The following is a post by our friend, Jeremy Williams. He's an executive principal working in Dubai, and he's working on ways to introduce NFTs and the blockchain to schools.
This article was originally posted on Medium, and you can find that here. Jeremy gave us permission to post it here and you can support him on his Mediun page or on his Twitter @jwilliamsnft
This is the first edition of what we're calling “Community Spotlight” and we hope to continue this in the future. If you have something you'd like to share and include in our spotlight, please contact us.
NFT Growth All Depenends On Utility
Jeremy Williams, PhD
Not sure what an NFT is? Read this first.
NFT utility can be defined as the specific use cases for any given token. Currently, the drive to NFTs for many is speculative value of said token.
After the last “Throwdowns” NBA Top Shot Drop, collectors across the Internet were venting their frustrations as the EV (Expected Value) of the NFTs were under the cost of the pack. Soon there after, a substantial drop in value of Top Shot moments were happening across the board.
To be honest, for a pure collector, the market dip was great. I was scooping up great moments that I want to have for my collection. For others, this was the end of Top Shot because the speculative value was not immediately higher than the cost of pack acquisition. Hooray for me.
This reductive view of the NFT as a digital land grab to be flipped for a quick dollar is the issue. What must happen to grow the NFT space is an increase in utility.
For CyptoPunks and other expensive NFT art, no utility is needed. They are valuable. People want them in many instances because of the art itself or because of the market value for the piece they have acquired.
Taco Bell sold digital tacos on OpenSea and without any utility they sold instantly. This leads people new to NFTs to not understand why anyone would make such a purchase.
For broader NFT use cases where EV is more speculative and volatile, it is imperative that utility from the developer is front of mind.
As the utility of the NFT increases, the potential disruptions to our lives will grow exponentially. Already, you can play fantasy basketball with your Top Shot moments. Further utility will come from external partnerships once they leave beta.
Gary Vee has introduced Veefriends where purchasing his NFT will allow you to attend VeeCon, an annual in person conference of entrepreneurial movers and shakers. In addition, Gary has added utility by randomly having prizes that range from him guesting on your podcast to playing a match of tennis attached to his NFT.
Imagine opening a pack of digital Chipotle collectibles where you have the chance to earn a “Golden Burrito” that allows lifetime free Chipotle for the lucky winner. Even in this instance, it may be the EV of that prize that would drive the consumer to make the purchase.
These examples, for the most part, demonstrate utility as secondary to the EV. The shift that must happen for the NFT growth to continue at an exponential rate is for the utility to lead the consumer to the purchase, not the EV. For this to happen, NFT developers need to prioritize the potential utility of the token over being first to the marketplace.
Gary Vee got this right, although facing massive challenges in his drop, utility led the way. People were not incentivized to a quick flip because ownership of the NFT provides access to content, prizes, and in person social events. If you’re looking to flip, you might make some money, but you’d be losing something also (that has a great value if you’re a GaryVee fan). This prioritization of the utility will lead consumers to hold on to their token not necessarily for the financial value of the token; rather, for the value of the utility provided.
Top Shot has faced challenges as the market has dipped but the Dapper team is keenly aware of the need of an increase of utility and has major plans to do so. In addition, moments are collectibles and people love to collect. Even Top Shot must increase utility 5 to 10x to successfully penetrate the market once they leave beta.
NFT developers, slow down and create real utility before you start your drop if you want to create real impact for the consumer versus being a flash in the pan.