Non-fungible tokens (NFTs) have come to stay on the walls of the blockchain ever since the world became aware of their potential greatness in 2017. A quick recap: NFTs are unique and one-of-a-kind digital identifier recorded on a blockchain and is used to certify ownership and authenticity. They are a special type of digital crypto asset that can come in the form of art, videos, music, and more.

NFTs have been evolving and expanding rapidly since their introduction, branching into various categories such as traditional NFTs, gaming NFTs, collectibles, utility NFTs, and more. In this article, we will focus on utility tokens, the “NFTs with benefits”.

What Are Utility Tokens?

Unlike traditional NFTs, which are primarily traded for digital collectibles or any form of art, utility NFTs have use cases other than just being unique digital assets. We can say they are a category of digital assets that serve specific purposes or functions on a platform. Utility NFTs allow those who hold them special privileges, rights, or rewards that would be inaccessible without them.

For example, in a video game that allows players to create or customize characters or avatars, you purchase or come across special armor, a unique utility NFT that makes your character one of the strongest in the game. This NFT enhances your gaming activity and gives you a certain edge over other players in the game who do not have such.

Utility NFTs are an exciting development in the digital asset landscape, with the potential to change how ownership and value are perceived in the digital economy. As with new developments, the furtherance and adoption of utility NFTs must be closely monitored, evaluating the potential benefits and challenges to see where it eventually leads.

How do Utility NFTs Work?

Now that we know what utility NFTs are, we can go further in the tunnel and try to see how they work. Of course, the blockchain takes credit for this innovation again, as utility NFTs are built on its decentralized technology. Utility NFTs introduce a new way for members of the community and asset owners to share values and experiences.

In the conceiving stages of a utility NFT, a unique digital signature, referred to as a “hash”, which cannot be copied or duplicated, is assigned to it. This hash is then logged or recorded on the blockchain, creating a permanent and unalterable record of the NFT’s existence and ownership. If you have already guessed “minting” at this point, you’re right. Minting plays an important role in ensuring the uniqueness and genuineness of the NFT.

After the minting process, the NFT gets the utility intended for it by the project's creator. This generally involves thinking about controlling access to the token, its physical and digital products, and shaping the desired user experience.

In the eyes of technical enthusiasts and professionals, Utility NFTs work like any other NFT; the only difference is the specific benefits they are associated with, therefore the name “NFTs with benefits”.

Advantages of Utility NFTs

Utility NFTs bring new reasons to be excited about the whole concept of NFTs, unlike just having regular NFTs you know you can sell any day. Some advantages of utility NFTs include:

Increased transaction transparency

Utility NFTs provide insights into the transaction history of their counterparts, showing how many have been bought or sold. For example, a player looking to purchase an in-game utility NFT would want to know if many players also bought similar NFTs. This may influence their decision to buy or not buy that NFT.

Access to exclusive content and experiences

As Web3 grows and creators begin to show interest in it, an increase in exclusive content and live exhibitions tied to NFTs is bound to happen.

Unlocking new revenue streams

Passive income can be generated through utility NFTs so owners can receive rewards such as dividends, cryptocurrency, music royalties, and even new NFTs.

Here are some great Utility NFT projects you could check out.

LinksDAO

LinksDAO is all about the ultimate golfing experience. It is at the forefront of utility NFTs, and it is a great medium for NFT enthusiasts and golf lovers to connect in Web3.

VeeFriends

VeeFriends is the brainchild of an entrepreneur called Gary Vaynerchuk. This NFT project allows its holders access to the VeeCon, a conference hosted for NFT enthusiasts around the globe, and as you might have already guessed, the ticket is a utility NFT.

World of Women

World of Women is an NFT project aiming to support, educate, and increase women's participation in NFTs and Web3. The utility NFT allows holders access to ownership of the project's artwork and real-life events.

Finale

Utility NFTs, if properly and comprehensively developed, have the potential to take over industries at an unprecedented rate. Game tickets, concert tickets, loyalty cards, all of these could come in utility NFT form, and in fact, some already do. Business owners can use utility NFTs to enhance and strengthen their brands, while NFT enthusiasts can find ways to rekindle their passion for the technology. The possibilities are endless with the assistance of utility NFTs.