The Non-Fungible Tokens (NFTs) have seen a significant evolution in a relatively short time, moving from being digital collectibles to becoming utility NFTs. A utility NFT is a type of token that has a specific purpose within its ecosystem.
As such, it is more than just a digital collectible or art, rather, it has practical applications that give it value. This guide will explain in greater detail what the NFT utility meaning is, key use cases of utility NFTs, and list some utility NFT projects you might be interested in, among other things.
Why Utility Matters in the NFT Ecosystem
Real-World Problems
NFTs with utility are often used to solve some real-world problems, often acting as solutions to challenges in different industries. NFT utility ideas have spread this kind of token to a number of industries, such as art, music, entertainment, and gaming, but also real estate, healthcare, education, logistics and supply chains, and even crowdfunding and community building.
NFT applications may differ from industry to industry and they can offer exclusive NFT perks or contribute to different industries in other ways. But, the fact remains that they are becoming an essential part of blockchain technology, as the real-world NFT use cases continue to grow.
Community Engagement
NFT utility services have also noted that the relationship between utility NFT creators and their consumers tends to become deeper and more meaningful. For example, many groups may have NFT membership which creates a unique type of community, where only those with the NFT can access the token-gated content.
It can also lead to personalized experiences in specific NFT ecosystems, or maybe even the metaverse, where only those with the right token can get NFT-powered access to the metaverse assets.
Key Use Cases of Utility NFTs
Token-Gated Access
A lot of various groups, industries, and alike want to provide content only for their specific community members, which is something that utility NFTs can help with. By distributing the non-fungible assets to said community members, they can ensure that only specific people can access exclusive content and events, or use their NFTs as proof of membership.
DeFi and Staking
Another NFT utility is to combine the unique properties of non-fungible tokens with financial mechanisms enabled by the DeFi sector. NFT functionality on decentralized platforms typically has rather specific use cases — allowing users to earn rewards and/or access specific DeFi mechanisms.
In some cases, NFTs may be allowed as collateral for those who might wish to take out DeFi loans, but NFTs can also have simpler utilities, such as serving simply as the key that enables access to DeFi platforms.
Real Estate & Asset Tokenization
Over the years, combining virtual assets and real-world assets became a common practice, especially when it comes to real estate and various commodities. Utility NFTs have allowed for fractionalization of assets, which makes it easier to achieve partial ownership of expensive commodities or even real estate.
In this scenario, they enable ownership, verification, and even trade of various goods via the blockchain and smart contract technology.
Gaming and Virtual Worlds
Utility NFTs have also found their use cases as gaming tokens. In fact, the gaming industry was among the first to openly accept them. Many crypto-related games use utility NFTs, which are tied to specific in-game assets, whether those are in-game items, skins, in-game currency, playable characters, or something entirely different.
This serves as one of the best NFT innovation examples, as the gaming industry could be revolutionized if this approach goes viral and starts being used in AAA titles of the future.
Virtual worlds also fit into this category to an extent, where metaverses allow users to purchase digital plots of land and, in most cases, do whatever they want with them. Holding the utility NFT serves as proof of ownership, it gives access to using your virtual parcel of land, and grants you the ability to use it for various purposes, including testing, building, coding, and more.
Intellectual Property & Licensing
Lastly, utility NFTs can also allow creators to tokenize intellectual property. This means that you can create something, tokenize it, and have an easy way to prove not only that you are the owner of the creation, but also that it is the original. What’s more, it becomes much easier to transfer ownership, handle licensing, and alike.
This truly revolutionized the way creators can prove ownership of digital creations, which are extremely easy to copy, download, and repost. In some cases, proving ownership of such assets is next to impossible, but not with utility NFTs around.
Prominent Utility NFT Projects
Best Examples of Utility NFTs
To get a better understanding of utility NFTs, consider some of the best utility NFTs that have seen major success, such as VeeFriends or Bored Ape Yacht Club.
VeeFriends is a utility NFT collection created in May 2021 by Gary Vaynerchuk, a known entrepreneur and influencer. The collection focuses on specific utilities such as community, access, and learning. The access utility comes from the fact that each unit acts as a ticket to VeeCon, a yearly event that focuses on innovation and creativity, and last for several days.
Each VeeFriends NFT also conveys a life lesson, which technically grants them a learning utility as well. As for the community part, it offers special perks to community members, such as exclusive access to events, but also mentoring sessions, and additional content by the same creator.
Then, there is the Bored Ape Yacht Club collection, also created in 2021, but this one was designed by Yuga Labs. It also focuses on community, membership, and exclusivity, and Bored Ape NFTs have been known to get quite expensive.
Owners have access to exclusive merch drops, events, and similar benefits, and they can access an annual event that often sees major music performances, various community meetups, and alike.
