Research institutions don’t hold back when publishing lofty future valuations of the NFT (non-fungible token) industry. One such report puts the 2030 valuation of the NFT ecosystem at over $211 billion.
What should the layperson or a non-web3-native business exploring NFTs make out of that number, except that it's a huge one?
Will the valuation be driven by exotic art pieces selling as NFTs? Or will the hyperactive communities of gaming NFTs pump NFT prices to that valuation? And above all, what should a brand or user bet on?
While yes, art projects and gaming NFTs like Bored Ape Yacht Club (BAYC) and Axie Infinity helped NFTs gain the much-needed initial momentum, the future course of NFTs looks very different.
Real-world utilities will drive the further adoption of NFTs. Soon, they will no longer remain these out-of-reach expensive digital collectibles but also evolve into something that every person owns and uses in their day-to-day lives.
NFTs are digital tokens based on a blockchain that represent the ownership of a real or digital asset, and they have various use cases beyond art.
Web3 brands primarily focus on art-oriented NFTs, while web2 brands offer more utilities with physical and digital NFTs.
Fortune 1000 brands like Adidas, Nike, Gucci, Prada, and Dolce Gabbana are entering the NFT space and better able to understand user needs from NFTs compared to smaller web3 brands.
The ongoing evolution of NFTs from a speculative asset to an asset with utility-backed value shows that we’re early in the NFT space.
State of the NFT Industry: We’re Still Early
For the uninitiated, NFTs are digital tokens based on a blockchain that uniquely and immutably represent the ownership of a real or digital asset. No one NFT can be the same as another, nor can it be subdivided or replaced with a new one.
So, imagine the ownership documents of a real estate property represented as an NFT. It would make it impossible for someone to forge, alter, or replace the documents. Besides, since the blockchain permanently records all transactions related to an NFT, the documents’ provenance and verification become extremely simple.
That’s only one of the many use cases of NFTs. You can even imagine NFTs as digital passes. And almost anything real or virtual that requires ownership record and verification for access can use an NFT.
But currently, web2 and web3 brands are just starting to explore NFT use cases.
A quick look at the NFT ecosystem would prompt someone to believe that art is the most popular current use case of NFTs. That’s reasonable to think because NFT art projects enjoy the most clout for now.
However, data from a Dibbs research report that analyzed trade volumes of over 200 NFT projects across 10 major NFT marketplaces on three blockchains suggests otherwise. The survey, which we exclusively revealed at NFT.NYC, shows that identity, not art, is the most popular NFT utility as they made up about 26.5% of all NFT activity.
Sweet surprise, isn’t it?
That was followed by art, content, DAO (decentralized autonomous organization) ownership, and merch NFTs. Event and reward NFTs also contributed a considerable volume alongside other utilities involving gaming NFTs and more.
While art still makes up a huge portion of the industry, it’s slowly becoming a small part of a wide and diverse NFT utility spectrum.
This ongoing evolution of NFTs from a speculative asset to an asset with utility-backed value shows that we’re early in the NFT space.
To get a fair understanding of what’s cooking around NFTs across web2 and web3 companies, let’s dive into how companies from both spaces are approaching NFT utility.
Approach to NFT Utility: Web2 Brands vs. Web3 Brands
When you think of NFTs from web3 brands, you think about primarily art-oriented NFTs. Be it BAYC, Moonbirds, or CryptoPunks, all of the most popular NFTs were launched as art NFT projects. Digital fashion NFTs from the likes of Nike-acquired RTFKT also make up a significant chunk of web3 NFT projects.
But the original idea behind an NFT collection doesn’t limit the utility that projects can build on top of them. That’s how things currently stand for NFTs under the umbrella of Yuga Labs — the web3 NFT company — as it’s building an immersive metaverse called Otherside. The metaverse will bring to life the otherwise static art NFTs such as BAYC, World of Women, and Cool Cats.
