The Nuances of Utility in NFTs
The word NFT entered the English language in 2014. However, the word began to take off in the general lexicon as a buzzword in early-2021, when Christie’s sold a work by the artist Beeple, as an NFT that combined over 5,000 images to create one main image, for c. $69,000,000. NFT is a term most often associated with so-called ‘crypto-art’; a trend popularized by large groupings of NFTs, which are called collections, such as Cryptopunks or the Bored Ape Yacht Club (BAYC). These projects are a huge part of the NFT ecosystem and have contributed to its growth, but at their core, NFTs are a new form of technology. The ways this new technology is and will continue to be perceived, and how it brings value to owners, is much more important.
This quantifiable value of an NFT is known as its ‘utility’.
Utility, also explains the ways that NFTs can be utilized.
Admittedly—beyond its aesthetic value—Beeple’s famed artwork was sold by Christie’s for just over $69 million in March 2021, and the work has very little utility in the sense of what can be done with it. Rather, its utility is rooted in bragging rights that its owner possesses about the work; it offers social cache.
However, what differentiates MetaMundo’s NFTs are their 3D quality. Unlike a 2D painting—and very unlike a 2D NFT — which can only be admired for its visual splendor; 3D NFTs can quite literally be inhabited, as a villa. And so they offer their owners, much more utility. For example: when have you ever heard of someone having a party with friends inside of a painting? It’s not possible. Though a party with 50 friends in a VR villa? Possible in the metaverse.
NFTs can have utility in a variety of different ways, and in the upcoming years, the different use-cases and ways of using an NFT will develop further in nuance. One of MetaMundo’s key features of NFTs we mint, when it comes to utility, is interoperability: the ways digital assets can be accessed and experienced in different metaverses, seamlessly. At the moment within the metaverse, web3, and gaming fields of development, the various types of utility present in NFTs can be generally summarized using five primary perceivable categorizations:
One of the main reasons that people invest, in general, is for passive income. In the traditional sense, this occurs via shares of stock in a company, where the holder receives a yearly dividend from their assets of company shares. However, NFTs offer their owners, the opportunity for passive income in a novel, new, and different way, as opposed to traditional stocks and bonds.
Many NFTs offer the ability to stake — i.e. lock up, temporarily — in return for utility coins. These coins hold value and can be sold/traded for fiat currency, or in some cases, could even provide exposure to blue-chip NFT collections, whereby holding the utility coin gives you partial ownership of an NFT. A blue-chip NFT project is one that is highly sought after; often their floor price — the lowest priced NFT in a collection — is over $50,000, such as The Bored Ape Yacht Club (BAYC): one if not the most successful NFT projects created.
Being part of this tiny group of NFT holders—owning an ‘ape’—grants its owner special access to events that its creators throw, such as its epic multi-day long party with a yacht cruise, concerts, and more as part of NFT.NYC. So, in some instances, owning an NFT also grants its owner access to IRL events.
Another income-based utility that involves NFTs is known as NFTfi. What that essentially means, is blue-chip NFTs can also be used as collateral to take out a loan using different types of cryptocurrency, such as, for example, Bitcoin. Imagine in the future that you wanted to apply for a mortgage on a house; you could use your ownership of say, a BAYC NFT, to receive a decentralized loan.
Passive income can also be generated through royalties. This is especially popular with music NFT projects, where artists share a portion of their royalties with fans who own their NFT. This is an interesting concept, as it means both the fan and artist benefit from one another’s success — and this shared investment can also be mutually beneficial, such as with marketing.
Nearly all NFTs entail resale royalties, granted to creators, literally forever.
Experience and Exclusivity
The principle of exclusivity is key to NFTs.
Like in the traditional art world, rarity is value.
It’s one of the major drivers of collections, such as the BAYC. Just as in fashion (where there is a continual aspiration to follow the latest trends, though also set them; balancing the need to be an individual with the innate human desire to simultaneously, be part of a group); trends are ever-shifting when it comes to the desirability of NFT collections. Purchasing a blue-chip NFT literally buys holders, bragging rights to the exclusive NFT collection they bought into.
But what is the value of exclusivity?
Often these NFTs give access to a token-gated community.
