NFTs are on the main stage now, billions of dollars have exchanged hands simply because of the ownership acquisition of these Non Fungible Tokens. One cannot really say why such insane amounts of money are poured into JPEGs on-chain but one can tell that if this is to continue after all of the hype, NFTs need to make some convincing offerings and use cases that justifies the current hype-value attributed to it.
Non Fungible Tokens, NFTs for short, are unique cryptographic tokens on the blockchain which serves as a certificate of ownership for any digital content. Content in this regard could be anything ranging from a JPEG, gif, short clip, text document, or even a tweet. Their immutable and non-interchangeable nature makes them suitable to be guaranteed content holders to prove that ownership is for whoever holds the keys to the tokens. A simple yet profound invention that has been and still can be applied in a number of ways unprecedented. However its most popular use case at the moment is in the ownership of art JPEGs and gifs, especially cartoonish or computer-generated portrait shots of a real or fictitious animal.
Many would argue that JPEGs or gifs are technically not the most difficult to create and duplicate — a photograph takes less than a second to capture and tweets are just accidental thoughts launched out for people to see etcetera. While this is fundamentally true, the creative process put in, to design art, capture an epic shot, make a video or even draft a tweet thread is invaluable and can almost not be price tagged. Still, this doesn’t completely justify $10M dollar purchases of crypto punks or $7M XCOPY’s caricature art value. However, we can make good peace with this when we consider how the value ascribed to art is almost always sentimental and how humans make irrational and impulsive purchases every time. NFTs just made this a little bit more obvious.
Sentiments are fickle and the foundations of a whole industry cannot be left to stand in such uncertainty. Standing on sentiments, a piece of single news is all it takes to send the hype cascading down, with billions of dollars wiped out of the market that any crypto veteran is already used to. When it comes to this, the ones who HODL, do so either because they are just made of diamonds especially their hands or because of the benefits (besides capital gains) they can access holding any particular NFTs — The NFT Utilities.
It should be clear now that this article is not about the general use of NFTs to serve as a digital content ownership certificate. It’s about the benefits derived from holding the certificate of a particular art JPEG from a collection. Some holders are fine with just being able to prove ownership of the content held within their NFTs and could not be more indifferent about the market. But the $25B market is driven by the emotionally-detached NFT flippers and so, supply must change form to the nature of demand.
They key to sustaining this “owned JPEG” industry then becomes attaching a real-world value to incentivize holding NFTs even when the market takes a sharp turn downwards. Some of the utilities notable collections use are outlined as follows;
- Full IP and Commercial Rights Transfer — HODLers would like to fully own their NFTs in order to build a brand or an identity around it. It almost makes no sense to pay all those millions of dollars for an NFT and not have the right to use it to make more money. Early NFTs like Cryptopunks had these rights restrictions, until Yuga Labs, creators of Bored Apes Yacht Club, bought them over. The market glaringly reacted positively as the sales of Punks jumped up.
- Direct and Direct Monetary Incentives — Teams with an ecosystem of products build inclusive NFTs which interact with the product ecosystem and leverage benefits exclusive to holders like discount fees, gradual distribution of monetary reserves, and airdrops. You didn’t receive any ape coins because you weren’t a bored ape holder. Either by collaboration with third-party staking services or providing the service directly, NFT projects now offer holders the possibility of even staking the non-fungible tokens to earn a passive income.
- Access to Platforms — Starting with discord groups, NFT collections have private channels with access granted to only holders of the project NFTs. It stretches more than that to apply across a full product restricted to only holders.
- Access to Celebrities, Events and Social Gatherings.
- Voting rights
NFT finds its value from a number of factors, sentiments being the first one. However, in order for it to move past being a bubble, especially in this frenzy that it’s being hyped to, collections are integrating tangible benefits to keep holders from letting go when the market takes a sharp turn downwards. This includes monetary incentives, access and rights to give holders a reason to hold as they can see how they benefit from “a JPEG” IRL. Indeed, sustainability can be found in utilities.