Similarly, NFTs from most web3 projects come with a promise of a future use case in the form of in-game assets, characters, or a game pass. Some web3 projects even use NFTs to distribute ownership and voting rights within a DAO.
Web2 brands, on the other hand, are writing a different NFT story altogether. Instead of basing the NFTs on potential future use cases, they are more about the here and now.
While NFTs from web2 companies accounted for less than 5% of all NFT transactions in Q1 2023, they offer more utilities than web3 native NFTs. To be specific, an NFT from a web2 brand has 2.5 use cases on average while web3 NFTs have only 1.5.
What’s more interesting is, web2 brands diving into NFTs are Fortune 1000 brands, from Adidas and Nike to Gucci, Prada, and Dolce Gabbana. With their sharp focus on user experiences and extensive resources, they are better able to understand user needs from NFTs compared to the relatively smaller web3 brands.
In fact, web2 brands are offering physical and digital NFT utilities as compared to mostly digital ones from web3 NFTs. That makes sense given web2 brands entering NFTs have a strong presence in the real world through their offline retail stores and IRL events.
Now, let’s check out some live examples of how web2 brands are leveraging NFT utility.
3 Major Web2 Brands with Utility-Focused NFTs
There are many web2 companies that are experimenting with NFTs to offer interesting utilities. But for the purpose of this blog, let’s check out three major brands: Adidas, Breitling, and Starbucks.
Adidas ALTS: Events, Merch, and More
ALT or ALT[er] Ego by Adidas is an identity and profile picture (PFP) NFT collection that has 8 traits with varying rarities. And each ALT NFT acts as the alter ego of the owner, and comes with four primary utilities:
- Exclusive or early access to physical and virtual products from Adidas across its online and retail stores.
- Access to tickets for real and virtual events hosted by Adidas.
- Access to a token-gated discord community.
- Opportunities to co-create Adidas products and experiences.
Breitling — Provenance
Breitling is a Swiss luxury watch company that leverages one of the most fundamental properties of NFTs — provenance. Every Breitling watch now comes with an NFT to prove ownership, thus moving a step ahead of the paper-based ownership certification.
Having the ownership linked to the NFT makes it extremely simple to transfer ownership or trace ownership history. The Breitling NFTs also offer access to unique services such as an online estimation tool and the Breitling Trade platform.
Starbucks Journey Stamps: Events and Experiences
Starbucks Journey Stamps are NFT collectibles that Starbucks users can collect by engaging with Starbucks Odyssey, the web3 extension of the highly popular Starbucks Rewards Program.
To earn these NFT stamps, users must complete journeys, which are quests to build knowledge about coffee and Starbucks. All stamps feature Starbucks artwork co-created with Starbucks partners and individual artists. But that’s not all.
The stamps also add point value based on their rarity, which users may eventually redeem for exclusive benefits and experiences such as:
- A virtual espresso martini-making class.
- Access to merchandise and artist collaborations.
- Invitations to exclusive events at Starbucks Reserve Roasteries.
- Trips to Starbucks Hacienda Alsacia coffee farm in Costa Rica.
Final Thoughts: The Web2 vs. Web3 NFT Utility Story
It’s quite apparent based on our research report that NFTs from web2 brands have better present utilities as compared to their web3 counterparts. The physical presence of web2 brands also gives them an edge over web3 brands in terms of how they can utilize NFTs.
But that is not to say that web3 brands are getting nowhere with NFTs. As compared to early 2021, NFTs have come a long way in how they’re positioned in the web3 space. From acting as identities in the form of web3 domain names or being used as tickets to real-life web3 events, NFTs from web3 companies are finding a strong foothold. NFTs had a strong Q1 2023, with trading volumes rising by 137.04% to $4.7 billion, the highest since Q2 2022.
The evolution of NFTs and how they represent physical and digital value would be exciting to witness over the next few years. If you are a business planning to tokenize physical or digital items using NFTs, schedule a demo with Dibbs today to see everything we can do for your NFT strategy.
View our full presentation from NFT.NYC 2023 below:
