Non-fungible tokens (NFTs), unique cryptographic assets manifested on various blockchains, particularly Ethereum via the ERC-721 standard, have been a multi-faceted and transformative phenomenon emerging in the digital age. Initially, they gained public attention through headline-grabbing sales in the digital art and collectibles sector. Examples like Twitter founder Jack Dorsey’s first tweet selling for 2.9 million USD or Mike ‘Beeple’ Winkelmann’s digital artwork “The First 5000 Days” fetching 69 million USD at auction, threw a spotlight on this emerging technology and gave the future of NFTs a new meaning.
However, this attention, primarily centered on the art and collectibles space, might overshadow the breadth and depth of NFTs’ evolution and their potential utility across diverse sectors. As a quick primer, NFTs represent unique data on the blockchain, providing digital scarcity and enabling the tokenization of both digital and physical assets. They create verifiable digital ownership and foster innovation in areas beyond digital art or collectibles.
According to Bloomberg data, trading volumes of digital art and collectibles fell 97% from their peak in 2022, and the number of NFT holders experienced a downturn in Q1 2023. Despite this downturn in the art-centric NFT space, the potential of NFTs transcends these fluctuations.
With a forecasted global market size reaching 211.72 billion USD by 2030, growing at a CAGR of 34.2% from 2023 to 2030, NFTs are stepping out of their niche and integrating into multiple fields such as commerce, supply chain finance, logistics, and identity management. These sectors are leveraging the advanced functionality of NFTs, unlocking a multitude of complex use-cases from tracking and tracing goods, creating digital twins for enhanced inventory and asset management, to improving identity verification and streamlining transactions. As the landscape of NFTs evolves, the focus shifts from the exclusivity of the tokens to their expansive utility, which is set to reshape a broad spectrum of industries.
From baseball cards to NFT utility and upgraded experiences
One of the most prevalent issues that transpired out of the wide adoption of NFTs was the static nature of the user experiences. From the use cases that revolved around art and sports collectibles trading or in-game custom items, NFT businesses have started focusing more on the additional value and enhanced experiences that they can provide to buyers by expanding the utility of their NFTs beyoned digital collectibles and towards utilising NFTs as vehicles to offer enhanced experiences, VIP access and more.
Instead of simply owning an NFT representing a music artist, a collector will now be more interested in the perks that come with it, which may include VIP access to future shows, access to presales or limited edition merchandise. A CoinGecko report found that NFT utility emerged as the top reason for buying an NFT. At least 3 out of every 4 NFT holders consider how much utility a collection offers or what benefits they can get from holding it, before buying.
Utilizing NFTs brings mutual benefits for both consumers and businesses, significantly transforming technical aspects of loyalty programs. Users gain unique experiences and additional value encapsulated within NFTs, while businesses can differentiate themselves by customizing tokens to encourage loyalty.
Businesses can leverage NFTs to revolutionize loyalty programs, offering exclusive, secure, and transparent rewards in the form of unique digital assets. An example of this in action is in the sports industry, where some teams have implemented fan tokens and NFTs as a way to foster loyalty amongst their fans digitally. This not only encourages fan loyalty but also paves the way for advanced, transparent, and engaging reward systems backed by blockchain technology.
Beyond loyalty, NFTs can also enhance processes and provide better customer experiences in some industries. A telling example of this can be organising live events. The ticketing process that allows access to these events plays a crucial role in ensuring a smooth and successful experience for attendees. By utilising blockchain and NFT technology for ticketing, event organisers can benefit from a more efficient approach in distribution, accountability, fraud/bot prevention and overall control over the whole event ticketing process. Event organisers can manage cost-effective and expedited transactions through bulk or batch processing, allowing multiple assets to be sent simultaneously. The use of NFTs as tickets can also mitigate the risk of counterfeit tickets, protecting both attendees and event organisers alike.
Enhanced token utility, longevity and unique experiences – how NFT utility makes businesses stand out
As we venture into 2023, we see NFTs’ utility becoming more multifaceted and extending into various sectors, reshaping business models and enriching user experiences. Let’s delve deeper into these evolutionary advancements, highlighting their impact on businesses.
