Utility Is the Future of NFTs
Ben Arnon is the co-founder and co-CEO at the Curio NFT platform.
Despite the rapid evolution of non-fungible tokens (NFTs) within the past year, collection strategies that succeeded in 2021 may die a lonely death in 2022 if providers are not one step ahead of the market. There is a massive untapped NFT market that must move beyond the digital collectibles approach to build greater utility into NFTs at every stage, and ultimately drive more value for fans and partners.
Over the last several months, we’ve seen a major shift in the market – moving away from the original “NFT 1.0” concept that saw NFTs as a digital version of licensed merchandise, which simply gave fans a way to show their affinity for a brand or flex their ownership of a limited edition. Bored Ape Yacht Club (BAYC) paved their way with a new strategy of establishing community membership as their core value offering, with the NFT simply serving as a badge of entry into an intriguing society with exclusive perks.
Many companies have piled into the NFT market trying to echo BAYC’s approach after coming to the realization that community is also a form of utility and value. The results have been unpredictable: game-changing for some projects, horrible for others, with no clear recipe for repeatable success. Exclusivity drives demand to be inside the velvet rope, but if you are too exclusive without any tangible rewards for membership, many fans won’t see the point, and the hoped-for crush of interest won’t materialize.
There is enormous potential to build on the BAYC template in ways many companies have seemingly overlooked. While well-designed original IP will always find an audience, there is also a lot of value in partnering with world-class brands and talent who already bring an ultra-engaged fan base. That minimizes the risks and costs associated with trying to conjure up excitement around an unknown property, as long as the collection itself is something that fans will see as authentic to the brand and their fandom.
If the underlying brand has a heavy element of worldbuilding and continuity, NFTs that offer owners untold canonical episodes involving characters, settings, and events from the story universe go right to the heart of the appeal of those properties. As an industry, we should be looking at ways that allow fans to use NFTs to create their own in-world experiences, or elaborate on the IP as digital, tokenized fanfiction. For properties that use real-world events to activate fans, like panels at Comic-Con, celebrity meet-and-greets, or pop-up experiences, NFTs can grant access to VIP-tier perks with significant IRL value.
Regarding the metaverse – whatever shape it ends up taking, marking territory in a virtual world, or building a digital fan-cave to flex your collectibles will not get you very far. Fans will want to bring those community memberships, experiences, and stories together in a shared space. Linking those experiences to NFTs will give fans more reason to collect, own, trade, and build complete sets that grow in value over the long run.
“NFT 1.0” was built on FOMO (fear of missing out), scarcity, and price appreciation. “NFT 2.0” is set to be about utility, value, innovation, and storytelling. As long as NFT providers and partners keep the customer experience at the center of their strategies, there seems to be a bright future ahead for the overall market.
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