2021 saw the rise of the non-fungible token (NFT) market, making NFTs one of the most talked-about topics for the proverbial office cooler-chitchat crowd around the world. The burgeoning amount of money associated with it, spearheaded by the Beeple sale at Christie's, makes it one of the fastest-rising assets during a time when the COVID pandemic has caused central banks to haemorrhage money at about the same speed as a unicorn puking rainbows from late-night binge-drinking. That was earlier in the year. Fast-forward to 6 months later, and it's clear that just being a pretty picture is not enough. Today's NFTs have gotta have more substance in order to keep the interest going. This brings us to the next phase of the NFT evolution: NFTs with Utility.
In this article, we'll take a look at how Utility NFTs came about, why we need them, what drives the demand for them, and some use cases or projects that promise to continue disrupting certain parts of society in a good way.
Let's Talk about NFTs First
In case you stumbled onto this article and can't make heads or tails of what a NFT is, here's a short primer: a NFT, the initialism for Non-Fungible Token, can be one of the following:
- a form of content such as a file or a copy of a file.
- a digital receipt or certificate that grants ownership rights to something.
- a digital record involving a link to the metadata of the NFT.
Most of us are probably most familiar with the first kind, which is mostly the kind used for artworks. If you'd like to learn more, check out Guy's video on this topic.
Why Own a NFT?
There lies, within most of us, a desire to own and even collect the things we like. We also want to share what we like with others, whether it’s simply basking in the joy of sharing or that it carries the underlying desire of showing off. While a million copies of the Mona Lisa exists around the world, the one hanging in the Louvre is still a major attraction because it is the original. If the museum ever had a fire situation, I’d bet my last crypto token that the Mona Lisa would be at the top of their to-save list.
When what we like gets validated by others, that thrill of having made the right decision before everyone else can be as intoxicating as being the first to cross the finish line with your parents watching. Yet I’d say this is an unintentional side effect. It wasn’t until much later, when the opportunity for reselling came up and others were willing to pay heaps for it, that the original desire to collect became “What’s the next best thing to buy for resale purposes?”.
NFTs with Utility vs Utility for NFTs
While the secondary market is still thriving and growing by the day, the visionaries in this space quickly realised its potential for something much more than just a unique thing commanding “I say so” prices. The market was also getting crowded as variations on the same theme mushroomed overnight. But it isn’t enough to do what others have done before. There needs to be a new way to give people a reason to get NFTs. Which brings us to a question - “What if the NFT has additional uses?”
At this point, I’d like to point out there’s a subtle difference between a NFT with utility vs having utility for NFTs:
Utility for NFTs
The answer to “Where else can a NFT be introduced to make things better?” is what drives up adoption rates for NFTs. There are ways for various industries to incorporate NFTs into their business, bringing about much-needed improvements. Some examples include real-estate, luxury goods, tickets to events, etc.
NFT with Utility
On the other hand, “What other benefits can I get from this NFT other than holding it?” looks at NFT usage in a slightly different light. The short response is: it’s a key that opens doors. Holders of this type of NFT is akin to having a membership card to an exclusive club. Holders gain access to a myriad of activities reserved for members. These include parties, airdrops, early access to new collections etc.
In a sense, there’s nothing new invented here. Many companies have a membership program that gives members certain privileges. Plastic is cheap (or expensive, depending on which side of the climate change convo you’re standing on). As an aside, I've heard that the Centurion card by Amex, which has one of the most exclusive programs in the world for their cardholders, has metal in it. In our current digital age, of course it makes logical sense to have a digital version of a membership card. How then, can NFTs put a new spin on a well-known operating model?
Bored Ape Yacht Club
In terms of fame, the Bored Ape Yacht Club (BAYC) is just as well-known as the Cryptopunks. An individual ape cost an average of $200 and the entire collection went for $24.3 million, according to Sotheby's. Unlike the punks, where the NFT is simply an artwork, holding a BAYC NFT is akin to having lifetime access to a members-only area which includes:
- The Bathroom - A collaborative artistic project where members get to draw a single pixel on a canvas every 15 minutes.
- Mutant Apes Yacht Club (MAYC) - The creators dropped a serum to the wallets of the NFT holders. After injecting their apes with the serum, a mutant version of the ape appeared.
- Bored Ape Kennel Club (BAKC) - Each ape gets its own dog. This is also airdropped to the members.
- Merch store - Exclusive merch only for members.
- Apes vs Mutants Mobile Game competition - Released on Dec 5th 2021, the game is meant to be played between Ape and Mutant Ape NFT holders. It involves apes throwing a bunch of bananas, then pizzas, at each other. Good thing that food waste is a non-issue in the digital world.
Access to any of the above requires a log-in with the Metamask wallet. The website will check whether you have an ape. If not, it will ask you to head over to OpenSea to get one. Even though most of the mutant apes and dogs are already available on the secondary market, these are all put on sale by the original members.
The BAYC team also allow the members to do what they like with the apes, including commercialising them as they wish. The team had their members voting for ways to use the funds, including donating a total of $850,000 to various ape-related animal charities. They were one of the first to introduce additional functions to their NFTs. This has proven to be a popular strategy for later projects looking to build a community and give NFT holders more bang for their buck.
Another new project that is about to kick off with some interesting real-world initiatives in collaboration with the NFT is Ghetto Sharkhood. Similar to BAYC, this NFT project features a collection of 10,000 sharks in various incarnations. At the time of writing, the sharks have not been minted yet. The minting date is set for Dec 12th, 2021.
