NFTs indeed started as hyped-up pictures of funny punks and monkeys, but they’re much more powerful than that. The technology behind utility NFTs offers a unique way to track, record and reward people who hold them. It’s becoming clear that we will likely see this tech integrated into all areas of our lives – from loyalty programs to exclusive event access to how we make large purchases [like real estate or vehicles].
What Are Utility NFTs?
Utility NFTs are digital assets with some privilege, rewards or rights attached to them. Think access to an event, a presale or the ability to claim a rare physical item. Utility NFTs are gaining popularity amongst brands as a way to reward their customers as something akin to a customer loyalty program.
How Do Utility NFTs Work?
Utility NFTs are similar to other NFTs – they are unique digital assets stored on the blockchain. An asset that lives on the blockchain allows the owner [of that asset] to store it in their wallet, proving ownership.
Can a Regular NFT Become a Utility NFT?
Yes. A regular NFT can be transformed into a utility NFT. For example, if a creator releases an image as an NFT [or digital asset] and it initially got sold as that – simply, an image – the creator of that NFT can decide to add access to new releases of their work, a party for holders of their work or other perks. This allows creators to transform their creations into unique experiences or access for their supporters [or buyers].
One example is when Kings of Leon released an album with a series of NFTs attached. This release allowed fans to purchase a unique digital copy of the album. Later on, the holders could obtain digital downloads and physical copies of a limited vinyl pressing of the album. These NFTs also give holders first dibs on the best seats in the house for upcoming Kings of Leon shows.
These are pretty awesome perks if you’re a music fan!
Why Do Utility NFTs Matter?
NFTs continue to develop beyond the hype – they need to hold some intrinsic value. This is where utility NFTs come in. Currently, plenty of NFT projects are playing on emotions and speculation – most of the market is based on flipping digital assets to make money. Beyond speculation and profit, NFTs hold value in their underlying technology. Using this technology will allow builders to create sustainable projects for brands, customers, fans and beyond.
Utility NFTs: Practical Applications
There are several different applications that utility NFTs provide, including:
Do you know those annoying loyalty cards you carry around to gain perks at your fave shops, restaurants, etc.? What if those all became digital assets that lives on your device? What if you could access them in your digital wallet whenever you needed them? Brands can integrate utility NFTs into their loyalty programs, allowing them to track their biggest buyers and fans and reward them with special perks.
Everyone likes to feel like they are a part of something exclusive – that’s why VIP access is so coveted. However, not everyone has the network to gain this kind of access. It may also be difficult for people to track special events or offers related to the artists, organizations or companies they are affiliated with. This is where access tokens come in.
Access tokens (or passes) allow holders to enter virtual and physical events. Think of this as having a master pass to everything that your favorite brand or artist has to offer – events, exclusive access, etc.
An excellent example of this is the VeeFriends NFT project. Launched by entrepreneur Gary Vaynerchuk, the VeeFriends Token (or NFT) gives holders exclusive access to events, a 1:1 conversation with Gary, and the ability to network with other holders.
Decentralized Autonomous Organizations (DAOs) are groups of people that use NFTs to access membership. Generally, people create DAOs to support a cause or investment initiative. DAOs usually require potential members to contribute to their cause before officially becoming involved. The structure of a DAO, which eliminates the need for a hierarchy, is likely how businesses will operate in the future.
NFTs provide a unique way for charitable organizations to collect transparent and publicly available donations. To do this, organizations set up contributions using the blockchain – organizations only need to set up the NFT donation once (this requires a small “gas fee”). Upon contribution, the donor receives the verified token (the NFT). Finally, day-to-day contribution activity doesn’t require staff oversight– all activity lives on the blockchain.
LPs & Staking
Liquidity pools and staking are already a popular concept in the crypto world. Both require holders of a particular coin to stake or lock up their funds to generate passive income.
LPs and staking NFTs operates in a similar capacity. You can lock up your digital assets or NFTs and make passive income. Just be cautious because these staking opportunities can be tricky – you need to ensure that you are staking with a reputable project or team. Like any other NFT transaction, you’ll want to ensure that the project you are staking your asset in isn’t a rug pull.
Finding convenient ways for fans to access tickets is the bread and butter of organizations like Ticketmaster and Eventbrite. Having this middleman has always meant extra fees for fans. Artists and teams can now cut out these third-party resellers and sell tickets to their event directly to their fans.
Using blockchain technology, artists and teams can distribute tickets to their events or concerts to their fans. This eliminates third-party fees for fans and allows the artist to pocket the entire cost of the ticket purchased.
Holding NFTs could prove incredibly valuable in terms of what we can access in the future. Because even creators of some of the image-based assets are thinking about ways they can add utility [or perks] for their holders. We’ll continue to see how this all evolves. For now, buying NFTs that you like is probably your best bet. And as the hype projects die down, the ones that look fun and interesting to you may have legs. In the end, you may be left holding something super rare and cool in the future that you could resell or reap some majorly awesome benefits from! You never know!