What Is A Utility NFT?

What Is A Utility NFT?

what is a utility nft

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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 in the past year, much of the attention has turned to Profile Picture NFTs (PFPs), or NFTs that can be used as avatars on social media. Influenced by Larva Labs’ successful NFT project CryptoPunks, PFP projects quickly dominated Twitter and marketplaces like OpenSea during the NFT boom. Other types of NFTs, such as generative art, have also gained popularity in recent months.

Art-focused NFT projects remain popular with collectors, though many creators are adding real-world experiences and rewards to their digital collectibles. This concept is known as utility, which gives the digital asset a broader value beyond just being a collectible.

Whether the added value is a physical item or a membership to an event or website, utility NFTs present significant opportunities for brands and creators to expand NFT use cases.

What are NFTs?

NFTs are crypto assets that represent a unique item, be it 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 the NFT is stored on the blockchain through 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 Utility to NFTs

Utility NFTs enhance the concept of digital collectibles by providing holders with real-world rewards and other privileges tied to ownership. Instead of viewing NFTs as collectible works of art, they can be used for a variety of practical applications, such as acting as a ticket to an event or providing a holder with long-term membership to a club.

Some NFT projects, such as Bored Ape Yacht Club (BAYC) and Doodles, were released as PFP artwork and gradually began to add utility for holders, such as exclusive access to parties or branded gatherings. Other NFT projects add utility right off the bat, like Coachella Collectibles, which grant holders a lifetime pass to the music festival, along with other perks like unique venue experiences and physical goods.

Utility As Access To Events and Locations

Some of the original utility NFTs functioned as access to unique platforms. One of the most common digital access features provided by utility NFTs is access to exclusive Discord channels.

As utility NFTs have evolved, they have also introduced new ways to provide holders with digital access to events and platforms. Americana, for example, is an online marketplace for physical collectors looking for luxury items, similar to resale sites like Grailed or StockX. To buy or sell items with Americana, users must have a token of something (their native NFT) to indicate their membership in the ecosystem.

Another example is Token Proof, a token activation platform and app, where users can verify ownership of their NFTs and access real-world events without connecting their crypto wallet. Entrepreneur Gary Vaynerchuk, as another example, issued tickets to his VeeCon crypto conference using utility NFTs.

Beyond issuing tickets for one-off events, utility NFTs are also frequently used as membership cards for exclusive clubs or restaurants. NFT Social Clubs have created more long-term options for NFT holders looking to meet up with their community and collaborate in the same space. And earlier this year, the Internet collective Poolsuite launched the Manor DAO, which will provide token-controlled access to a property they plan to purchase called Poolsuite Manor.

Additionally, Vaynerchuk recently announced the launch of a New York seafood restaurant called Flyfish Club that is only accessible to NFT holders.

NFTs linked to real world items

While token-controlled access through utility NFTs presents a unique way for communities to come together, some NFT projects also tie 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 releases like the popular Moonbirds PFP project.

And more often, Web2 and Web3 brands have used utility NFTs to reward their holders with physical items like 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 CloneX collection holders to “forge” their tokens. digital into physical goods.

As the application of utility NFTs continues to grow, they can be used by a variety of industries to provide holders with anything from key cards to store discounts, ensuring that NFTs retain value for holders over the long term. term.

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