The Complete Guide to Utility NFTs (With Examples)
Learn how to add real-world value and utility to your NFTs with our comprehensive guide on Utility NFTs. Get the knowledge and tools you need to succeed in the world of NFTs today!
Welcome to our guide on Utility NFTs. As the NFT market continues to grow, it's more important than ever for creators and businesses to focus on adding real-world value and utility to their tokens.
Utility NFTs offer a unique way to engage with your community and provide value to your customers. In this guide, we will delve into the world of Utility and NFTs, exploring the various ways in which adding utility can be used to enhance your brand and build a loyal community around your project.
We will cover topics such as what NFTs utilities are, the best NFT utilities to consider, and how successful projects have incorporated utility into their NFT ecosystem/brand.
Whether you're an artist, a business owner, brand, or just getting started with NFTs, this guide will provide you with the knowledge and tools you need to get started.
What is a Utility NFT?
Utility NFTs are a type of digital asset that can be used for a specific purpose or function within a given ecosystem. Unlike traditional NFTs, which are primarily used for digital collectibles or art, utility NFTs have a practical application within a specific platform or application.
One example of a utility NFT is a token that grants access to a virtual world or game. These tokens can be used to purchase in-game items, unlock special features, or gain access to exclusive content. Another example is a token that represents a share in a decentralized autonomous organization (DAO), which can be used to vote on proposals and make decisions within the organization.
Utility NFTs have the potential to disrupt traditional business models in a variety of industries. For example, in the gaming industry, utility NFTs could allow for new ways of monetizing and distributing in-game content. In the music industry, utility NFTs could be used to represent ownership of a specific song or album, allowing for more direct monetization for artists and more control for music rights holders.
However, it's important to note that the current regulatory environment for NFTs is still uncertain, and the practical applications and long-term viability of utility NFTs have yet to be fully realized. Additionally, like any new technology, there are also concerns about potential negative impacts such as increased carbon footprint and potential market manipulation.
Overall, utility NFTs represent a promising new frontier in the world of digital assets and have the potential to revolutionize the way we think about ownership and value in the digital economy. However, it will be important to closely monitor the development and adoption of utility NFTs and consider the potential risks and benefits before fully embracing this new technology.
How do Utility NFTs work?
As established, Utility NFTs are a cutting-edge type of digital asset that can be used for a specific purpose or function within a given ecosystem. Built on secure and decentralized blockchain technology, these types of NFTs offer a new way to share value and experiences among community members and asset owners, but how do they work exactly?
When a utility NFT is first created, it is assigned a unique digital signature, or "hash," that cannot be replicated or duplicated. This hash is then recorded on the blockchain, creating a permanent and unchangeable record of the token's existence and ownership. This process, known as "minting," is an essential step in ensuring the authenticity and uniqueness of the token.
Once minted, an NFT can be given whatever utility the project or creator dreams of, this generally requires thinking about aspects of token gating, physical/digital products and the desired user experience as the possibilities of what can be done with this technology can be endless.
Additionally, once a utility NFT is purchased for the first time, it can be freely traded and sold on marketplaces, allowing for it to gain value over time as demand increases and for owners to transfer utility to others.
In sum, utility NFTs work like any other type of NFT, except for the fact that they have a specific benefit tied to them. They are minted like your typical ERC token, and utility is generally ascribed to the ownership of the token via off-chain experiences and products.
Looking for inspiration on how you can incorporate utility into your NFT project? Keep on reading.
10 NFT Utility Examples
As covered, Utility NFTs can be used for a variety of applications, such as digital collectibles, virtual real estate, gaming items, and more.
In this section, we will explore several examples of NFT utility use cases, including memberships and event tickets, physical products, loyalty rewards, governance and voting rights, airdrops, and more.
The goal is to give you a better understanding of how this technology can be utlized within your project or brand. Now let’s dive in!
1. Memberships and Event Tickets
- NFTs can be used to represent memberships or event tickets. For example, an NFT could be used as a membership card for a private club, granting access to exclusive events and perks. Similarly, an NFT could be used as a concert or sports event ticket, allowing the holder to gain entry to the event and proving attendance.
2. Physical Products
- NFTs can also be used to represent ownership of physical products. For example, an NFT could be used as a certificate of authenticity for a piece of fine art. This would allow the owner to prove ownership and authenticity of the physical artwork, while also allowing the artwork to be tracked and recorded on the blockchain.
3. Loyalty Rewards
- NFTs can also be used to represent loyalty rewards or points. For example, an NFT could be used as a token that can be earned by making purchases or engaging with a brand. These tokens could then be redeemed for discounts or exclusive offers.
4. Governance and Voting Rights
- NFTs can also be used to represent governance and voting rights. For example, an NFT could be used as a token that grants the holder the right to vote on important decisions or proposals within a decentralized organization or community.
- NFTs can also be used to represent access to future airdropped tokens, which are tokens that are distributed to holders of another token as a reward or incentive. For example, an NFT holder who has an asset for 12 months or longer could be airdropped a specific collectible or cryptocurrency as a reward for holding.
6. Allowlist and Drop Access
- NFTs can also be used to represent access to exclusive content or events, such as allowlist or drop access. For example, an NFT could be used to represent the right to participate in a limited-edition merchandise drop or the ability to access exclusive content like a concert or event.
