The first wave of non-fungible tokens (NFTs) rode high on the phenomenon of FOMO (fear of missing out). Driven by scarcity and the potential to buy low and sell high, collectors rushed to be part of the NFT ownership club. As the DeFi landscape evolves and communities become more collaborative, NFTs need to be more than mere items of investment. Innovation and utility should be front and center of the next wave of NFT development.
NFTs for Membership
NFTs can be used as digital membership tokens to provide access to exclusive groups. The most popular example thus far is the Bored Ape Yacht Club (BAYC). BAYC NFTs function as badges of entry that allow holders to join a private Discord channel and access special members-only perks. BAYC has been an extremely successful test case for using membership as the core value offering of an NFT.
Where regular NFTs are driven by profitability FOMO, the membership strategy hinges on exclusivity FOMO. Holders want to be behind the velvet rope and in the company of like-minded individuals, often with similarly impressive asset portfolios. Using NFTs for community membership also helps to weed out players who are purely interested in investment and not collaboration.
Indeed, community can be considered a form of value and utility for NFT holders. However, the community in question has to provide tangible rewards for members. Many NFT collections have tried to employ this strategy and failed when they could not deliver community perks of value to their members. In the future, NFTs could be the standard entry protocol for groups that want to grow with the input from their members.
NFTs for Gaming
NFTs have extreme potential in the world of gaming and large changes are anticipated as more games are built around NFTs. Gamers are highly-invested in their digital avatars, identities, statistics, and statuses. They are willing to spend considerable sums to upgrade their online persona or unlock exclusive content that allows them to play in new worlds.
With DeFi moving into the gaming field, the decentralized nature of blockchain can power many innovative applications. Loot is an NFT project where NFTs are unique bags of items that can be used by holders across numerous distinct games. The same concept can be applied to using NFTs as gaming avatars that can be played and leveled up across multiple games, becoming more powerful and valuable with time.
The play-to-earn model is another way that NFTs are changing the dynamics of the gaming industry. Where game publishers used to own and control the gaming ecosystem, players can now contribute value and earn NFTs through interacting with the game. This paradigm shift turns games into collaborative platforms where players have ownership and say in how their gaming experience works.
NFTs for Asset Management
NFTs have been widely used for digital art asset management. As the trend continues, they may be the gold standard for artists and performers to manage their rights and licensing. With collectability being virtually non-existent since the proliferation of internet file-sharing, NFTs are helping to make digital assets valuable again through irrefutable proof of ownership.
The new NFT protocol by Charged Particles allows creators to generate multi-layer NFTs that can store various types of assets—including other NFTs—within a single NFT. For instance, a musician can create an NFT that contains nine musical tracks (each an individual NFT), a text document with lyrics, and an image file with album artwork. The NFT can even contain interest-earning social tokens that reward fans for their support.
The asset management possibilities for this new type of NFT are boundless and will impact how DeFi sectors interact with each other. One concept envisioned is a savings management application that ties into the statistics of an in-game weapon. As the NFT holder reaches a designated savings tier, their weapon automatically unlocks additional capabilities.
NFTs for Building Society
What is really interesting about NFTs is the way that they offer a social stake in a community that is always in development. By purchasing an NFT, people can support the projects and groups that they believe in. Democracy may be rare in real life, but it can exist with smart contracts. Unlike on Patreon or fiat platforms, contributors have a proven stake and can become vote-holding members of decentralized autonomous organizations (DAO).
NFTs can also be used as rewards in applications to gamify positive social and environmental actions. Users can gain points towards owning an NFT by planting trees or volunteering with non-profit organizations. These NFTs can be displayed in a ‘gallery of good deeds’ and shared with visitors. There is a further possibility of users farming NFTs and donating them to certain non-project projects to help them raise funds.
As the NFT universe progresses, there may be a growing gulf between people who are only concerned with investment and those who see genuine value in building a community around a new financial reality. Regardless of the motivations of collectors, NFT creators should provide utility and innovative ways of adding value in order to truly harness this incredible technology.