Beyond the Hype - How NFTS Are Providing Real World Utility

They came, they saw, and now, they are conquering. Non-fungible tokens (NFTs) are the biggest buzz not only in the world of cryptocurrencies and blockchain, but even in the wider technology sector.

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Snoop Dogg, Paris Hilton, Stan Lee, Tony Hawk and many more have sold tens of millions of dollars’ worth of their own NFT collections; Serena Williams, Jimmy Fallon, Ashton Kutcher and countless others all have NFT avatars on Twitter; OpenSea recorded over 64,000% in trading volume growth in 2021; the European Union is weighing expanding its regulatory scope to cover this sector – clearly, NFTs are making a big splash.

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However, for most of the market, and certainly to many outside crypto, NFTs are just one big bubble. To them, an NFT is a speculative asset that you buy and hold in the hopes that its value shoots up, kind of like how many traders look at cryptos in general. This belief is strengthened by the enormous value gains of some NFTs such as the Bored Ape Yacht Club collection whose floor price earlier this month hit a record 146 ETH ($411,000). 

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But it’s not all about the hype, speculation, Twitter profile pictures and online avatars. These are just predecessors, and like with any other invention, there must be hype before utility.
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Andras Kristof, the founder of Galaxis development platform captured it best when he stated, “The dotcom bubble collapsed, but the internet came out of it. The ICO bubble collapsed, but DeFi came out of it. The NFT bubble will collapse, but [great] products will come out of it.”
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NFTs are already showing that they have utility and in recent months, they are becoming much more than just ‘expensive JPEGs’ as some skeptics have claimed or a sign of mental illness as Tesla boss Elon Musk once mocked.

So, let’s look at NFT utility and how they are being used to shape the future of finance, tech, art and so much more.

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DeFi Made Easy with NFT Lending

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NFT utility has been realized in several sectors, but perhaps none more than in finance. And when it comes to finance in crypto, decentralization is key, hence the rise of the multi-billion dollar DeFi sector. 

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NFTs are gaining growing utility in DeFi through decentralized lending and borrowing platforms. This sector has shot up in recent months, based on the idea that most people don’t want to sell their NFTs, even when they need the cash for real-world needs. 

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There are various models around this, the first of which is peer-to-peer lending. The most popular model by far, it involves marketplaces like NFTfi and Arcade that match a borrower with a lender. Upon accepting an offer from a lender, the borrower transfers his NFT into a smart contract-guarded vault for the duration of the loan and receives crypto such as BTC, ETH or even USDT. If the borrower defaults, the lender gets the NFT that was put up as collateral. 

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This model has become so popular that in a world-first, two South Korean investors went to court over one such deal gone sour. 

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There are other models as well, though not as popular. They include borrowing directly from a protocol like BendDAO, as you would a bank, and using your NFT as collateral as well as collateralizing your NFT and receiving a platform’s stablecoin, much as you would collateralize ETH on MakerDAO to mint DAI stablecoin.

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Real Estate of the Future to Be NFT-based

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Away from finance, NFTs are finding utility in real estate, and their effect here could be massive and far-reaching. In fact, NFT utility in property ownership has so much potential that Shark Tank star and famed investor Kevin O’Leary believes they could become bigger than Bitcoin.

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“You’re going to see a lot of movement in terms of doing authentication and insurance policies and real estate transfer taxes all online over the next few years, making NFTs a much bigger, more fluid market potentially than just bitcoin alone,” O’Leary told the network earlier this year.

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The Shark is right. NFTs have found utility in real estate in more ways than one. The first is as a means of cutting down on the tedious hassle of property transfer. Anyone who has bought property knows just how lengthy and costly this process can be even at a time when the world is mostly digital.

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By including all the details and ownership rights of a property within an NFT, a property owner can very easily transfer it to any buyer at the touch of a button. This, once it goes mainstream, will change real estate for good.

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NFTs have also found utility in fractional ownership of property. Sometimes, investors desire to buy property but can’t come up with all the money required by themselves. NFTs allow property owners to subdivide their properties and sell them in pieces as NFTs. 

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Think of how the vast majority of Bitcoin holders don’t hold a whole BTC as it’s quite expensive – this is what NFTs can do for property.

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Why Play for Free? NFTS Changing the Gaming Landscape

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While gaming may be third on our list, it might very well be the biggest industry in which NFT utility has been on display.