In this case, the value derives from who is in the community. This means the NFT’s utility comes from the access and exposure that it provides its owner. Imagine being part of a club with the most famous celebrities, CEOs, artists, and sports figures — if such figures appeal to you, that is… it would have quite a high membership fee. Much higher than another club made up of a group of ten randomly selected people chosen off the streets of Manhattan, for instance. It is this invisible exclusivity — present in nearly every IRL social situation — which helps to determine value in the form of social inclusion.
An NFT can also provide access to exclusive events in the metaverse and IRL. This is one of the utilities that Metamundo’s The Metaportal: OG1500 NFT offers: access to exclusive experiences across a variety of metaverses, as well as IRL gatherings, such as parties, or side-arms of festivals and conferences that MetaMundo is present at. The best quality of this type of utility is that it truly is a fusion between the community of NFT holders and the NFT creator.
Many projects have very ambitious roadmaps; a roadmap describes how an NFT project will develop and expand over the near future. It will typically begin with an initial NFT drop, then even more utility will be offered—such as the introduction of a token, airdrop, and even virtual land sales. Essentially, this means that an NFT project’s utility will expand and develop over time.
A prime example of this is the maturation of the BAYC ecosystem. It has created something reminiscent of an index fund based on a specific set of intellectual property; which can be an artistic style, or a specific creator, allowing access to profits from all future projects. This is something Steve Aoki aimed to create with his Aokiverse: an extension of personal branding.
The final category is one that has seen limited development so far but will see great improvement in the next few years: how an NFT’s technology links it to the real world.
One clear application of NFTs is ticketing; this could be for the entrance to an event such as a festival or things as simple as purchasing a product. In this form of NFT, our IRL interaction with NFT technology would be no different from that of today, however, a derivative digital asset would be produced. This would have all sorts of applications, from providing a more effective resale of goods, to allowing comparing interests with others, in a new way.
It would add another layer to our digital presence and bring depth to in-person experiences. NFTs could also be used to represent expensive assets such as housing, this could simplify the long and tedious process of purchasing a house, and therefore, greatly reduce all the fees involved.
In some instances, regardless of if an NFT is 2D or 3D in format, sometimes an NFT is highly regarded by its owner due to the emotional resonance that the NFT evokes in its owner. In many ways, the utility of an NFT is dependent on its owner’s personal values: if you value parties and exclusivity and social cache—and can afford it—a BAYC NFT may be more your thing, as opposed to an inexpensive NFT by a relatively unknown artist. In this sense, NFTs and the reasons that they are bought entail a multitude of conditions on the part of collectors that align to create the reasons for collecting NFTs in the first place.
Sometimes, the reason for purchase is simply emotional: someone liked it.
But most often, there are underlying reasons—the desire for quantifiable utility on the part of the collector—for purchasing an NFT, as noted above.
There are many ways in which NFT projects can possess utility; the numerous possibilities will just continue to expand in the future. MetaMundo is helping to further push the boundaries of NFT utility through our efforts to create 3D assets that work toward creating a more interoperable and open metaverse.
For a deeper dive into some of the mechanics that will have an effect on utility, written from the perspective of art in relation to celebrity culture (aka: hype) and the finances of the art market that determine value, have a read of:
—Isabelle Graw, High Price: Art Between High Price: Art Between the Market and Celebrity Culture (Berlin: Sternberg Press, 2009).
MetaMundo is a curated marketplace for 3D scenes and assets, enabling anyone to own high quality 3D NFTs for use across the open metaverse. Powered by web3 technology, the scenes and assets available on MetaMundo are verifiable on the Ethereum blockchain. We developed our own NFT, specifically for 3D scenes and assets, which are metaverse-ready. Each of our NFTs contain a bundle of 3D files, optimized for use across the open metaverse — including versions, which can be used in high fidelity game engines and environments. MetaMundo presents exclusive drops to collectors from the world’s leading 3D artists, designers, architects, and brands — with creators receiving royalties from future sales. Every 3D NFT minted by MetaMundo can also be resold by collectors on secondary NFT marketplaces.
MetaMundo is backed by acclaimed metaverse funds, advisors, and angel investors.