It’s no secret: Most NFT projects nowadays thrive and survive on hype. Unlike the early days where art patronage and appreciating art for art’s sake made NFTs valuable, these things are practically non-existent in today’s digital art sphere.
If you’ve been following up with our Weekly Blurbs and read other recent blog posts on the Haus, you should understand our critical stance on this issue of hype. However, let’s not just deem NFT a “bubble” just because of hype.
A new breed of NFTs is taking form, slowly but surely, establishing its goals and dreams for the long haul. That’s right, NFTs with utility, accompanied by a sustainable and visionary roadmap.
In this article, we’ll be covering some examples of utility in NFTs, and why these NFTs (not those hyped ones), are here to stay.
Why NFTs Need Utility
NFTs need utility because hype exists. In other words, NFTs need some intrinsic value rather than just playing on the emotions and speculations of people.
Charlie Munger, Vice-Chairman of Berkshire Hathaway and regarded as the right-hand man of Warren Buffet, recently slammed Bitcoin and other cryptocurrencies. He said, “I’m proud of the fact I’ve avoided it. It’s like some venereal disease… I just regard it as beneath contempt…”
When such people accused Bitcoin and other cryptocurrencies of being a “bubble”, Bitcoin maxis and crypto enthusiasts were able to counter with blockchain tech being crypto’s intrinsic value. Without crypto, the blockchain cannot function economically.
But when NFTs come into question, where does their value lie? Art? Patronage? Or more like hype and whale manipulation? It becomes clear that NFT-goers aren’t exactly certain where they stand, though I can confidently say most are in it for the hype to make a quick buck.
I like to compare the NFT hype to the Dutch Tulip Bulb Market Bubble of the 1600s. Kickstarted by an appreciation for the exoticism of these tulips, to the upper classes snapping them up as a symbol of wealth and social status, and the eventual leveraging of other assets to buy and trade tulips for profits, eventually led to its downfall. In a nutshell, people purchasing tulips on credit turned out to be a disaster when they couldn’t repay their debts.
This looks extremely akin to NFTs. From art patronage, to celebrity endorsement, and now people flipping for profit. Isn’t this a bubble waiting to pop? Yes… if not for the power of utility.
The Utility of NFTs
The utility of NFTs gives them value. By owning this digital copy, the person or entity gains certain privileges or rights to something exclusive. And in so doing, NFTs can harness the power of blockchain tech, instead of human-driven hype.
Next, we will be going through different use cases in NFTs… enjoy!
1) Access Tokens
We all covet that sense of exclusivity. That’s why VIP is a thing… right? However, we may not always have the contacts or be aware of an exclusive event happening, which is why access tokens bring value and makes sense for holders.
Access tokens/passes usually allow its holders to gain access to premium memberships in other virtual worlds, through the power of collaboration. This concept of having a “Master Pass” to many different VIP rooms makes an NFT useable.
Using the influence and contacts of founders of the NFT project, collaborations with other communities will be a win-win for both sides; exclusive access for the former, and more publicity for the latter. Hence, NFTs in this domain make sense.
A great “Access pass” concept is The Meta Key project, marketed as “the key to the metaverse“. With their token, you can gain access to exclusive airdrops, virtual events, galleries, and more. All you need is one Meta Key, so their intrinsic value lies in the concept of membership.
2) DAOs
DAOs, also known as Decentralized Autonomous Organizations, are groups that can use NFTs as one of their access points. Most DAOs require people to contribute to their cause, in one way or another, to become a member of the DAO.
While this is also a form of membership, it is more like a chance to participate in the governance of a project. Most DAOs are formed with an end goal in mind, so buying an NFT from their collection can be your contribution (and entry pass) into the DAO.
A good example will be LinksDAO, a DAO made for golf enthusiasts. They used the power of NFTs to sell these membership passes to initiate golfers into their DAO, and are planning to use the funds towards the eventual goal of buying a golf course. With such a mission in mind, owning a LinksDAO NFT presents the opportunity of having a membership to a golf course in the future. That’s value for you!