The Ghetto Sharkhood team has two roadmaps, one for the project and another that's closely-tied to reality. The project roadmap has the usual features typical of a NFT project such as:
- Ghetto Shark Fund aka community fund to decide on fund allocation.
- Ghetto Sharkade for playing NFT games. NFT holders can also host their own games and invite others to play.
- Ghetto Shark Coin for staking and spending at the merch store.
- Ghetto Shark Impact Fund for supporting social and environmental programs.
- Ghetto Shark Partnerships with other companies and blockchains.
What makes this project worth a second look and stands out from the rest of the collectible-type of NFTs is their Ghetto Sharkhood Impact Roadmap. This is different from the one for the project as it's closely-tied to reality. The sector that they are focused on is agriculture.
A portion of the proceeds from play-to-earn games in the Ghetto Sharkcade are used to fund programs that support agricultural communities, especially in rural areas. The idea is to help farmers produce food in a sustainable manner, thus making a positive impact on their lives.
Education is one of the initiatives for the team. It covers education for children and technical knowledge for farmers to enhance their operations. They also have plans to create a network of different farming communities that can support one another. This network also extends to linking buyers with farmers in a more direct manner. After that, the next phase is to provide healthcare services to women and children in developing areas. Last but not least is being involved in beach cleanups and animal conservation efforts, amongst others.
I will be keeping a close eye on this project to see if it will be able to live up to any of its plans for social improvement. If it works, this could be a new model for future projects, which will ultimately benefit those in need.
One name I come across time and time again when looking into NFTs is Gary Vaynerchuk aka GaryVee and his project VeeFriends. Who is this person and why is he often mentioned when talking about NFTs? In short, he's a wine critic turned entrepreneur active in digital marketing and social media. He started a NFT project called VeeFriends and launched the first collection in May 2021. The purpose of the project is to provide a blueprint for others on how to successfully start a NFT project.
He saw, early on, the importance of having utility added to the NFT tokens instead of just artwork. Unlike most NFTs, the artwork for VeeFriends is really nothing to boast about. However, it's what the token unlocks for the holder that gives them their real value.
There are three types of NFTs:
- Admission NFTs: 9400 pieces
- Gift Goat NFTs: 555 pieces
- Access NFTs: 300 pieces
All the NFTs gives holders 3 years' access to VeeCon, Gary's own conference on business, marketing, ideas, creativity, entrepreneurship, innovation and fun. It's basically a mega-networking opportunity as the current floor price for the cheapest NFT starts from slightly under 9 ETH.
As the name states, the Gift Goat allows holders to get gifts from Gary in addition to the admission to VeeCon. He will be mailing out 6 mystery gifts per year to each NFT holder.
Access NFTs are the top-tier ones because this gives the holder access to Gary's time. Whether it's doing an activity together or 1:1 face time virtually or in-person, this is like a meet-the-idol moment for his fans. I do wonder if it's possible to meet him more than once with the token. Also, how would something like this work on the secondary market? I can't imagine him spending his time meeting people all day long. He'd never get any work done!
GaryVee has succeeded in showing marketers the potential of NFTs for branding and marketing. He's also succeeded in pushing NFTs to the mainstream crowd through his own reach. Many of the NFT holders probably aren't crypto-savvy at all. They're just his regular fans who want to get an opportunity to have more engagement time with him.
This model has certainly perked up the eyes and ears of the business community and a few of them have taken the plunge into the the world of NFTs. Congratulations to "Mr. Vee" for increasing adoption of blockchain technology and what it has to offer.
"Meta Optimist" by Clinique
Clinique saw beyond the artwork potential of NFT when they released one of three editions of "Meta Optimist", a NFT piece that also gives the holder free products for 10 years, and a 50-year-old product called Almost Lipstick Black Honey that's usually out of stock. "Modernise loyalty" is how Carolyn Dawkins, SVP of Clinique Global Online, explained the consumer engagement and marketing strategy. R/GA Head of Creative Nick Pringle also offers another telling description of NFTs' potential: ".. it's a piece of code that unlocks a series of functions." Those two quotes pretty much sums up what NFTs are capable of in the future.
Other fashion brands saw another way for NFTs to make an impact with their sales by offering virtual goods in exchange for physical ones. This is what lifestyle brand Axel Arigato offers together with Aglet, an app that transforms physical steps into in-game currency. The currency can then be used to purchase virtual sneakers. By completing the collection in the app, they get a special pair of in-game virtual shoes, which lets them be in the draw for a real pair of shoes by Axel. Even if they don't manage to get the real shoes, showing the virtual shoes in the stores nets them a free pair of socks. Talk about cross-promotion between the real world and the metaverse!
In a society where exchange values are prized over experiential value, NFTs seek to marry both by combining artwork with utility. From a simple digital artwork, to being the key opening all kinds of doors, NFT's versatility promises a not-so-far future where it will quickly become part and parcel of our everyday lives. Through the four projects highlighted here, we see that it is a tool like any other that can be tailored for all kinds of purposes. From social impact to selling more stuff, this piece of tech has the power to change the way we engage with one another, whether as a consumer, collector or creator.
What's even more exciting is that we've only just scratched the surface of NFT's utilitarian function. As with everything in the crypto space, developments are happening at a dizzying pace. While NFTs have been around since 2017, the speed of development in the past year until now can truly be described as exponential. It is feasible to believe that there will be more ideas and initiatives in the future that can further induce more ways for NFTs to become part of our lives.
Disclaimer: These are the writer’s opinions and should not be considered investment advice. Readers should do their own research.