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With an estimated 3 billion fans, gaming is one of today’s biggest and fastest-growing industries – bigger than the music and movie industries combined. What’s more, gamers are tech-savvy and have been spending money on tokens even before Bitcoin was cool. This makes gaming the most NFT-ready industry there is.

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NFTs are changing the gaming experience, bringing in a much-needed aspect of revenue for the gamers. Blockchain-based games have been behind the rise of a new trend in gaming known as play-to-earn in which money is on the line every time a gamer sits down to enjoy their favorite game. This P2E model have made blockchain games much more popular than their traditional counterparts.

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As Jamie Burke, the CEO of Outlier Ventures VC firm observed, “people spend five times more in a blockchain game than in a conventional game.” 

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Axie Infinity has been the greatest illustration of just how massive an opportunity NFT gaming on the blockchain is. The P2E game burst onto the scene recently and at its peak, it saw over 2.7 million users playing the game daily. By February this year, over $4 billion in NFTs had been sold on the platform.

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What’s more, many of these users weren’t in the U.S or Europe as with most traditional games. In fact, the country that had the most Axie players was the Philippines, once again showing just how blockchain, and NFTs in particular, can ensure inclusivity in gaming and more broadly, in finance.

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Axie’s $600 million hack may have soured its allure, but its model proved that NFT gaming can be a gold mine.

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Want to Explore the Metaverse? Bring Your NFT With You

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The metaverse is just as big as NFTs in today’s world. Mark Zuckerberg is betting his $550 billion giant Facebook (read Meta) on it, and this alone should be proof enough that the metaverse is here to stay.

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And if the metaverse is here to stay, so are NFTs. The two have become inexplicably intertwined, with NFTs becoming more like the keys to the metaverse.

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Think about this – you’ve put on your VR headset to explore some metaverse built on Decentraland or The Sandbox (or you can insert your favorite platform here). You’re walking on the streets of Paris in France or Florence in Italy and you decide to get into an art gallery. The art there is sublime and you decide to make a purchase of one painting. Upon a quick transaction, you get the art, but instead of taking it home with you (remember you’re still lying on your couch), you get its NFT on your OpenSea wallet.

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This is just one simple way the metaverse and NFTs can open new doors. But it goes beyond this. Our avatars on these virtual platforms will be turned into NFTs and we will basically be needing them to explore the metaverse. 

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On platforms like Decentraland, users get to buy virtual plots of land, which is finite and as such, quite valuable. NFTs enable users to prove ownership of this type of property in the metaverse, giving them new utility.

Eric Anziani, the COO of Crypto.com exchange described the role of NFTs in the metaverse, stating, “NFTs really started initially with the digital art side. But it's going to be a lot more powerful. It will be the tool that represents any digital type of assets in virtual worlds going forward. So the applications are tremendous.”

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Forget Spotify and Netflix – NFTs changing content distribution

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It all started with NFTs representing art. But in the past couple of years, it has grown to encompass any form of content. Today, NFTs are being used to represent music, film, games, books and any other form of content, making it more valuable, and perhaps even more importantly, allowing the content creators total control and ownership of their material.

Already, some of the world’s biggest artists have aped into NFTs. From Snoop Dogg releasing his ‘A Journey with Dogg’ collection to Shawn Mendes NFT partnership with Genies, the revolution has already started. Rock Band Kings of Leon went a step further and even released their ‘When You See Yourself’ album as an NFT (they even became the first band to have its NFT song played in space). 

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By selling their content as NFTs, artists cut out the middleman, and in this industry, there are loads of them. When you purchase your Katy Perry song as an NFT, all the proceeds go to her directly. What’s more, the artist can decide to do the revenue sharing directly from the start such that 70% might go to her, 15% to her producers, 5% to a songwriter and so on.

So, what now?

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The above are just some of the most innovative ways NFTs are gaining utility in the real world, but there are many more ways that we simply don’t have the space to cover in just one article. However, this shows that there is more to NFTs than just pure speculation or FOMO (and it’s definitely not a manifestation of mental illness, Elon Musk).

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So go ahead and mint your NFTs (and we have a simple guide for you here) and get to exploring how you can use it in the above (and many more) use cases. You can even come up with a creative new way to use it and who knows, it could be the next billion dollar idea. 

Speculation isn’t wrong either. And if you already own an NFT, or even a collection of them, make sure to check out our guide on how to promote it or even how to market it. 

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Whatever you do, remember to stay safe as there are plenty of scammers out there preying on unsuspecting investors. Thankfully, we have compiled a list of red flags to smoke out the scammers and the rug pulls.

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