3) Ticketing
Ticketing to live concerts and events has got to be one of the most lucrative businesses in the world. Not just for artists, the producers, or even the organizers. Instead, it is the ticket providers and distributors reaping huge returns.
Huge ticket marketplaces like Ticketmaster partner with different artists and organizations to let consumers conveniently buy their tickets. Without having to worry about ticket sales or the hassle, artists can focus on what they do best.
However, blockchain tech cuts out the middleman, and NFTs are the new “tickets”. Through the blockchain, artists and groups can distribute NFT tokens as a ticket to enter their concert or event, earning the full sum of what fans paid, not paying any commissions to ticket marketplaces.
In this year’s Superbowl, commemorative NFT tickets were distributed to those who physically attended the event. While this is not the actual ticket itself, it really shows how we’re completely ready for NFT ticketing and businesses are quickly catching on to utility in NFTs.
4) LPs and Staking
Liquidity Pools and Staking are concepts closely linked with passive income in the crypto world. With cryptocurrency investors able to do this by themselves already, what’s the role of NFTs in this scene?
Well, some Liquidity Pools and Staking protocols require a large pool of funds to receive better rewards. For example, delegating in the Polkadot ecosystem requires 120 DOT while doing that in the Avalanche ecosystem needs 25 AVAX, each of them fetching more than $2000 at the time of this writing.
If you’d like to go a step further like becoming an Ethereum validator, one would need 32 ETH to do so, almost $90K right now! As a result, NFT collections can act like a startup to fund LPs and staking mechanisms, allowing holders to make passive income with their NFT.
While many projects adopt this idea of “staking NFTs”, always be extra careful with them as they could easily be rugpulls. In other words, there are no commitments the core team must make to “stake” or reward the holders.
However, a good platform for staking NFTs is NFTX, where one can stake their NFTs to earn vTokens, tradeable for other assets on and off the platform. This way, holders can lock up their digital assets for passive income, not bad at all!
5) Charity
Many people are puzzled by the use of NFTs when it comes to charity. Why not just donate the money directly to organizations, and get rid of the whole complexity of the blockchain + artwork of NFTs?
Well, NFTs provide accountability in charity projects. Since NFTs rely on blockchain tech, all transactions are publicly recorded in a ledger, which means that there is a lower chance of behind-the-scenes “shady works” going on.
While transacting via the blockchain requires “gas fees” to be paid, organizations set up the NFT donation system once, and the blockchain takes care of itself from then. No need for monthly maintenance or paying workers to manage the charity’s day-to-day operations. On top of that, donors get a verified token of appreciation, the NFT!
Why not explore a fantastic example, Gnars! Gnars is our CC0 brainchild and one of the key objectives of the project was to raise donation dollars. Combining the unique ideas of auctioning on the blockchain, with art appreciation, our community has been growing steadily these past few days. Donations in the thousands, all aided by the blockchain, in less than a week… LFG!
6) Institution-Backed Products
While NFTs exist on the blockchain and are “nothing more than JPEGs”, massive adoption by established institutions has given rise to the possibility of getting IRL things upon purchase of an NFT.
Of course, this is very limited to the brands which have already established their presence in the physical world; other flagship projects are most usually scams. With these companies venturing into NFTs and the metaverse, they can use existing product models as designs to upload onto the blockchain. By owning these NFTs, you could be eligible to claim these products in real life.
A promising example is RTFKT Studios, a fashion metaverse organization that sold $3.1 million worth of virtual sneakers in a matter of minutes. Since then, Nike has acquired them, so could this mean holders of these sneakers can get a pair IRL? In this sense, owning an NFT which could give you something back IRL proves its utility.
Utility In, Hype Out?
Hype is not a reliable source of income, but utility is. When the dust storm in the NFT space finally settles, which JPEGs will be lost in the mayhem, and which NFTs will rise to even greater heights?
Let’s hope more NFT-ers choose utility over hype.
