Utility NFT Benefits: Bringing Value to Web3
Popular tokens have one thing in common: They prioritize utility NFT benefits as part of the experience
Most of us first learned about NFTs (non-fungible tokens) because of their relation to digital art, but the technology is capable of much more. NFTs that function as utility tokens act as a gateway to the new possibilities afforded by Web3 technology. By embracing utility NFT benefits, brands will be better equipped to engage audiences in any industry, from music to apparel and beyond. Let’s dig into some examples of successful NFT projects and how you can implement their lessons into your project.
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What Are Utility NFTs?
Utility NFTs are digital tokens that serve at least one digital- or real-world use case. For example, a music NFT released alongside a new album might unlock downloads for additional songs or alternate recordings. A sports NFT, on the other hand, may award game tickets or access to exclusive athlete meet-and-greets to token holders.
As the public becomes more familiar with the technology, brands are experimenting with new utility features that appeal to newcomers and Web3 early adopters alike. With this approach, brands can enhance the value of NFT projects and use them to build communities of engaged fans.
What Are Some Examples of Utility NFT Benefits?
Utility NFTs have benefits ranging from product purchases to governance over project decisions. Our recent analysis of trending projects on OpenSea identified the utility NFT benefits that tend to resonate with audiences, each of which falls into one of the following categories.
Digital Proof of Ownership
Since NFTs use integrated smart contracts by design, one significant utility is the option to streamline buying, selling, and trading of property. The most common example is asset tokenization — the technique of minting NFTs to represent valuable items, such as trading cards or vintage cars. While the object is safely stored in a vault, the corresponding token is available to trade on NFT marketplaces at market value. This approach lets collectors and asset holders sell rare items while reducing the likelihood of damage before the transfer.
This includes digital deeds for land or lodging. Roofstock’s Head of Web3 Initiatives, Sanjay Raghavan, put his house up for sale as an NFT-minted property, allowing SFR (Salesand Foreclosure Resource) sale and settlement to be completed via NFT marketplaces. Web3 tech is being used more and more to simplify homeownership and access to digital assets. Whatever class of property someone wants to sell, utility NFTs provide a degree of transparency and liquidity that is tough to match in traditional markets — but making the best of this new medium requires established expertise and technology. Get in touch with Dibbs to learn more about the possibilities of monetizing real-world assets for your brand.
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NFT utility does not just refer to the rewards token holders can claim — it can also give them a voice in how an organization grows. Some token creators use their NFT projects to support decentralized governance, much like how modern stock trading lets stakeholders vote on company decisions. Projects like DAO Maker, Aragon, and 0x use these models so users can vote on how an organization can develop. Turning over governance to dedicated community members may be an unappealing proposition for some brands, but you get to decide just how much sway token holders should have — with everything from product feature requests to deciding how the internal token economy will operate.
The most immediate benefit of NFT utility is also the simplest — token holders can earn exclusive rewards for associating with a brand. These rewards may be physical or digital, but all enhance the token’s value with products that will never be available through other channels. Music NFTs have many examples, with Kings of Leon helping to define the medium by bundling digital music tracks, artwork, and concert tickets with the token for its album When You See Yourself.
Turning to other industries, the Nike-owned virtual sneaker brand RTFKT is one of the leaders of NFT rewards programs. Initially founded to create shoes and apparel for metaverse avatars, the company expanded into physical merchandise with real-world versions of its digital clothing line. Meanwhile, metaverse and video game companies are experimenting with avatar skins, in-game items, and other cosmetics that will only be available to token holders through NFT partnerships.
Web3 makes it easier for brands to build engagement with vibrant fan communities. Due to their limited numbers, NFTs effectively grant access to an exclusive club that shares mutual interests. Bored Ape Yacht Club was among the first to kick off this trend with its social media avatars, but brands can build connections that take this utility even further.
For example, many popular NFT projects drive community engagement by granting access to digital or in-person experiences. On the digital front, token creators might build private Discord channels where token holders can meet, showcase their NFTs, access exclusive content, and share mutual interests. NFTs can also unlock access to real-world events such as concerts, sporting events, and celebrity meet-and-greets. Thanks to the public nature of blockchain ledgers and their secure authentication process, it’s far less likely for non-token holders to crash these parties.
Bringing Utility to NFTs
Utility NFT benefits can be as varied as blockchain ecosystems themselves, but some consistent techniques can help ensure one’s tokens will trend on marketplaces. First and foremost, creators should never feel limited to one utility — the more utilities an NFT has, the more valuable it becomes for brands and customers. When we analyzed the most popular NFT projects on OpenSea, we found that 64% of tokens include at least two utilities while 43% have three or more. RTFKT, an NFT brand that produces physical rewards, digital rewards, and access to an online community, is just one example of this trend.
Brands stepping into the Web3 space for the first time should also keep in mind that few NFT projects succeed by standing alone. The expertise and technology that let companies mint tokens differ from those used to market them to audiences, distribute custom rewards, or vault tokenized assets. That’s why partnerships are so essential when building utility into your NFTs. At Dibbs, we understand the value and utility of tokens across multiple industries and leverage our market expertise to help organizations monetize their property.
Interested in learning more? Contact us today.