Understanding NFT utility and its value are what helps you choose the best platform for buying one.
Understanding NFT Utility
NFT Utility is the value of a Non-Fungible token. It is how you can use the NFT that helps you understand its value. This can be divided into two categories.
First is the Buyer Utility. This utility gives additional value to the token that is used as part of a buyer’s purchasing decision. It affects the demand for a token.
From this, we can see that the use cases for NFTs are varied. But here are some examples, collecting and curating. Here users can collect and curate their favorite digital assets by buying, selling, or trading them with their friends and other users.
Second is the Digital goods ownership. Users can own digital goods, such as unique in-game items, digital artworks, and even digital real estate. Third, is Digital rights management where users can have digital rights, such as ownership of intellectual property rights or usage rights of digital content.
The usage right is where an NFT is used as part of some sort of transaction. For example, there is a car auction platform where users can buy cars with NFTs instead of fiat money. With blockchain technology, voting and polling can be done transparently while still keeping anonymity.
A voting system built on a blockchain will have NFTs instead of votes. With non-fungible tokens, gamification becomes possible where users can be rewarded with tokens for playing games with each other. So, this utility gives additional value to the token that is used as part of a buyer’s purchasing decision.
The value of NFTs is closely tied to their utility. The more useful and interesting it is, the more valuable it is. The NFT value can be divided into 2 parts, Intrinsic Value, and Extrinsic Value.
In Intrinsic Value, the NFT value is due to its intrinsic properties. This value is not dependent on any platform, service, or community. For example, a rare kitty that is generated at the Genesis Block of a blockchain will always have some value regardless of what happens to the CryptoKitties platform.
Now in Extrinsic Value, the value of an NFT is due to its extrinsic properties. It is derived from other parties and demands for its usage. This value relies on external factors such as the platform it is built on, the community around the project, etc.
For example, an ERC721 token might have a low intrinsic value. That is if there are very few users or games built on top of it. But high extrinsic value if there are many users and game developers who want to interact with that token.
Extrinsic value also relies on the platform it is built on as well as the community around it. The more users and developers there are interacting with an NFT, the more valuable it will be in the long term. This is because new use cases for that token can be found in future projects built on top of it!