Eternity Law International — News — What is an NFT utility?

What is an NFT utility?

Published:
November 2, 2022

Typically realized during an ICO, utility tokens offer token holders many privileged services and aren’t treated to be investments as they feature speculative nature and act more like promotional instruments for the issuing company. Let’s find out what is NFT utility and how it differs from traditional NFT.

NFT utility: what is it?

Commonly associated with initial coin offerings, a utility token is a particular kind of cryptographic asset targeted at pooling the funds needed to launch a crypto project. Investors may acquire these utility tokens in various cryptocoins or even fiat money. Once bought, they are stored in an e-wallet and can be used to access services provided by the project.

Utility NFTs bring real-world value to the holder. This value can be rendered in the form of memberships, service access, access to various events, virtual assets, or material goods. Another characteristic of utility tokens is that they do not present any owner’s stake in the project being contributed to and instead, permit the holder to purchase or sell tokens on a preferential basis.

Types of NFT utility

The list of NFT utility types is too big to be fully included here. Let’s take a look at the most widely used tokens to give you a general overview of different NFT ideas.

  1. Access NFTs

The owner of an NFT may utilize it as a ticket to access an event. Due to blockchain technologies, it is now not complicated to verify ownership of a token. Access tokens deliver their owners access to various experiences, or teams in the virtual and real worlds.

  1. Redeemable NFTs

Another type of NFT utility is redeemability. The concept behind a redeemable NFT is that its owner can switch it for a virtual or physical asset. For example, in some NFT projects, owners of specific NFTs could redeem physical things like clothing for their tokens.

  1. Royalty NFTs

NFTs can be sold on the aftermarket and follow on public offering. Each time an NFT finds a new owner, its creator may get some dividends. Many NFT platforms give the creators a certain percentage of the overall sale price in the form of cryptocoins, providing them a another income stream.

  1. NFT voting rights

Some NFT owners take advantage of voting to decide an aspect of a DAO. For example, one NFT may present the right to give one vote.

Key advantages of utility NFTs

  • Utility-based NFTs gained great popularity in the previous years due to a plethora of benefits that include:
  • Secure technologies – Blockchain that stands behind the NFts guarantees safety for the consumers. Within its system, it is impossible to change, delete, or hide data that was already recorded in the blockchain. Thus blockchains safeguard the authenticity and rarity of tokens.
  • Transparency – The NFT market provides the highest clarity of business activities due to blockchain technologies. Any unlawful is not possible.
  • Portfolio diversification – There is a number of dissimilarities between traditional assets like bonds and NFTs. It allows financiers to diversify their portfolios and accordingly reduce risks of loss of funds.

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