NFTs Are More than JPGs: Redefining NFTs by 10 Emerging Utilities

NFTs, or non-fungible tokens, are digital assets that are becoming increasingly popular due to their unique characteristics and potential uses. Built on blockchain technology, what makes NFTs unique is that no two are the same, setting them apart from other types of digital assets –– such as cryptocurrencies –– that are interchangeable and divisible. NFTs represent a wide range of both digital and physical assets, from collectible items and artwork to digital media and even virtual real estate.

In the context of NFTs, utility is a term used to describe an NFT’s purpose or function, such as the transferring of real estate ownership, accessing a virtual world like the Metaverse, or participating in a blockchain-based game. These are just a few of the NFT utilities that are driving interest among collectors, investors, and creators today. But we’re just beginning to discover and understand the widespread value that NFTs can bring to the real-world, both physically and digitally.?

As NFTs continue to grow beyond their original utility as a PFP - and their public perception as merely expensive JPGs - it’s important to evaluate how the most common utilities have changed since the technology’s inception. To interpret this evolution, we evaluated the 100 most successful NFTs projects on OpenSea and uncovered the 10 most common types of utility for NFTs within two categories: those that provide both digital and real-world benefits as well as those that provide digital benefits only.

Here, I will break those down:?

NFTs that provide digital and real-world benefits can do so via utilities such as:

1. Members can redeem their NFT for a physical object of desire (e.g. trading cards)
2. Members access exclusive events in real life (e.g. concerts)
3. Members receive exclusive merchandise (e.g. sneakers)
4. Members acquire real estate using a digital deed

NFTs that provide digital-only benefits can do so via utilities including:

1. Members have access to content specifically designed for them?
2. Members own a unique piece of art that can be displayed digitally
3. Members have a unique picture that can be used on Twitter, Instagram, and more (e.g. Crypto Punks)
4. Members can vote in decentralized autonomous organizations
5. Members use skins and other custom items to enhance their gaming experience
6. Members receive digital rewards, tokens, NFTs, and more

Identifying these top ten utility types is important to understanding the future of the NFT market, but it’s equally significant to have a pulse on the sentiment around NFTs overall, particularly as their cultural purpose is debated. To understand sentiment - which is particularly challenging given the nature of NFT ownership - we recently tapped Dibbs’ marketplace to secure and analyze sentiment data. We found that more than half of NFT enthusiasts want more utility from the NFTs they invest in. Similarly, 52 percent want collections to be usable in future digital innovations like the Metaverse and video games.?

The data collected from OpenSea supports that NFT utilities are evolving, making the market for them larger and more committed over time. In fact, we found that the most in demand utility was for content (21% of trading volume in the last 30 days) followed by gaming, events, and rewards distribution. Contrary to what you may see in the media, NFTs are becoming stickier, more usable, and more interesting opportunities for say IP holders and brands to leverage than before considered.?

OpenSea’s data indicates that an NFT’s discrete utilities play a big role in trading and sales activity. For instance: collections with multiple types of utilities (64%) traded at faster rates and higher values than collections with only one utility (35%); collections with two or more types of utility made up 73% of all trading volume; and sales volumes increased for collections that had both physical and digital utilities. Combined, these findings show a clear mindset shift around NFTs today; their usability is continuing to grow.

As an avid NFT enthusiast who sees the growing usefulness for these assets in both physical and digital worlds, I believe we’re approaching a tipping point in the market. Many people think of NFTs as a one-hit-wonder, with value only having been present in PFPs or other digital content-related opportunities, but in fact the NFT market is dynamic and fascinating in terms of the utilities that are possible and emerging. It’s more essential than ever to fully understand the key drivers and trends that are having the most impact on NFT sales. We need Web3 strategies to emerge for brands and IP holders that go beyond Discord servers and token-gated platforms to give NFT holders what they really want: more value and greater utility over time.?