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The overall trading volume of NFTs increased from $200 million in 2020 to over $12 billion in the first quarter of 2022; that’s an insane amount of increase. There must be more to NFTs than just the excitement in the market for that value to be maintained over time.
We are still in the initial phases of figuring out how NFTs can be used in the real world. However, these unique tokens can be something other than JPEGs stored on a blockchain. Utility NFTs, also known as NFTs that have genuine use cases, have the potential to become the driving force that turns NFTs from an investment craze into a new way to work, play, and engage with one another.
Utility NFTs are a general category of NFTs that can be used for various purposes in the real world. They are one of a kind, and, like other types of NFTs, they are often developed using smart contracts. They are also indistinguishable from one another in terms of being transparent, secure, and immutable.
However, in contrast to normal non-fungible tokens, the primary focus of utility NFTs is not the collectibility of the tokens themselves but the real-world applications, benefits, or perks they provide to holders of NFTs.
How Utility NFTs Work
The technologies of blockchain and smart contracts drive NFTs. Each transaction is recorded on the public ledger distributed over the network to maintain the most excellent possible levels of immutability, transparency, and safety. Most utility NFTs thrive on the Ethereum blockchain network because it allows them to access smart contracts.
In addition, they use cryptographic encryption so that all transactions are as secure as possible and cannot be altered. The ownership of these non-fungible assets is offered through smart contracts, limiting their ability to transfer.
Applications of Utility NFTs
The craze for utility NFTs is on the rise. The development of these digital assets is attracting significant financial investment from various industries. In this section, let’s focus on various applications for utility NFTs.
As a Ticket
One of the most important ways NFTs can be used is as digital versions of tickets to exclusive events. Some projects have already given holders of their utility tokens special access to events that are only open to those with the tokens. Because each NFT is unique, event organisers can check these digital VIP tickets just like they would check paper tickets and don’t have to worry about ticket fraud.
In The Gaming Industry
People used to play games on big machines in arcades, but now they play simple games online and in real-time. Traditional gaming companies are now spending a lot of money to add blockchain and NFTs to e-games to draw people worldwide.
Play-to-earn games allow people to use gaming skills to make money while sleeping. Some players use NFTs to make it easy to switch between games. Others use them to claim ownership over in-game items like avatars, merch, clothes, etc.
With the help of utility NFTs, players can keep the things they buy in-game even after they leave the game. They can keep the assets on the blockchain or trade them for money or other assets on NFT marketplaces.
As the Internet moves into a new era, metaverse projects have started adding NFTs like virtual land. Doing your research, investing, and getting your NFT plot is all you need to do to own a piece of land. Some projects may also let people who own virtual real estate rent their land to others. However, we also see cases of NFTs being used for brick and mortar real estate deals too.
Art and Fashion
With the launch of several projects, the fashion and art worlds have shown that they are very open to utility NFTs. NFTs are digital versions of real-world things like merch, clothes, jewellery, art pieces, etc. Fashion brands can use NFTs to set up online auctions where users can place bids. The blockchain will run the auction and ensure the winner can be proven. In the future, users may be able to try out different looks by putting on virtual clothes in the metaverse and using augmented reality.
You should consider purchasing one of these utility NFTs even if you are not a dedicated NFT collector because it may come with a perk that can be useful to you. Utility NFTs have a range of purposes and are expected to see even more use cases develop in the future. These applications include receiving passive income and having exclusive access to events and products.
The possession of a unique NFT asset is one factor that contributes to the value of an NFT; another factor is its utility. Creators of NFTs and platforms that support them can keep releasing additional utilities in the future to assist in the growth of an exclusive community of NFT owners. NFTs will become increasingly useful for the people who make them and those who own them as Web 3.0 continues to develop.
Suppose you are an investor considering including non-fungible tokens in your portfolio. In that case, you should consider the utility of non-fungible tokens because these NFTs have more applications and value than merely collectable NFTs.