March 1, 2023
By Anjali Kochhar
Non-Fungible Tokens (NFTs) are one of the newest investment options and a funky one at that. However, they are marred by one understanding – NFTs are just another rendition of digital art, having no particular intrinsic value. But, this understanding is likely to change with the emergence of utility NFTs. There is, however, one catch – a huge chunk of NFT investors has never heard of utility NFTs.
According to a recent report by DappRadar and Alsomine, 60 per cent of NFT consumers have never heard of “NFT utility”. Only a mere 6 per cent have invested in one or more utility-based non-fungible tokens. This lack of awareness restricts NFT to a “profit-making” asset, rather than something more.
What is Utility NFT?
Put simply, a utility NFT is a type of non-fungible token that can go beyond collecting, trading, or earning a profit. Using blockchain technology, these tokens can be used as virtual gateways in applications or programs that store consumer data.
A simple example of utility NFT can be concert tickets. For instance, you are organising a concert for 1000 people. How do you invite these people? By issuing 1000 individual and unique tickets. Each ticket will have a unique code, making it “non-fungible” or irreplicable. However, each ticket will confer the same right to those invitees – entry to the concert.
Now imagine, you decide to go paperless while adhering to the “uniqueness” of each ticket. Here, NFTs can be used to invite people. Of course, digital tickets do exist. But this example just goes to prove the “utility” of NFTs, while securing their unique character.
Limited understanding of NFTs
At the moment, utility NFTs are still in their nascent stage. Why? Because their use cases in practical life are limited. However, experts see potential in them, to go beyond just blockchain-based JPEGs.
While research is one limiting factor, the other factor is pertaining to a lack of awareness. The DappRadar-Alsomine report suggests that a mere 13 per cent of NFT enthusiasts have come across the term ‘utility NFTs’. But, they did not seem to dwell much on it.
Here’s what the report suggests：
- 60 per cent – never heard about utility NFTs before
- 11 per cent – have ventured into utility NFTs but never invested/owned one
- 6 per cent – have purchased one or more utility NFTs
- 10 per cent – purchased and used the asset
What do these figures indicate? That while experts suggest the wide scope of utility NFTs in future consumerism, this scope is still a mystery for most consumers. However, this situation is likely to change starting in 2023, with the onset of two projects – ImmutableX (IMX), and Orbeon Protocol (ORBN).
Scope of ImmutableX (IMX)
Put simply, ImmutableX (IMX) is a type of decentralised exchange (DEX), that provides a rapid, secured, and private mode for trading cryptocurrencies and NFTs.
IMX differs from a regular crypto exchange by being 100 per cent trustless, which means users have total control over their funds, eliminating risks of centralised failure or fraud.
What intrigues investors about IMX is its ability to process transactions 600 times faster than any regular NFT exchange, thus enhancing user experience. Additionally, it would not require any extra energy to expand, thus, providing a sustainable and scalable platform for NFT trading.
Then, the question remains – how is IMX useful in increasing the scope of utility NFTs? Well, NFTs are largely used to sell digital art or make a profit through trading. Other use cases might come to the forefront gradually. Till then, IMX is likely to encourage more investors to trade NFTs, through its secured solution.
With more investors leaning towards NFT, its utility is sure to increase. Those interested in crypto trading may also make use of this platform for trading. Thus, it’s a win-win situation for all.
Orbeon Protocol (ORBN) – Widening utility of NFTs
While IMX will increase the utility of NFTs in conventional use cases, Orbeon Protocol (ORBN) is likely to boost another use case entirely i.e., fundraising for start-ups. ORBN functions as an investment platform based on fractionalising NFTs.
For instance, if a start-up X wishes to raise funds, ORBN will mint a unique NFT for the firm. Then, it will be fractionalized or break that NFT into different values, enabling people to come aboard and own a fraction of the token. In exchange, start-up X will receive funds to continue their business.
Another unique aspect of ORBN is its “fill or kill” mechanism. It instantly connects companies to potential investors through NFTs. However, if the company fails to reach its funding goals, investors would get their money/NFTs back.
With the booming start-up culture, companies are likely to venture into the utility of NFTs, for faster and secure funding. However, as reiterated before, lack of awareness is still a bigger issue that utility NFTs continue to face.
About the author
Anjali Kochhar covers cryptocurrency stories in India as well as globally. Having been in the field of media and journalism for over three years now, she has developed a sharp news sense and works hard to present information that goes beyond the obvious. She is an avid reader and loves writing on a wide range of subjects.