As the NFT craze continues to sweep the art world and beyond, it’s important to take a step back and consider the true potential of digital assets. I believe it all hinges on utility NFTs.
During the ‘crypto winter’, we saw the NFT market in particular suffer, with transaction volumes declining. From January 2022 to September 2022, the trading volume of NFTs experienced a significant decline, falling from US$17 billion in value to just US$466 million, a drop of 97%.
Due to these significant declines, to keep the NFT industry above water, we need to establish where the problems lie and where the potential future stands in these digital assets.
Challenges current NFT holders face
One problem is that NFTs are still a relatively new and emerging technology. As a result, there is a lack of standardisation and interoperability between NFT projects and technologies.
This can make it difficult for users to understand and use NFTs, limiting the potential for new and innovative use cases. As with any new technology, there is also the chance of falling victim to fraud and scams. There will always be bad actors looking to take advantage of unsuspecting users, so it is important to be vigilant and use caution when buying or using NFTs.
Additionally, NFTs face regulatory challenges, as laws and regulations are not yet widely adopted to govern their use. This can make it difficult for businesses and developers to create and operate in the NFT space.
Alongside this lack of established operational frameworks, creators are also struggling to monetise digital assets. Moreover, there is a lack of scalability in the current infrastructure for NFTs, which can create issues with high gas fees, slow transaction processing times, and limited storage capacity – remember in 2021 when the Stoner Cats tv show NFT cost users US$700,000 in ETH gas fees? This can make it strenuous for NFTs to achieve mass adoption.
Lastly, there are still concerns about the environmental impact of utility NFTs, as the process of minting and trading NFTs can consume a lot of energy.
It is important for the industry to find solutions for some of these challenges in order for NFTs to reach their full potential. That potential could lie within utility NFTs.
While utility NFTs also have the potential to revolutionise the way we think about digital ownership and the transfer of value, there are also some challenges and problems that need to be addressed.
Utility NFTs have the potential to revolutionise NFTs
NFTs with real-life use cases, otherwise referred to as utility NFTs are important because they provide a new level of functionality and interactivity within digital assets. Unlike traditional NFTs, which are often nothing more than digital collectibles, utility NFTs have actual use cases and can be used to access certain digital goods or services.
Think of it like a key that unlocks a virtual world or grants access to exclusive content within a game or app. This added functionality can provide a new level of engagement and value for users, which is crucial for the widespread acceptance of NFTs.
Utility can mean many different things. For the Doodles NFT collection, holders gained the ability to create custom wearables for their original Doodles avatars on the Flow blockchain.
In other instances, such as with the Bored Ape Yacht Club, holders of the blue-chip NFT have exclusive rights to access online members-only areas, limited edition merch, real-world events and even free NFTs in some instances.
Even global iconic brands such as Adidas have gotten in on the act.
However it is important to understand that utility NFTs offer more than just new forms of engagement.
They also have the potential to revolutionise the way we think about ownership and the transfer of value. Decentralised marketplaces enabled by utility NFTs can lead to a more efficient and fair market, as well as open up new opportunities for creators and entrepreneurs. And by democratising access to digital assets, utility NFTs can help promote greater participation and inclusion in the digital economy.
Utility NFTs can be used to represent ownership of physical assets like real estate or collectibles. Most importantly, utility NFTs can foster a new form of community ownership and collaboration.
Or take the example of World Mobile a decentralised mobile network operator — that launched its EarthNode Utility NFT. The NFTs designate ownership of a World Mobile EarthNode, which will power its network, providing internet connectivity in under-connected locations across Africa and the United States.
By owning this NFT, people will have the opportunity to run an EarthNode, with the ability to validate transactions and secure the network. Node operators are rewarded with the native token for processing transactions and giving users access to the decentralised mobile network.
NFTs for the greater good
By allowing individuals to own these types of digital assets, NFTs enable the creation of decentralised communities where members can work together to develop and grow the asset for the greater good through a sharing economy.
This can lead to more sustainable and resilient forms of ownership, as well as foster a sense of shared responsibility and engagement.
NFTs like the EarthNode NFTs are ushering in a new era of utility-driven value back into NFTs. They not only signify ownership of an asset, but they also allow the ability to operate a vital piece of infrastructure utilising blockchain.
This use case has never before been implemented. The implementation of NFTs allowing for ownership of infrastructure along with ownership transfer in a decentralised way is driving innovation within the NFT space.
Furthermore, utility NFTs can enable new forms of decentralised marketplaces, where anyone can participate and trade goods and services. This can lead to a more efficient and fair market, as well as open up new opportunities for creators and entrepreneurs.
Bringing it all together
In summary, utility NFTs with real-life use cases are important because they provide a new level of functionality and interactivity within the digital assets, enable new forms of decentralised marketplaces, democratise access to digital assets and foster a new form of community ownership and collaboration.