NFT
Non-fungible tokens continue to flood the Web3 world, flooding marketplaces like OpenSea with new collections almost every day. As the NFT craze accelerates, it is imperative to consider the real potential of these digital assets, and it’s all about the concept of “utility”.
During the “crypto winter” that started in January 2022, the value of NFTs suffered. Transaction volumes plummeted from the heady heights of the previous year as multi-million dollar NFT sales made headlines almost every day. Trading NFTs fell from a high of $17 billion in January 2022 to just $46 million in September of that same year, representing a 97% decline.
Part of the reason for these declines is the major challenges facing the NFT industry, such as the potential for scams, lack of regulation, and the fact that blockchain infrastructure is not standardized. NFTs also suffer from scalability issues, as we saw during the creation of the Stoner Cats NFTs when users lost more than $700,000 in collective ETH gas fees.
With NFTs facing so many challenges, there is a clear and urgent need for digital assets to provide additional benefits to users. People need tangible reasons for wanting to buy and sell NFTs, which is where the utility comes into play.
Utility will prevail
Utility NFTs are digital assets that have real-life use cases or benefits. They will be incredibly important in the continued adoption of digital assets, providing holders with greater functionality and interactive experiences. Unlike traditional NFTs, which are digital works of art, utility NFTs offer users something other than simple, certified ownership of some pixels. They offer real life benefits that non-NFT holders cannot access.
Utility NFTs can be thought of as a digital key that unlocks access to a particular benefit, such as a virtual world, video game, mobile application, a real-world event or party, digital accessory, asset ownership, or anything else. Linking these kinds of benefits to NFTs allows digital assets to take engagement to a new level, increasing their value to users. The utility will be the magic that pushes NFTs to mass adoption.
There are many new use cases for utility NFTs. The Scribbles NFT collection, for example, entitles holders to create custom wearables for their Doodles avatars.
Just Doop’d My Doodle ❤️🔥
2x of each portable with that Common Doop. Bullish about expanding it #Web3 ecosystem with a low barrier to entry…
< br>It is #Doodles 🌎 & Beta Pass is the alpha pic.twitter.com/y3Rl1IwoIo— .JUICE (@juicemandood) February 1, 2023
Meanwhile, the Bored Ape Yacht Club is an exclusive community that provides the rights to access member-only online experiences, limited edition merchandise, and star-studded parties in the real world. Even sportswear brand Adidas has embraced the idea of NFTs, with a collection that gives access to a range of unique, physical products like a hoodie with their blockchain address on it.
These are just some of the earliest examples of utility NFTs, but their potential goes beyond creating new forms of engagement. Utility NFTs can represent ownership of almost any kind of real-world physical asset or experience.
Dynamic NFTs increase utility
The best kind of NFTs for utilities may turn out to be a new generation of so-called “dynamic NFTs”, which can evolve over time in response to external parameters or events, such as changes in the weather, movements in the financial markets, the results of a football match or anything else.
A few examples help us understand how dynamic NFTs work. Imagine an NFT sports card collection, where each token represents a different player. That NFT would display the player’s stats such as his speed, strength, agility, goals scored, assists, transfer value, and so on. As the season progresses, the NFT’s metadata may update itself to change these stats.
So if a player makes a hot streak and scores in eight consecutive games, his number of goals will increase and the NFT value can gain. An alternative example might be in real estate, where an NFT represents home ownership. In this case, the dynamic NFT can update itself in response to any changes to the property, such as if maintenance work is carried out, an extension is built, or if it is sold to someone else.
At this point we can begin to understand the incredible potential of dynamic, useful NFTs and their possible place in the world, but what does it take for that to happen?
How will utility NFTs get off the ground?
Technology is already a thing, but the challenges mentioned above, especially the lack of standardization, are a major barrier to mass adoption. Existing NFTs are scattered across multiple blockchain ecosystems. They cannot be easily transferred between one or the other, and a lack of understanding of how this underlying infrastructure works is sure to cause confusion.
What is needed is to create a standard environment for NFTs to exist in, and this is true Equal thinks it may play a role. Peer is preparing to launch a web3 social app that the company says will take usability for NFTs to the next level. It creates a global augmented reality based app that will essentially superimpose a social network on the real world.
With Peer, users have the option to place digital assets in real locations. Others can then personally travel to those places and hit those NFTs to reap real benefits. It’s an app that encourages people to get out into the real world, explore the NFTs they discover and reap significant benefits.
As Peer explains, while utility NFTs are already viable, no one has outlined a proper vision for how the technology could impact our daily lives. Peer wants to change that by becoming a global playground where everyone can interact with and exchange digital assets.
Once we have the right environment for utility NFTs, they are likely to quickly demonstrate their true value. Utility NFTs will create new, decentralized communities where members will work together to develop those assets and the benefits they provide, resulting in greater benefits for all. Not only will we see more resilient and sustainable forms of ownership, but also a greater sense of shared responsibility.
In summary, the future of NFTs will be focused on real-life use cases and applications that people desperately want and are willing to pay for. Once the questions of usability and accessibility are resolved, everyone will recognize the inherent value of NFTs.