With an impact on nearly every creative industry, including digital art, music, photography, and videos, NFTs have taken the world of collectibles by storm. However, the future of NFTs is not limited to record-breaking art sales. Rather, utility NFTs are increasingly recognized as an important tool that will define the Web3 era.
What Is a Utility NFT?
Even people with a general understanding of the concept of NFTs may not yet be familiar with the distinguishing characteristics of a utility NFT. While in some ways it is a minor distinction, it's important to be fully informed about utility NFTs because, in the eyes of many experts, they are seen as the future of the NFT marketplace and Web3 as a whole.
Tokens are the core of transactions on Web3 and can be used to describe a number of different digital assets. This includes cryptocurrencies like Bitcoin andNFTs.
The term non-fungible means that items cannot be directly exchanged for equivalent values in the way that forms of currency, including cryptocurrencies, can be. For example, there has been a sizable market for NBA video clips, but a person could not simply trade a clip of LeBron James for a clip of Steph Curry because they have different valuations.
NFTs with Practical Uses
Much of the conversation around NFTs has centered on collectible items like artwork, video clips, and trading cards. However, there are many practical uses for NFTs that make them valuable in an entirely different way.
Utility NFTs are useful to owners because they grant rights, privileges, or rewards that would otherwise be inaccessible. For example, rather than issuing physical tickets for an NBA game, the league could instead sell NFTs.
Physical tickets are unique and allow the buyer to attend a game, and an NFT ticket would accomplish the same goal in a digital format. However, the possible benefits of an NFT ticket go beyond simple access privileges:
- It is easy to resell because of its digital format.
- It instantly becomes memorabilia that can later be sold to a collector.
- Because NFTs make it easy for sellers to track purchases, buyers could be rewarded later on with items like highlight clips or trading card
Utility NFTs open the door to new, mutually beneficial methods of engagement and interaction between buyers and sellers.
What Are the Benefits of NFTs?
The popularity of NFTs has exploded since late 2020, and there are obvious reasons why they have generated such a high level of interest. One of the main advantages of NFTs is that they present opportunities to buyers who are willing to take risks. For example,the Bored Yacht Ape Club has propelled the world of crypto forward by embracing the notion that it is still an area of experimentation and exploration.
There are also several other significant upsides to the use of NFTs:
- They make markets far more efficient by streamlining processes and supply chains.
- They offer enhanced security via blockchain technology, which allows for easy verification and tracking and reduces the potential for hacking and forgery.
- The path of ownership is incredibly transparent to anyone on the blockchain.
- Transfers between users are fast and straightforward.
These attributes apply to all forms of NFTs, and they are particularly important for those with use cases beyond collectibility. The combination of security, portability, transparency, and decentralization makes them ideal for use in a number of functions on web3.
What Role Do Utility NFTs Play in Web3?
Experts predict that the web3 blockchain market will be valued at $23.3 billion by 2028, an enormous expansion from 2021's valuation of $2.9 billion. NFTs are a huge part of this expected growth because they help to create a functional, useful transactional system on the web.
Web3 refers to the concept of a new kind of internet service utilizing a blockchain. Web3 transactions are conducted using tokens rather than traditional currencies. This includes both fungible tokens like Bitcoin and non-fungible tokens or NFTs.
The term web3 represents a progression from the first era of the internet, web1, in which the majority of systems were decentralized and community-governed. The modern internet age is known as web2 and features centralized services run by large companies like Apple, Amazon, and Facebook.
The expected shift toward web3 is based on the idea that a decentralized web offers enhanced privacy, security, and financial benefits to users rather than corporations. Defining features of web3 include:
- Artificial intelligence and machine learning
- Free of intermediaries
In order for this system to work, it's necessary to use new forms of currency and transactional processes. NFTs align with this shift because they allow users to interact and make purchases directly from the source. For example, an artist can sell a work of art directly to a buyer rather than going through an auction house or gallery, which acts as a gatekeeper and collects a commission.
Potential Applications of Utility NFTs
Utility NFTs have already become a part of the web through sales of assets like concert tickets and access to parties or events. However, this only scratches the surface of the potential of NFTs.
NFTs are expected to play a greater role in the purchase and sale of property. For example, the deed to a home could be an NFT rather than a physical document, which would simplify the closing process and ensure that documents are protected from fraud, destruction, theft, or loss.
This same principle could apply to other major purchases, including forms of transportation like cars. The entire transaction history for that particular item is recorded in the digital blockchain ledger, creating a system of extreme transparency in which information like the number of previous owners of an item is readily available to a buyer on the blockchain.
Other potential applications include college profiles. In this case, a prospective student could post an NFT profile that colleges could then bid on by offering scholarships. Similarly, a gig worker could post a professional resume NFT and potential employers could bid using benefits and wages.
How Does a Business Start Selling Utility NFTs?
There is much to learn about the role that utility NFTs can play in the future of business. However, there are already incredible opportunities to capitalize on the NFT market, which experienced massive growth in both sales and the number of users in 2021.
To learn more about how to use a branded NFT marketplace to expand your Web3 presence, contact the experts at Anterdit today.