Emerging Utility NFT Projects
If you are interested in joining some upcoming utility NFT projects early and become a core member of their communities, consider the following utility NFT examples:
- New Wave Crypto — An upcoming project that promises special OG perks and lifetime access to OG members, particularly the first 500 who sign up for the whitelist NFT access.
- Deco! — An NFT project that grants users unique access to bi-annual global events for holders and collectors, offering free flights for 4 years, access to exclusive giveaways and party-only collectibles, limited-edition clothing, food, drinks, music, and extraordinary decorations.
- Midnight Paws — The Rebellion Begins — An NFT project that offers access to exclusive giveaways and community events, as well as early holder bonuses and voting rights for future expansions.
- Exclusive R0ar Society — A collection of 10k unique ETH-based NFTs where each of them acts as a key to the exclusive ERS community, offering access to The Penthouse Suite, events, and IP licensing opportunities. Other than that, it also has airdrops, various unique NFT perks and benefits, governance opportunities, and more.
- Ark of Noah — An upcoming collection that will see launch on February 1, 2025, which features 10,000 NFTs and grants access to a PvP NFT quiz Game, dally raffles and giveaways, exclusive drops, engaging Discord games, and exclusive access to various events and collaborations.
The Future
Trends to Watch in NFT Utility
As with other parts of the crypto and blockchain industries, the NFT sector is constantly evolving and going through trends. This will continue in years to come, as innovation continues to reshape the industry further.
Experts predict that utility NFTs might start playing a larger role in proof of ownership, and especially in community building and engagement, which can already be seen with so many community-focused projects.
Some are also predicting that NFTs may see greater levels of integration with the Internet of Things (IoT) sector, as NFTs and IoT enjoy a synergy through supply chain transparency, secure data storage, ownership, and unique identifiers.
Lastly, experts also say that tokenized physical assets and immutable NFT-based digital records could have a large effect on the transparency of Decentralized Physical Infrastructure Networks (DePIN). As such, they could bring greater transparency and governance capabilities, which could revolutionize sectors like decentralized energy grids or shared wireless networks.
However, these are not the only sectors where utility NFTs could grow as trends, as breakthroughs could happen in virtually any area, be it legal and governance applications, education and professional development, healthcare and wellness, or some other area, so keep an eye out on new developments at all times.
Challenges Facing Utility NFT Adoption
Unfortunately, for all their potential benefits, utility NFTs also face certain barriers. One of the main ones is high entry cost, as the NFTs with great utilities also come with a hefty price tag, especially when it comes to those that promise exclusivity in any aspect.
They can also suffer from complexity and accessibility issues when it comes to non-technical users. In other words, they must become simpler to use in order to see wider adoption.
Environmental concerns have also been mentioned, as many blockchains are energy-intensive, which could be frowned upon in a world that is growing increasingly green. Finally, there has been limited interoperability among NFTs, as most are locked in a specific ecosystem, which limits their usefulness.
Not to mention that there is still a major lack of regulation and consumer protection, although this is something that might change in the future, especially in the US, which could become more crypto and blockchain-friendly as of 2025.
How to Identify a Valuable Utility NFT
Metrics To Consider
As usual with crypto-related projects, not all utility-based NFTs are created equal. Many projects could be low-quality or just a bad investment. To combat this, you must do your research and consider the following when choosing an NFT to buy:
- Practical benefits — know what you are getting from the NFT you are buying.
- Earning potential — Consider whether the NFT generates passive income or if it has resale potential
- Supply and Demand — How many NFTs are there in the collection? A low supply could generate greater demand
- Community engagement — Does the project have an active community?
- Creator’s reputation — Make sure that the creator is reputable and learn if they have other successful collections. This could help you avoid scams.
Avoiding Scams and Low-Quality Projects
Speaking of avoiding scams, it is no secret that the NFT sector, like the rest of the crypto industry, is commonly seeing fraud. The best way to avoid getting caught up in one is to do your research of both the project and the team behind it.
Make sure to evaluate its roadmap and see if it is sensible and feasible. Also try to assess community engagement, but also avoid FOMO. You should also consider the smart contract security, watch out for phishing attempts, and check the IP rights and ownership of the NFTs before buying them.
Conclusion
The NFT sector has lost a lot of its hype over the last few years, but there will likely always be a market for utility NFTs, which provide actual benefits. This guide explained what utility NFTs are, why their utility matters, and what are their key use cases. We also mentioned some prominent utility NFT projects, and also a few that are coming in the near future, as well as potential future trends in the sector.
Utility NFTs could definitely be a valuable purchase if you keep security and various metrics that could give them value in mind. And, if you wish to learn more about how to create and launch an NFT collection, or get some free NFTs in 2024 and 2025, feel free to check out our guides on these subjects.