Even in the crypto community, several people disdain non-fungible tokens (NFTs). Can this perspective change as NFTs evolve and bring greater utility?
The NFT market exploded at the height of the COVID pandemic, with multi-million dollar sales of digital art capturing global attention. These sales, including a staggering $69 million NFT by Beeple, occurred despite the global economy’s downturn.
Though the NFT market’s value has dropped since the initial hype, it could be seen as beneficial for the industry. This drop has motivated NFT creators to come up with more innovative offerings, adding real-world utility to attract holders beyond digital art enthusiasts.
Utility – The main driver of value
A significant driver for NFTs’ value is utility, which has led to the emergence of different NFT classes. NFT utility refers to benefits provided to NFT holders, such as memberships, rewards, access to events, and passive income opportunities.
One famous example is the Bored Ape Yacht Club (BAYC), an NFT collection that has evolved into an elite club offering numerous perks for holders. BAYC NFT holders get access to exclusive activities, a ticket to the BAYC metaverse, airdrops for new NFT collections, and branded merchandise available only to NFT holders.
Types of NFTs
The push for utility in NFTs has led to a new class of NFTs. Unlike the art-centric BAYC, projects like Ghetto Sharkhood and DeGods have created utility NFTs focusing on enabling novel Web3 projects.
These utility NFTs have found applications in various domains. In gaming, Axie Infinity NFTs represent characters required to play the game and earn rewards. Axie Infinity exemplifies the emerging genre of “play-to-earn” games, where gamers can earn cryptocurrency for completing tasks and winning battles.
In metaverses like Decentraland and The Sandbox, NFTs serve as virtual land titles, allowing users to develop virtual land or start a business within the metaverse.
In the art world, the Artfi project uses NFTs for fractional ownership of physical artworks, increasing accessibility to an elite investment opportunity. NBA’s Top Shot uses NFTs to grant rights to exclusive game clips.
These new utility NFTs cater to a different user base. While collections like BAYC appeal to hardcore NFT enthusiasts, the newer NFTs target a broader audience. Video gamers may not be interested in digital art but would be willing to spend money to play an interesting game and earn from it.
Innovation is key
The NFT landscape has diverged into two distinct spaces, but the lines are getting blurred as innovation continues.
Yellow Duckies, an NFT collection primarily targeted at enthusiasts, also serves a vital role within the Yellow Network’s ecosystem. Yellow Network, a new Layer-3 blockchain, uses Yellow Duckies as a Canary Network, a testing ground for new features and updates. Inexpensive Yellow Duckies NFTs allow transactions and smart contracts to be tested with minimal risk.
Yellow Duckies’ popularity and its function as a Canary Network illustrate NFTs’ ability to marry monetary value and experiential value.
NFTs are for everyone
NFTs hold significant potential for a wide range of applications, promising to transform our interactions with digital platforms. We are still in the early days of NFTs, and with rapid development, we can expect more applications to evolve, enticing everyone to start believing in NFTs.