Digital Twins and Product Passports. A key development in NFT utility is their use as ‘digital twins’. This essentially means creating a digital replica of a physical asset, leading to a myriad of benefits for businesses and supply chains. These digital twins, facilitate the creation of ‘digital product passports‘, offering comprehensive data about a product such as its origin, how it was manufactured, and its complete history. This opens up new levels of transparency and traceability, enhancing the trust factor for businesses and consumers alike.
NFT utility in real estate. NFTs, unique tokens on the blockchain, can represent real estate properties, thereby tokenizing them. This tokenization, alongside the use of smart contracts (which are self-executing agreements coded into the blockchain) paves the way for peer-to-peer transfer of ownership and disintermediation in the real estate industry.
When a property-based NFT is created, it can be linked to a smart contract encapsulating the sale terms. The exchange or purchase of this NFT can trigger the contract, transferring ownership rights to the buyer and recording the transaction on the blockchain. This process minimizes the need for intermediaries and simplifies real estate transactions. It provides a faster, transparent, and decentralized method for property transactions, revolutionizing laborious processes. Moreover, NFTs open the door to fractionalized ownership, allowing properties to be divided into tokens owned by multiple holders, broadening investment opportunities.
NFT utility for voting and permanent records. The application of NFTs for voting and permanent records can revolutionize data preservation and identity verification in digital spaces. Soulbound tokens (SBTs), proposed by Ethereum co-founder Vitalik Buterin, are a form of NFTs designed specifically for these purposes.
SBTs essentially enable individuals to create a digitized and secure version of their identity and personal records. These could include a wide array of data ranging from academic achievements and medical history to employment records. Each record can be minted as an NFT on the blockchain, providing a unique, tamper-proof, and easily verifiable identity token.
In terms of voting, NFTs can represent voting rights in a secure and transparent way, making them ideal for digital elections. Each voter could be assigned a unique NFT, which can be used to cast a vote. The use of NFTs ensures that each vote is independently verifiable, cannot be duplicated, and is permanently recorded on the blockchain. These utilities of NFTs provide a secure, transparent, and decentralized way to manage and validate personal data and voting processes, providing a groundbreaking approach to identity verification and democratic participation in the digital world.
Dynamic Nfts. Dynamic NFTs, minted using a governing smart contract, open up further use cases for NFTs by allowing off-chain data to be utilised to make changes to the NFTs metadata after it has been minted. This facilitates use cases across a range of different industries. For example, in the gaming industry, dynamic NFTs could underpin digital assets such as weapons or avatars that could be updated or upgraded as a player progresses through the game or unlocks new levels.
From the examples above, it’s clear that utilizing NFTs in a way that facilitates enhanced token utility can help a business reach a wider audience, unlock new revenue streams, drive efficiency, unlock innovation and even foster customer loyalty.
The future of NFTs is not defined merely by speculative market trends or by extraordinary auction prices that marked their early history. Rather, it will be shaped by their increasing utility across various sectors – from art and entertainment to real estate, logistics, and identity management. As the NFT landscape evolves, businesses are beginning to explore the utility of these tokens and how they can be leveraged to offer unique experiences, enhance customer loyalty, be harnessed as digital counterparts in supply chains, can power digital product passports, streamline property transactions, and even create a new paradigm of personal data ownership.
As we step into this new era of NFTs and token utility, finding the right partner to navigate this digital revolution becomes crucial. That’s where Protokol comes into play. As a leading Web3 development partner, Protokol offer a wide range of NFT development services, from a whitelabel NFT creation studio to custom NFT solutions built to your exact needs. Working with Protokol can enable your business to:
- Offer Enhanced Token Utilities: We specialize in developing custom solutions that increase token utility, delivering added value to your users.
- Deliver an Engaging Experience for Token Holders: We don’t just create a technologically sound product but we also provide an engaging and user-friendly experience for your token holders.
- Unlock New Business Models: We help you explore and unlock potential new revenue streams and business models through the innovative use of NFTs and blockchain technology.
Contact us to learn how we can build a custom NFT solution for your business and how we can deliver enhanced token utility for your users.