well. Loyalty rewards come in the form of giveaways, special codes, discounts, and other rewards.
This is mostly a promotional strategy to encourage people to join an NFT community. It helps to bring attention to the brand itself. It is mostly evident in the dramatic airdrop stunt digidaiku pulled during the Super Bowl.
But, make sure that the airdrop is announced publicly by the brand. Don’t believe anything you get on a private DM! It is probably someone trying to pull an NFT scam on you!
9- Event Tickets
This NFT utility may be the answer to every music artist’s fan prayers. What it does is utilize token-gated NFT technology to help NFT holders of a particular collection gain exclusive access to the musician’s events. This way no one takes advantage of a fan’s love and their will to pay a kidney to attend a concert!
10- Membership Access
The Future of NFT Utility
The main goal of the NFT utility is to bring holders value. That’s why NFT project creators go out of their way to do airdrops , events, merchandise , mint passes , access to specific events, and more. However, this may all be a little too late because NFTs hype is dying in 2023. This is why the future of NFT utility must go beyond the JPG. Read all about it here.