What is NFT Utility?
NFT projects all fall somewhere on an extremely wide spectrum of utility. Some have none; others are life-changing. The best way to evaluate a project’s utility is to look at its returns.
It’s about profit.
If you are just looking at which collection’s utility brought holders the highest returns, the obvious answer is Bored Ape Yacht Club. Holders were airdropped a mutant serum NFT for every ape they owned. Consequently, a Mutant Ape Yacht Club NFT was created by applying a serum to a regular Bored Ape.
Mutant Apes were released in a public sale for 3 ETH each. Almost immediately after they launched, mutants were selling for over 7 ETH. They dipped to 3 ETH for a while but came back with a vengeance in late 2021. By the end of January 2022, they broke a floor of more than 25 ETH. (If they held long enough, holders were essentially given $70k for free.)
Now that is utility.
Some NFT projects claim that a fully playable game is utility in itself–and it sort of is–but it pales in comparison to profit-centered benefits. For example, would you rather invest in an NFT that gives you presale access to later profitable mints or an NFT that allows you to play a simple game?
If you wanted to play a good game you wouldn’t look at NFT collections, you would go to the Steam or Xbox store. Sure, many NFT games are fun, but they can’t compete with AAA game studios.
How NFT Projects Generate Holders Profit at Low Cost
Most NFT utility boils down to profit, but there are a million different ways of achieving it.
The most common method is to give holders access to special benefits, like a 2nd generation of NFTs or exclusive physical merchandise. The dev team makes out great because it’s cheap to create a secondary collection, or even a batch of merch compared to the mint revenue.
The best example of this is the new project Hausphases. The founder, Assa, wanted to create a community around the NFTs with the goal of paying back their loyalty. Owning a Hausphase gives you access to at least 3 other NFT collections. One of which, called MURI, is a gritty anime-inspired collection that is gaining traction quickly.
Was that all he did?
Assa also went through the trouble of buying a painting from the famous artist Takashi Murakami and fractionalizing it into 144 NFTs. He then airdropped them to Hausphase holders on Valentine’s day. Some sold for more than 2 ETH, although they are sitting at about 0.7 ETH now. The airdrop cost Assa close to half of the mint revenue
Talk about treating your customers right.
They minted out a couple of months ago for 0.02 ETH apiece and because of the enormous utility, the floor broke through 1.4 ETH (a 70x return). It has dipped down since, but if the team continues to bring value to holders, it will likely go higher.
Stake to Earn
The second most common way to bring holders profit is play-to-earn games (P2E). P2E games are all the rage right now. The whole market saw the game-changing P2E collection, Wolf Game, skyrocket to a 17 ETH floor because it was so profitable. Since then everyone has been looking for the next 1000x P2E play.
When you hear play-to-earn you are probably thinking of a fully playable game with some kind of monetary component. This is unfortunately almost never the case with NFT P2Es.
Most of these games are little more than a collection of NFTs, a staking page, and a token. Usually, the NFTs are staked to earn tokens which can then be used to mint more NFTs.
The better projects include other incentives to spend the tokens. The worst ones just let both the token and NFTs become worthless as both supplies rise out of control.
Where’s a good one?
An example of one of the best P2E games out there is Ether Orcs. It’s the OG of on-chain gaming and is one of the most consistent NFT collections out there. While Bored Apes and Cool Cats fell hard over the past couple of weeks, the Ether Orcs floor barely moved. The Orcs have built a brilliant and extremely complex tokenomics system that appears to be sustainable, for now at least.
That can’t be said for almost all of its competitors.
NFT Utility is Quickly Evolving
Earning a token or gaining access to exclusive content or mints isn’t the only kind of utility for NFTs. The market is constantly innovating and there have been a few amazing projects with great ideas. One of the most interesting of these is LinksDAO.
A LinksDAO NFT is essentially a membership for a decentralized autonomous organization (DAO) with the goal of buying a golf course and building a luxury leisure club. Holders will be exclusive members and get loads of perks after the course is acquired and transformed.
LinksDAO hasn’t reached its goals yet but it’s still inspiring to see innovation in real-time.
Because of teams like LinksDAO, NFT utility is changing rapidly and will look completely different in a year or less. Until then, though, the only utility that really matters is profit.
Finally, here are a few projects to watch this upcoming week, accompanied by short descriptions:
- Wave Catchers is a new project pioneering how whitelists are distributed
- It’s a simple collection of 3,334 pixel-art surfer themed NFTs that give you access to an on-chain whitelist marketplace
- Whitelists are often extremely hard and tedious to get on, so anything that makes the process better stands out
- The Citadel is yet another play-to-earn game NFT collection with a space theme inspired by the game EVE Online
- It has an incredibly dedicated team that reminds me of the Ether Orcs team
- There is no mint date out yet, but it’s smart to keep an eye on this one
- Raid Party is one of the most popular play-to-earn NFT collections, with an amazing user interface for the game
- While they were extremely expensive when the project launched, RP NFTs have dipped significantly recently
- Even though the NFTs are down, the returns from the game are much higher than nearly every other P2E
Want to keep up with Henry and NFTs 24/7? Join him in AlphaMint’s dedicated NFT Discord server, and don’t forget to check more interesting projects in the previous volume of NFTimes.