Unlike Collectible NFTs, Utility NFTs produce value beyond just emotional and social acceptance (or speculation).
For the most part, these functional NFTS serve two purposes: 1) they act as “Keys'' that give the owner exclusive access to things (i.e. like a private concert or secret Slack/Discord room) 2) they are NFTs that generate revenue or other valuable assets.
Let’s dive deeper into these and where they could go.
NFT as Keys (Access-based NFTS)
One of the first utility use cases we are currently seeing is NFTs acting as keys. As NFTs are linked to wallets, they can be used as keys to gain access to exclusive communities or events.
NFTs as Keys to Private Communities
As people use NFTs to enhance their identities, communities of those identities are forming. Collab.land and others have launched Discord plugins that check your wallet for an NFT before you enter. In those locations, since the room is exclusive just to NFT holders, owners can bond by their shared identity and talk about relevant topics.
It may seem weird but you can think of these new communities as the new BMW owners club, the Breitling Watch community or an exclusive country club. In all cases these communities bring people of similar values together through a common purchase or brand.
The community/Identity combination seems really powerful and may be something that outlasts all speculation. I imagine access-based NFTs exploding in 2021 as celebrities and brands experiment with private channels for their best NFT-owning guests and new NFT collections built specifically for communities start to emerge.
NFTs as tickets to events
In addition to long-standing communities, NFTs are emerging as tickets to one-time events like virtual concerts, meet-and-greets with celebrities and more.
Get Protocol has launched a platform that lets venues create and sell NFTs of tickets for in-person events. The NFT is linked to the person’s wallet and won’t show the QR code of the ticket until the event starts, making it much harder to create photocopies/fraudulent tickets. Plus, as all tokens are NFTs, the venue can receive a share of any secondary proceeds.
Expect more innovations to occur in ticketing as venues continue to try to solve the problem of scalpers/fraudulent tickets as well as seize the opportunity to make extra revenue on secondary sales.
NFT Tickets to Virtual events or rooms.
Just like NFTs can offer tickets to in person events, NFTs will be a prime way to sell and grant access to events in virtual worlds. Imagine a conference or club in a virtual world where you need a special NFT ticket to get access. The access is what gives the NFT utility and therefore value.
NFTs as Keys to other Assets
NFTS as keys can go well beyond just tickets and communities. Method.fi, for example, launched a creative use of an NFT that is basically an access key to a crypto wallet. Place tokens into a wallet and have it controlled by whoever owns the NFT. In this case, it is being used as an escrow wallet so you can stake tokens and earn interest without storing them on another platform.
This type of asset “Key” however could be used to solve numerous other problems such as ensuring that a set of NFTs are transferred at one time, loans for blocks of NFTs, or a layer to help escrow in other situations.
Metaverse/Digital World Utility NFT as Keys
One huge area for Utility NFTs to thrive will be the Metaverse, which you can think of as digital worlds (Think the next versions of Second City, World of Warcraft, Fortnite, Roblox etc…). The most successful metaverses to date have been locked in by private companies. However, there is an opportunity for an open Blockchain-based metaverse to emerge that leverages the community’s ability to build and generate income. In these scenarios, NFTS will likely be used for almost every asset - allowing players to much more easily buy/sell/create their goods on marketplaces. Some examples:
Markets for online avatars have appeared in past games via the black market. A “farmer” grinds away at a game like World of Warcraft or Pokemon Go, getting an avatar up to a high level in the game who has “superpowers” and can do more in the game. They then sell that avatar to someone else who wants access to the fun without the grind. There is definitely a question whether this would be detrimental to the Metaverse and therefore prohibited.
Game Item NFTS
Like a full avatar, if game items become sellable via NFTS, a marketplace will emerge for rare items. Again this is currently seen in games like World Of Warcraft where people will sell rare magical weapons and in Pokemon Go where rare “shiny” Pokemon are bought and sold. While some of the items are for collectible purposes, others make the game easier to play or let you do challenges you would not be able to complete otherwise.
As discussed below, people will be able to create and build Metaverse properties (like houses, land, stadiums, concert halls, haunted houses) and either make money through access fees or by selling them to others.
In the future, access is going to be a huge need solved by NFTs.
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