7. Exclusive Content
- NFTs can also be used to represent exclusive content, such as VIP membership, early access, or behind-the-scenes access to an artist or creator. For example, an NFT could be used to represent a VIP membership for a music artist's fan club, granting access to exclusive content and experiences.
8. Exclusive Experiences
- NFTs can also be used to represent access to exclusive experiences, such as meet-and-greets or private tours. For example, an NFT could be used to represent the right to attend a private concert or meet a celebrity.
9. Metaverse Events
- NFTs can also be used to represent access to events within virtual worlds or metaverses. For example, an NFT could be used to represent a ticket to a virtual concert or event within a metaverse.
10. Discounts and Promo Codes
- NFTs can also be used to represent discounts or promo codes. For example, an NFT could be used to represent a discount code that can be used to receive a discount on a purchase or service.
What are the best NFT Utilities?
With all the different types of utility you can provide to your users or community members it can be difficult to determine what’s the right choice. As a rule of thumb, the best NFT utilities will vary depending on the specific needs and goals of the user.
For example, an artist may find that creating and selling digital collectibles as NFTs is a useful way to monetize their work, while a gamer may find that owning unique, in-game items represented by NFTs enhances their gaming experience.
Similarly, a virtual world developer may find that using NFTs to represent virtual real estate is a useful way to monetize their virtual world, while a company may find that using NFTs to represent loyalty rewards or access to exclusive content is an effective way to engage with customers.
Ultimately, the best NFT utilities will depend on the unique needs and goals of your community members (and your brands) meaning, the utilities that you value the most are really only something you can determine for yourself.
5 Popular NFT Utility Projects
The world of NFTs is constantly evolving and new utility projects are popping up all the time. In this section, we'll take a look at 5 popular NFT utility projects that are currently making a big impact in the industry.
From gaming to sports and entertainment, these projects are providing unique and innovative ways to add value to NFTs.
LinksDAO is at the forefront of NFT utility, as their team aims to build a global community of golf enthusiasts in web3. The platform aims to create a new way to experience golf, by reimagining the golf and country club experience.
By holding the NFT token, members of the community get access to exclusive events, such as tournaments, and special privileges, such as access to participating golf clubs (and in the future their own course!).
Additionally, members can also vote on the development of the platform and even propose new ideas for the community to consider. This creates an engaged and empowered community of golf enthusiasts, and enhances the utility of LinksDAO's NFTs.
VeeFriends, an NFT project launched and run by popular entrepreneur Gary Vaynerchuk, has provided utility within their NFTs by allowing token holders to participate in the VeeCon conference.
The event is an NFT-ticketed conference hosted around the globe, designed for NFT enthusiasts. At the conference, NFT holders have the opportunity to interact with other enthusiasts, share their ideas, and learn from each other, while also getting special privileges such as mentoring lessons from Gary.
By incorporating the use of NFTs as event tickets, VeeFriends provides a unique and valuable experience for their community, and enhances the utility of their NFTs.
Doodles is an NFT project that provides utility to its community by allowing token holders to vote on future releases and events. The project consists of 10,000 hand-drawn collectibles designed by Burnt Toast, featuring colourful characters with a variety of different traits.
When a community member owns a Doodle, they get to participate in the voting process and have a say in the direction of the project. Additionally, the project has implemented a community-governed treasury called the Doodlebank, which stores funds for future expansion and development. One example of the community's influence can be seen in the Space Doodles collection, which features spaceships and received a lot of support from fans. By providing these opportunities for community engagement and decision-making, Doodles adds new value to their NFTs and creates new touchpoints for interaction with their community members and asset owners.
Bored Ape Yacht Club
Bored Ape Yacht Club has provided utility within their NFTs by allowing token holders to participate in exclusive events such as ApeFest. ApeFest is an annual event organized by the Bored Ape Yacht Club, where token holders can come together, show off their collection and participate in various activities like live music, auctions, and games.
By holding a Bored Ape Yacht Club NFT, members of the community get access to these exclusive events and other benefits such as early access to new features, discounts on merchandise, and allowlist/new mint opportunities.
RTFKT and Nike have set the standard for incorporating utility into NFT projects with the launch of their CloneX and CryptoKicks projects.
They have included features such as exclusive physical item mints, allowlist access, and free future mints, making utility an integral part of their brand strategy. With CryptoKicks, they're taking things to the next level by exploring the connection between physical and digital products through exclusive footwear available only to token holders.
If you're looking for inspiration on how to add utility to your NFT project, RTFKT is a great example to follow.
In conclusion, Utility NFTs offer a unique and powerful way to add value to your NFTs and engage with your community.
They can be used to enhance your brand, build a loyal community, and provide real-world value to your customers. We hope that this guide has provided you with a deeper understanding of the world of Utility NFTs and the many possibilities they offer.
Whether you're a creator, DAO, brand, or just getting started with NFTs, we encourage you to explore the many ways in which you can add utility to your NFTs and create a successful ecosystem. Remember, the NFT market is constantly evolving, so be sure to stay informed and stay ahead of the curve.
Thanks for reading and we wish you all the best in your NFT journey!